Organizational Characteristics Of Portuguese Startup Studios

The aim of this study is to understand what lies behind the emerging new phenomenon of startup studios in the entrepreneurial environment, clearly define the concept of startup studio – also called company builder, venture builder or startup factory – and understand what sets the startup studio model apart from other incubators. In order to achieve this goal, it is necessary to first, understand what an incubator is in the current scope of entrepreneurship and, second, distinguish the various types of incubators. This section intents to introduce the concept of incubator, especially how the term is defined in the entrepreneurial environment and its evolution through time, to which degree the incubator term will impact the definition of Studios and the interconnection of the concepts.

Incubators in the Entrepreneurial Environment

The origin of the term incubation comes from ancient times. People would go to a Roman (or Greek) temple to lay themselves down on fresh hide from newly sacrificed animals. This practice was called incubatio and it was practiced mainly to obtain a vision on how to overcome one or another disease. Most times this practice would take place in the temple of Aesculapius, the God of medicine, which lead us to the medical usage of the word. Gradually an incubator became the place where prematurely born infants were nurtured and take care of. The principle of the incubator is that premature infants require temporary care in controlled conditions. These conditions should help newborn babies to survive, grow and develop once they left the incubator (Aernoudt, 2004). Similarities can be found with the current use of the term in business context. Business Incubators typically support new ventures in the hope they will later develop into self-sustaining, thriving companies (Bruneel, Ratinho, Clarysse, & Groen, 2012). Indeed, a business incubator can be formally defined as a shared office-space facility that seeks to provide its incubatees (i. e. “portfolio-“ or “client-“ or “tenant-companies”) with a strategic, value adding intervention system (i. e. business incubation) of monitoring and business assistance (Hackett & Dilts, 2004).

Furthermore, Hackett & Dilts (2004) explain that the incubator is also a network of individuals and organizations including the incubator manager and staff, incubator advisory board, incubatee companies and employees, local universities and university community members, industry contacts and professional services providers such as lawyers, accountants, consultants, marketing specialists, venture capitalists, angel investors and volunteers. In other words, Business Incubation supports the startup and early stage of new business ventures by providing them with the safe harbor, intensive resources and a development environment in which they can flourish (A Brief Introduction to Business Incubation, 2015). Their role is to provide a support environment for startup and fledgling companies, thereby promoting local job creation, economic development, and technology transfer (Peters, Rice, & Sundararajan, 2004). Peters, Rice & Sundarajam (2004) also refer in their paper that the role of the incubator in the entrepreneurial process has changed from being just a business center with office facilities to one offering training, networking and consulting in all areas of expertise to startup firms. However, the value added by incubators is highly debated.

Type of Business Incubators

The concept of business incubation has changed over with time, evolving since the establishment of the first Business Incubators, with consulting firms and other professional service providers offering similar new-business facilitation support (Bruneel et al. , 2012; Von Zedtwitz, 2003). The literature on types of incubator is based on the premise that not all incubators are equal and that there are different types with significant differences (Barbero et al. , 2014). Incubation research has tended to treat the types of incubator in a homogeneous fashion, although some studies have recognized the different nature of incubators (Aernoudt, 2004; Barbero et al. , 2014; Bruneel et al. , 2012; Grimaldi & Grandi, 2005). It is possible to find various ways to categorize the different types of incubators. On one hand, researchers have highlighted the differences in the organization, activities, services and objectives (Aernoudt, 2004), while others categorize the types of incubators through a generational sequence (Bruneel et al. , 2012) or even distinguish them between non-profit and for-profit incubators (Peters et al. , 2004).

On the other hand, Grimaldi & Grandi (2005) say that the differences on the type of incubator is a mix of all the factors mention above. They argue that the existence of different incubators and the evolution of their business models over time have been driven by the evolution of company requirements and needs, which in turn has prompted incubators to diversify their offer of services. Most of the research on the types of incubators is based on studies by Von Zedwitz (Carayannis & Von Zedtwitz, 2005; Von Zedtwitz, 2003) in which he suggests a categorization of five incubator archetypes based on the four dimensions of Porter’s theory on competitive scope. The author suggests that incubators fall into two basic types, depending on its strategic focus: for-profit and non-profit. Hence, identifying the following five basic archetypes: independent commercial incubators, regional business incubators, university incubators, company-internal-incubators and virtual incubators. For the purpose of this study, it is in our interest to better understand the Independent Commercial Incubators, since it is the most similar to the Startup Studio Model.

The independent commercial incubator (also known as private incubator) business model can be defined as to be based on clear internal competencies and focuses on a given technology, industry or target market. A set of internal technical competencies attracts a preferred-profile entrepreneur, in which the incubator is able not only to create synergy among the incubated startups but also to fine-tune its skills in this particular competitive environment (Carayannis & Von Zedtwitz, 2005; Von Zedtwitz, 2003). Thus, enhancing its possibilities to optimally leverage each individual startup.

The Startup Studio Model

Although there is little research on the startup studio business model, mainly because it is a fairly recent phenomenon, it is possible to find some initial definitions on this concept. Startup Studios are organizations that aim to build startups in a sustainable and repeatable way, using the in-house ideas and resources, pulling business ideas from within their own network and assign intern teams to develop them (Diallo, 2015; Elziere, 2014; Rao, 2013; Szigeti, 2016). To shed some light on the Startup Studio model, usually, the concept is explained by comparing it with the movie industry. In a movie studio there are multiple movies being produced simultaneously, taking advantage of a generally successful, repeatable process (Scheuplein & Kahl, 2017; Szigeti, 2016). Moreover, startup studios are not something completely new, but that recently got a momentum.

This new way of doing business is catching the eye of successful tech entrepreneurs that are founding their startup studios, for example, PayPal co-founder Max Levchin’s HVF Labs, Twitter co-founder Ev Williams’ Obvious Corp, former MySpace CEO Mike Jones’s Science Inc. , serial entrepreneur John Borthwick's Betaworks, and Vimeo co-founder Jake Lodwick’s Elepath (Lapowsky, 2014), just to name a few among many others. Despite the lack of concrete definition on the Startup Studio concept, in his book Szigeti (2016) discusses what he calls the “Anatomy of Startup Studios”. Having interviewed eight Startup Studios directors/CEOs Szigeti was able to characterize common startup studios traits and highlight what sets this model apart from other business incubators. Following his discoveries, Startup Studios can be characterized as: • Focusing on building multiple products & startups simultaneously;

• Idea generation is largely an internal process (some studios take outside ideas);
• Having a majority stake in their startups (or close to that);
• Having a core team and infrastructure that supports all their initiatives (and are shared by all projects);
• Unsuccessful ideas are discarded easily, and teams reassigned to other initiatives:
• Successful initiatives are spin off into a separate company, which continues its growth as a regular startup.

Szigeti also highlights the fact that each startup studio he interviewed uses a different model and structure by arranging core elements in different ways. These elements are: the type of Studio’s founders, which can be, for example, serial entrepreneurs that want to keep building companies or VC funds that want to offer a more complete service; Funding of the studio; Focus, on a specific technology or industry (Betaworks, for example, is focused on the social web); Idea Generation, as an internal process or a mix between internal ideation and external idea pulling; Team setup; Operations; Studio Resources, such as providing only initial funding, network and experience or a wider range of competencies and help throughout the entire process; Equity, taking a majority stake or not; and Exist Strategy, aiming for quick wins or long run profitability. However, there is no evidence that there is an optimal model to maximize startup performance.

Portugal Outlook

The Portuguese startup ecosystem is young but is growing fast and well (Startup Europe Partnership, 2015). With a government-supported entrepreneurship ecosystem, Portugal is a top destination to create, test, fail fast and try again (Fentiman-Hall, 2017).

Vehicle for Economic Development

Economic studies from around the globe consistently link entrepreneurship, particularly the fast-growth variety, with rapid job creation, GDP growth, and long-term productivity increases (Isenberg, 2010). The European Commission also points out in its Green Paper (2003) the importance of entrepreneurship, namely that it contributes to job creation, economic growth, boosting competitiveness, unlocking personal potential and its social impact (European Commision, 2003).

Entrepreneurial Ecosystem

The entrepreneurial ecosystem consists of a set of individual elements – such a leadership, culture, capital markets, and openminded customers – that combined enable productive entrepreneurship within a particular territory (Stam & Spigel, 2016; Startup Europe Partnership, 2015). Together these elements turbocharge venture creation and growth. The most difficult, yet crucial, thing for a government is to tailor the suit to fit its own local entrepreneurship dimensions, style, and climate as Isenberg (2010) study shows in the successful cases of Rwanda, Chile, Israel and Iceland. (Isenberg, 2010). Grandes Hubs de desenvolvimento

The Portuguese Ecosystem

By 2016 the unemployment rate in Portugal fell to less than 10 per cent, with 46 per cent of new jobs coming from startups younger than five years old (Fentiman-Hall, 2017). Rising from the late-2000s financial crisis, Portugal is rapidly emerging on the European startup map. This young ecosystem has already been able to produce tangible results. Small numbers if compared with other European countries like the UK, Germany, France and Spain. But not small at all if we consider the relative smaller size of the Portuguese economy (Startup Europe Partnership, 2015)

In the Forefront of Entrepreneurship

Portuguese unicorns and Portuguese entrepreneurial landscapeBig numbers and success rates. Evolution and so on One European unicorn has Portuguese blood in its veins – Farfetch, a leading example of the Portuguese ecosystem.

Startup Studios in Portugal

As result of the fast-evolving entrepreneurial ecosystem it can already be seen the emergence of Startup Studios in Portugal. The Studios that will be studied on this section and that will be subject of analysis for the purpose of this study were identified by the way they describe themselves in the “about us” sections in their websites. The four Studios identified characterize themselves as Venture Builders. They all aim at developing the startups they create (or embrace) as their own.