Usually when I tell people I work for a venture studio it is met with an (understandably) blank stare. It’s a reasonably new phenomenon in Australia and there’s no ‘purist’ definition just yet.
Different venture studios have a different niche. Some focus on internally incubating ideas and recruiting CEOs to run them, some hone in on innovating for/with corporates and some provide a specific skillset to existing startups, like branding or design.
For us at Paloma, we help with all aspects of building startups — from idea validation to fundraising. But the core of what we do is around building the tech and teams behind ventures. From day zero all the way to massive scale, we are product builders and like to get in the weeds with founders.
Why? Let’s take a step back
The last ten years has seen phenomenal growth in Australia’s startup scene.
Granted we may not be London, Tel Aviv or San Francisco, but we do now boast a rich ecosystem flooded with accelerators, funders, service providers and seasoned founders.
Local startup darlings have had their introduction to the world stage, VCs have raised impressively large funds and we are beginning to get a mention on the entrepreneurial world map.
But, we haven’t solved everything. Only 0.6% of Australia’s population has the job title ‘software engineer’ and so the fight for great technical talent is fierce.
Previously I worked at Australia’s largest network for entrepreneurs, Startup Victoria. I spoke to thousands of founders at all stages of growth and the two major challenges I heard on repeat were:
1. I need capital
2. I need technical capability
It’s incredibly frustrating to watch great entrepreneurial talent go to waste. Many founders get stuck with underwhelming tech… or nothing at all.
It’s difficult to get funding in Australia without a (decent) product and so it can turn into a pretty demoralising game of chicken and egg.
Even later stage startups can struggle to launch new products or secure the necessary talent to get something to market fast enough to compete
So where do venture studios come in?
Whether you’re a pre-product/pre-revenue founder, or a later stage growth scaleup, venture studios like Paloma can BUILD for you.
None of the hiring hassle, none of the uncertainty, just a world class team that is guaranteed to build you a world class product, fast.
Take Afterpay as an example. We built the first version of their app in just 12 weeks and continue to work with them as their tech partner to this day.
What’s the downside?
Some would say…
An in house team is always preferable
If you can get an A class tech team, good on you! Having a team you’ve hand selected, interviewed and brought into the company undeniably has its merits. But the reality is, it’s super hard to do and carries a lot of risk if you get it wrong.
A good venture studio will bring you on the journey and build your product muscle in the process.
At Paloma, key members of our team often move over to work full-time at our early stage startups after 18 months… becoming an in-house team after all.
It’s impossible to get accepted
Unlike accelerators, venture studios are not volume plays.
We work with ~5 early stage ventures a year and are very selective about the builds we take on. Our team needs to have total conviction in the idea since we’re coming on essentially like a technical co-founder.
So yes, it is competitive. But when there’s a match, it’s a bloody good match.
Venture Studios take too much equity
Some do. Some take way too much equity and do low quality work. As with anything, the best advice is to do your research.
At Paloma we have fees and equity based models. If we do take equity, it’s around 10% ordinary shares.
With our earlier stage ventures, taking some equity guarantees we have skin in the game and will treat the business like it’s our own. We really are a co-founder, in the weeds, day to day, in all the same Slack channels and all the daily standups.
Does the Paloma model actually work though?
The proof is in the pudding:
• We have 10 early stage ventures in flight, with a combined portfolio value of $200m+ AUD
• 87% of the ventures we’ve built from scratch have reached the $1m ARR milestone
• 90% of the ventures we have built from scratch have raised over $1m at Seed Round
How do I find a venture studio?
You’ve found us! We work with founders at pitch deck to growth stage.
Get in touch using the contact links below, or reach out to me personally on LinkedIn here
I am always up for a chat.
I’ve also recently co-founded the Venture Builders Collective (a community of ventures studios in Australia and New Zealand) with Aginic Ventures and Until Now. So if it’s not a good fit for us, I can pass you on to one of my friends in the industry who might have a different niche.
