Article | Resilience of Venture Studio Model

‍“The era of cheap and readily available cash is over”

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CNBC

Based on extensive market research combined and insights from industry leaders, we have discovered that startups are currently facing the most difficult fundraising environment in more than a decade. The rate at which Venture Capitalists (VC) deploy funds in Europe and North America has slowed significantly since peaking in November 2021.

As venture capital has moved downstream, European startup investment has dropped $14 billion since its peak in the second quarter of 2022. This decline of capital flows has resulted in a cash-strapped financial environment, increasing competition for existing and new startups seeking pre-series funding. According to a recent CrunchBase news report, European seed funding has dropped 19% year on year, confirming the decline in early stage funding for startups in 2022.

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“Deal activity hasslowed across the board”
Mike Volpi, Index Ventures

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The competition for existing startups to secure funding has never been greater, despite the post-pandemic boom in VC investment at the end of 2021. According to investment firms, there is a less than 4% chance that a new startup will receive funding from a VC or angel investor. Cleantech, Fintech, EdTech and AI startups are better positioned to receive funding because of the traction associated with these fast-growing industries. However, we have discovered that other, more traditional startup industries with minimal online presence have struggled within this difficult financial environment. Due to high competition and slower deal activity, only the most promising startups will succeed. The startup landscape has shifted as venture capital investment has become a luxury that most cannot afford.

Startups in the cleantech industry have faced a similar problem. An increased technology risk for lab developed solutions, expensive scale of innovations, and fiercely competitive markets are some specific risks connected with cleantech ventures. However, the cleantech industry remains optimistic as the sector has gained significant traction and become a hot topic for venture capital firms. The industry benefits from both public and private financial streams, making the industry more resilient and more importantly, more attractive to VC firms. Given the current climate emergency, promising cleantech solutions that reduce harmful human pressure on our biosphere will be favoured by VC’s and state-run funds. These firms will therefore be able to circumvent the cash-drained environment and have a higher chance of success.

In difficult environments where VCs are wary, startups have other options, one of which is the startup studio. The startup studio model is well suited to assisting startups in transforming their ideas into tangible business assets. These studios are exceptionally efficient venture builders with a track record of rapidly scaling innovative entities. Startups created and developed by startup studios, on average, take only 25 months to progress from scratch to Series A, as opposed to traditional startups, which typically take 56 months. Not only do startup studios scale businesses faster we uncovered that average Internal Rateof Return (IRR) is more than double that of a traditional startup.

According to Startup Studio Insider this business model "will disrupt funding and startup acceleration as we know it."

The model is becoming regarded as the most secure approach for early-stage firms to prosper and solve problems that 90% of entrepreneurs fail to overcome. To convert a concept into a business, venture studios provide a close-knit collaboration environment for entrepreneurs and the venture team. The two entities share core ideas and resources, but what distinguishes startup studios is their grasp of specialisation.

Why specialisation? Entrepreneurs can focus on value propositions while venture studios focus on enhancing dealflow. As a result, startups avoid heated disputes with venture capitalists and instead focus on producing a high-quality product. Therefore, specialisation can result in an accelerated speed to market.

Startup studios also serve as a safety net for corporate operations, taking on functions like goal setting, brand-building, and assembling specialized teams to manage diverse activities. The model inherently primes startups throughout the pre-seed and seed rounds and the studio is heavily involved in all aspects of the business from marketing to product development to resource allocation. Studios have the opportunity to present promising startups already exhibiting high growth potential to VC firms to invest in later on in the firm’s maturity process. In this way, startup studios can de-risk venture projects and function as a complementary source of dealflow for VC’s.

Environmentally, our plant needs immediate and scalable cleantech solutions to support a liveable biosphere, and facilitating these solutions requires urgent action.

Our response, BXVentures. The first startup studio entirely dedicated to developing and scaling cleantech ventures to foster a liveable planet. Through the following studio benefits, the BXV model addresses specific risks associated with cleantech startups:

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1.      Co-piloting approach

Entrepreneurs frequently require strategic direction to minimize inefficient resource allocation. BXVentures offers active co-piloting with entrepreneurs, in addition to a strategic counsel comprised of venture building expertise, seasoned entrepreneurs and expert scientists.

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2.      Techdue diligence

Startups in the cleantech industry might not have the technical know-how to validate solutions, and VC firms are aware of the higher technological risks associated with cleantech assets. BXVentures conducts tech due diligence in the early stages and provides startups with privileged access to university labs to test and qualify cleantech solutions.

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3.      Fundraising preparation and administration

Entrepreneurs in the cleantech industry are no longer burdened by arduous and time-consuming administrative and fundraising tasks. The BXVentures model outsources other financial and legal parts of enterprises while preparing firms for VC rounds.

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For a more comprehensive understanding of the BXVentures studio model and how we can accelerate the widespread adoption of clean technologies, visit our homepage https://www.bxventures.com.