Only a few weeks ago, the venture capital world witnessed one of the biggest IPO success stories of this year. Snowflake, a cloud-based data-warehousing platform, entered the public market and is now valued at more than 66 billion USD. Part of Snowflake’s success can be attributed to Sutter Hill Ventures, a venture studio that stood at the beginning of the company creation. Venture capital companies are increasingly moving upstream towards the inception of new ventures and in this blog, I elaborate on the reasons why venture studios are well-positioned to reap the benefits that investments in early-stage tech startups may provide.

The conventional tech startup formula seems simple; have an idea, assemble a team, build a product, and start selling and growing. Yet, 9 out of 10 startups fail. The common reasons behind the failure include insufficient financing, missing team competencies, inadequate timing, and lack of distribution network.

The venture studio model aims to address these challenges. The underlying premise of the concept lays in economies of scale. Instead of creating a single startup, a venture studio leverages a shared network of resources, staff, investments, and management to build multiple startups simultaneously. This enables startups in the studio’s portfolio to gain operational efficiency from shared expertise and resources.

Venture studios share some similarities with Hollywood movie studios. The goal of a movie studio is to find a promising script, hire a production team, and provide capital and operational support to create a successful movie. While movie studios release new movies, venture studios create new businesses and products.

Simply put, a venture studio is an organization that comes with ideas and hires executives who build companies around them. Venture studios usually use both internal and external sources to generate ideas. By conducting iterative validation process, a venture studio identifies promising ideas and then hires a dedicated team to build successful ventures. Venture studios usually take co-founder role in the new ventures while providing both operational and capital support.

The secret ingredient of the venture studio model is its decision-making process. By its very design, a venture studio is made for early-stage experiments and prototyping. Through iterative testing and validation of ideas, a venture studio can quickly identify a promising idea that best suits the studio’s core competencies. This reduces the cost of early market validation, removing many of the inefficiencies in the traditional venture model.

The future seems bright for venture studios. According to the GSSN report from 2019, the number of venture studios grew by more than 5,000% over the last decade. Today there are more than 200 venture studios while their number is expected to double by 2023. Even though what is to come is uncertain, venture studios are well-positioned to shape the future by bringing up success stories similar to Snowflake.

On Tuesday, Mollie, the Amsterdam-based payment processing platform, announced raise of €90 million in the Series B funding round. The company is now valued at more than €1 billion, reaching the status of a startup unicorn.

Mollie’s success further establishes the Netherlands as the European hub for tech startups. At the current state, the country is home to 13 unicorns, ranking only behind Germany (30) and the United Kingdom (74). Considering the success that the Dutch startup ecosystem has experienced, a question may arise. What is the secret ingredient that is behind the thriving Dutch startup scene?

According to the recent study by NimbleFins, the Dutch-based startups benefit primarily from the three-country specifics:

1. Established physical and digital infrastructure – The Netherlands is known for its excellent transportation and telecommunications network, which makes doing business faster and easier. On top of that, Dutch are among the European frontrunners in digital infrastructure as the country boasts some of the highest broadband speeds.

2. Welcoming regulatory environment – The government seeks to foster the startup ecosystem through various activities starting from tax incentives and funding programmes to startup visas for non-EU citizens. Particularly, the country provides the so-called “start-up visa” that affords ambitious entrepreneurs one year to launch an innovative business.

3. Highly skilled workforce – The country is home to some of the highest-ranked universities in Europe which provide the job market with a competitive workforce year after year.

On the other hand, access to venture capital is lagging behind other European countries. According to a report by Dealroom, venture capital investing is Achilles heel of the Dutch startup ecosystem. Many promising startups, especially in their early stage, struggle to secure funding. The lack of VC-funded growth may then hamper the scalability of new businesses.

With all its characteristics, the Dutch startup ecosystem provides fertile pasture for new business. The Crunchbase database currently lists over 10,000 Dutch startups. Will any of these follow in the steps of Mollie and become the next startup unicorn? ?