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White Paper - Generative Venture Studios.pdf

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Pierrick Bouffaron

This white paper explores the venture studio model. In doing so, we present the venture studio as a new generative framework central to boosting frontier tech ecosystems. Seen by many as an emerging asset class, venture studios efficiently reframe the dynamics between time to market, resources allocation, and capital structures that frontier tech startups need to become the next unicorns.

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Building frontier tech startups from the ground up GENERATIVE VENTURE STUDIOS White Paper ADVANCED MATERIALS + MANUFACTURING AM 2 S I N G A P O R E
AM AM2 is the first Singapore-based venture studio that creates and strengthens science-startup projects in the advanced materials and advanced manufacturing fields. We are on a journey to build eight companies over five years. Will you join us? www.am2.sg 2 Hello Tomorrow Asia Pacific is a mission-driven global organisation that aims to accelerate the transfer of deep technologies to solve some of our most pressing industrial, environmental and societal challenges. www.hello-tomorrow-apac.org About About
GENERATIVE VENTURE BUILDERS Building frontier tech startups from the ground up GENERATIVE VENTURE STUDIOS CONTENTS 04 Executive summary 06 The challenge of frontier tech 07 Key learnings in frontier tech 08 Understanding the venture studio model 09 A value-booster for frontier tech 11 Current state of operations 13 Key takeaways 14 The Singaporean scene 15 Conclusion 03 Generative venture studios: building frontier tech startups from the ground up
GENERATIVE VENTURE BUILDERS EXECUTIVE SUMMARY The turn of the 21st century has brought about the accelerated digitization of the global economy. Among an abundance of high tech, startups and fundraising, one indicator has remained stable: nine out of ten startups still fail in their first two years of existence. In this context, Singapore is no exception. Over the last decade, more than 200 incubation and acceleration structures have been created in the Little Red Dot. Accelerators and incubators provide startups with timed support including advisory, expertise and infrastructure. They work closely with local investors who provide financial resources, such as venture capital funds, family offices and business angels. This has worked well in the digital space, but we have yet to see the same results for frontier technologies. We believe the dual vision of supporting startupsconstrained timing on the one hand, money on the othergenerates discontinuous, incomplete and ultimately insufficiently effective coverage of the needs of frontier tech entrepreneurial projects. Financial support is challenging as investors favor low technical risks. The local frontier tech ecosystem is still nascent and coming to terms with how to adequately support the kind of big idea, research-driven innovative solutions Singapore needs to be developing. The venture builder modelaka startup factoryseeks precisely to rethink this relationship and fill the space. By enacting a much more hands-on and collaborative approach, venture builders actively make investments in frontier tech projects safer while supporting entrepreneurs who need more time to develop disruptive solutions. This white paper explores the venture studio model. In doing so, we present the venture studio as a new generative framework central to boosting frontier tech ecosystems. Seen by many as an emerging asset class, venture studios efficiently reframe the dynamics between time to market, resources allocation, and capital structures that frontier tech startups need to become the next unicorns. 04 Generative venture studios: building frontier tech startups from the ground up
KEY HIGHLIGHTS 01 The frontier tech scene is morphing A new frontier tech ecosystem is taking shape, with big ramifications for all players, most notably companies, investors and startups. While the US and Europe have been the forerunners in those fields, Asia has started to catch up. 02 Singapore is a regional tech leader Singapore is acknowledged as a global leader in scientific research and boasts a dynamic startup ecosystem which will mature over the next decade, embracing its role of regional tech beacon and anticipating the next waves of innovation. 03 New translational capabilities will be key to further frontier innovation Local operational forums whereby industry, investors, entrepreneurs and researchers can rigorously interrogate R&D and go-to-market pathways are still rare in the region. 04 Writing collectively a Singaporean frontier tech playbook Most accelerators and venture capital firms today do not work on the kind of frontier tech big idea, research-driven solutions that the Singaporean academic elite produces. Universities Institutes Research Corporations Investors Market Generative Venture Studios Fundamental Science Applied Research Product Development Prototyping Production Industrialization Scalability Bring business to science Turn ideas and brain power into industrial products and solutions. Bring science to business Raise awareness about frontier tech in the business world and collaborate. 05 Generative venture studios: building frontier tech startups from the ground up
GENERATIVE VENTURE BUILDERS THE CHALLENGE OF FRONTIER TECH 06 Generative venture studios: building frontier tech startups from the ground up In many countries, an obsession with digital technologies and exponential growth has captured entrepreneurial mindsets and current innovation discourses and, with it, the economic and political life of their ecosystems. The venture capital model largely inherited from a US market-centric philosophy and risk perception strongly influenced how new ecosystem entrepreneurial thinking has been globally rationalised and operationalised. As a consequence, the appetite for fast tech became the norm motivating technological entrepreneurship. Exponential growth thinking has also permeated public policy globally in the search of solutions for innovative statehood. However, politics of exponential growth does not embrace politics of technology when it comes to frontier tech. While frontier tech technologies offer society the opportunity to solve grand societal challenges, the road to market is a high-risk venture that requires massive investments and hybrid venturing lenses. The long gestation period means returns are typically slower to materialize, unlike for general consumer tech. Across Asia, Singapore has one of the most advanced startup ecosystems. Still, frontier tech investments are still few and far between. New innovation vehicles are necessary to keep pushing the entrepreneurial scene forward. Three areas need some collective attention: A new approach to market timing. Frontier tech research and go-to-market pathways require lengthy gestation periods. Behind each discovery is years of research, requiring large repeated rounds of funding. New hybrid models such as venture studios, indie hard tech funds and public-private partnerships will be crucial to bring world-class research to market. More must be done to leverage the fantastic efforts made over the last two decades to build a rich and dynamic fundamental science ecosystem. Availability of talent. The number of available experienced professionals with both industry and supply chain knowledge of how to commercialize frontier technologies is a large obstacle. Consequently, frontier tech valorisation channels tend to stagnate, as the ecosystem still lacks simultaneous depth and breadth found in other high-tech hubs. A special emphasis on talents and amalgamation of local and international expertise is essential. The dawn of a local frontier tech venture scene. The absence of a sophisticated frontier tech community in Singapore results in startups that end up having to look overseas for capital. Few local investors view frontier tech venture capital as a viable asset class. Venture returns are still largely unproven in Singapore, while returns for traditionally non-liquid, such as real estate, are high. New models will help demonstrate the value of hard tech.
GENERATIVE VENTURE BUILDERS KEY LEARNINGS IN FRONTIER TECH Frontier technologies are novel and offer significant advances over technologies currently in use. Advanced materials, biotechnology, blockchain, artificial intelligence, drones and robotics, quantum computing as well as photonics and electronics make Hello Tomorrow and BCGs list of top sectors. They all require substantial R&D to develop practical business or consumer applications and bring them from the lab to the market. Many of these technologies address big societal and environmental challenges and will likely shape the way we solve some of the most pressing global problems. Frontier tech venturing is more than ever a key endeavour. The central roles in the development of new scientific discoveries and their transfer to commercial applications have traditionally been played by large entities and institutions corporations, governments and universities. These roles are increasingly augmented, and in some instances replaced, by startups. The shape of technology R&D, productization and commercialisation is changing quickly. Nowadays founders can start, test and scale their frontier tech solutions with fewer resources and considerably faster than ever before. They benefit from technological advances that have substantially lowered the ignition costs. Longer development cycles and higher capital needs, however, are still the norm compared to their digital counterparts. A global survey of 400 frontier tech startups carried out by Hello Tomorrow and BCG back in 2017 revealed that the five core challenges faced by frontier tech startups were time to market, capital intensity, technology and scaling risks, and uncertain commercial and regulatory pathways (see figure 1). These challenges essentially stem from three core characteristics of frontier tech startups: Non-conventional value propositions. In frontier tech, product development depends on fundamental research and/or advanced R&D, based on the early combination of unique skillsets, know-how, and infrastructure. Implementation in complex value chains. Many frontier tech products require hardware integration, involving the collaborative work of specific experts and industrial stakeholders to procure, prototype, manufacture, and scale. Intensity of the capital and labour needs. The infrastructure, skills, and resources needed by a frontier tech startup over its lifetime require substantial capital allocation as well as innovative or hybrid financing mechanisms. Over the last years, support organisations such as incubators, accelerators and investment firms have adapted their approach to supporting the needs of frontier tech startups, with limited success. In this paradigm, a new operational model is expanding in most mature tech ecosystems: the venture studio. Time to market underestimated by 40% of startups Other - Conservative market - Find the right contact - Aptitude to scale up production Figure 1: core challenges for frontier tech Source: Hello Tomorrow and BCG survey among 400 startups, 2017 Time to market Capital intensity Technology complexity Uncertain go-to-market Regulatory framework Other reasons 07 Generative venture studios: building frontier tech startups from the ground up
UNDERSTANDING THE VENTURE STUDIO MODEL A venture studio is a structured organization dedicated to repeatedly creating startups by providing human and financial capital from day one. A venture studio is an entrepreneurial project with a top-gun team of founders, unique expertise, requisite capital, strong networks and the singular ambition of building on these capabilities to develop and scale ventures over a few years. Most studios originate the ideas and projects they develop. They do not join entrepreneurs or existing projects but initiate and mature them. They generate ideas, establish the base value proposition and engineer possible economic models before spinning off startups that are led by partners and managers within the studio. In order to create and develop successful ventures, a studio acquires long-term assets: teams, methodologies, know-how and technologies. A fundamental characteristic is the provision of everything that is necessary for an idea to come to life from the start, in particular the combination of human and financial resources. This is especially relevant in the frontier tech space. Its no longer the era of fail fast and break things. Instead, we are entering an era of articulated development of technologies that provide long term value- based businesses and performance. 08 Generative venture studios: building frontier tech startups from the ground up The industrial analogy of being a startup factory defines the key principles of a studio: Reducing operational venturing costs. Built around a multidisciplinary team and (often) a technical platform, venture studios make it possible to generate significant synergies, both in market terms (startups share their sectoral knowledge or even their clients) and in terms of costs (pooling of skillsets, know-how and tools). Consolidating the company building processes. Repeating the startup creation journey with consistent quality is a key objective for studios that differentiate them from solo (and riskier) approaches. Balancing project risk and value. For a studio, a project is not "doomed" to become either a major success or a total failure. For example, it can remain small but develop technologies used by other internal ventures. This ability to share between them spreads the risk for studio investors. Mastering market timing. From ignition to exit, based on a flexible and bespoke relay- race approach, the support duration is longer for a venture studio, often several years. This is the opposite of the spray and pray and winner takes all strategies. Gathering the best capabilities, at all times. The multidisciplinary and operational support provided by venture studios involves constant proximity to venture leads. The studios are also often called the "third founder" by reference to the typical pattern of regular entrepreneurial teams. A venture studio can be seen as the hybrid form, within the same initiative, of an investment vehicle, a prototyping company and a long-term accelerator.
A VALUE-BOOSTER FOR FRONTIER TECH Highly intensive and generative capabilities 09 Generative venture studios: building frontier tech startups from the ground up As a hybrid asset class, the venture studio model is a perfect candidate to develop and scale frontier technologies, building on its capacity to manufacture companies. The model calls for specialization, the mastery of sectorial value chains as well as portfolio defensibility. 1 A distinctive degree of specialization and market knowledge. In frontier tech, studios tend to offer very advanced technical know-how and a unique access to laboratory and prototyping equipment in addition to traditional forms of support (e.g. strategy, HR, back office). The high levels of specialization, resources, network alongside productization and industry familiarity constitutes a hefty moat against competition. A generative capacity to launch ventures. The venture studio capitalizes on emerging transformational technologies and their capacity to serve as generative mechanisms for disruptive innovation and entrepreneurial opportunities. They reproduce innovation success better than individual entrepreneurial stories, capitalizing on collective best practices, learnings and networks. A manufactured portfolio strategy balancing ambition and collective defensibility. A studio portfolio is able to aggregate assets not meaningful (and often not even conceivable) to an individuals entrepreneurial journey, but whose impact is critical for the whole studio performance. Market and technical expertise both generate and leverage knowledge inside the studio: every learning, action, and failure is internalised, digested and re-used. The availability of human and financial capital from the start. To progress from running lab-based experiments to prototyping products, frontier tech requires investment and support at a very early stage. But typically, significant investment is hard to come by without a running prototype, which puts many founders in a catch-22 situation. On the contrary, the venture studio model brings experience and capital as soon the startup ignition. A collection of projects spearheaded by a top operational team. The scientific and engineering challenges of frontier tech startups are great, and each project requires talentpeople with key knowledge and experience. From the start, studios provide an interdisciplinary team of doers, from product managers to industrialists, and attract managers and entrepreneurs along the way. A degree of internalization calibrated to accelerate the portfolio . To ensure relevant tech- to-market support, venture studios have internal teams that are able to internally support core developmental themes while others are entrusted to partners in their network. For example, studios can internally create hardware prototypes, while individual ventures might need to call on external design offices, studios and laboratories.
A different approach to go-to-market and venture alignment. Alongside the potential for wide-reaching applications and problem- solving, science-driven ventures are often distinguished by significantly longer time- frames and specialised resources needed to take their innovations from the lab to a product. As a third founder, the studio is built to support this journey over the years. A scalable process organized as a relay race. The scaling journey of frontier tech is long and arduous, requiring the navigation of multiple phases and challenges. While frontier tech startups are just as likely to exit as regular ones, it can typically take close to ten years to see returns, versus the usual three to seven years. A different approach to pivoting and value generation. Some science startup projects will pivot and change direction altogether. Much more flexible than an accelerator or a fund, a studio, while aiming for success for each project, can adjust its support for each startup, both in terms of duration and resources. A VALUE-BOOSTER FOR FRONTIER TECH Bespoke value and equity story 2 The venture studio model features a business model structured on building startups. It may seem simplistic, but that is exactly what venture studios are about. Unlike investors or innovation programs, venture studios not only provide capital, but are also hands-on and engaged in the startups they co-create. A strategic and operational view of value creation. Venture studios resemble venture capital firms in that they grow a portfolio and own shares of the various businesses they develop. The scope of their activities encompass the entire process of designing, developing and strategically managing the enterprises in which they participate. A strategic view of equity. Shareholding varies a lot at the time of spinout. Most venture studios are in the 40-60% range, especially when working in the frontier tech space or for corporations. Studios closer to the accelerator model tend to keep a lesser portion of shares. This is no surprise. The venture builder keeps a board seat and acts a co-founder. Issues such as employee compensation, key hires and partnerships all require the flexibility to reallocate equity accordingly. A venture studio has the latitude to reorganize the cap table of the spinout in order to be attractive for a roadshow with more traditional venture capital firms or to bring talents in. 10 Generative venture studios: building frontier tech startups from the ground up
CURRENT STATE OF OPERATIONS 1 2 3 4 STUDIOS HUMAN CAPITAL FINANCIAL CAPITAL STARTUP FACTORY + - Openopportunisticstudios No specialization, various ideas Mostly external resources (e.g., Bam Ventures, Atomico, Expara) Financial studios Mostly built around financial support Closer to accelerator VCs (e.g., Idealab, Pioneer Square Lab, Science Inc.) Service-driven studios Providing HR and expertise, mostly invoiced Closer from specialized incubators and consultancies (e.g., Colab, venture builder consulting services) Value-driven studios Strong interaction with corporates, governments or universities to ignite and develop projects (e.g., Prehype, Techno Founders, Post Urban Ventures) 11 Generative venture studios: building frontier tech startups from the ground up In maturing markets, venture studios can make up for patchy ecosystems. The ability of studios to attract human capital, to retain knowledge, and to grow networks of potential investors compensates for ecosystems that are not as deep as already mature markets like Silicon Valley, Boston or Shenzhen. Many challenges await the founders and builders in a maturing field or frontier tech space in which problems like lack of calibrated investment culture, excessive bureaucracy, a shortage of skilled labour and long development cycles are commonplace. The venture studio model helps frontier tech entrepreneurs in all these aspects, allowing founders and managers to spend more time on product development and growth. Spinouts from a venture studio can access and leverage the same processes, resources and talents present in mature collaborative ecosystems that facilitate synergistic entrepreneurship. Studios focus on expertise scalability as much as market scalability. The venture studio structure facilitates connections and alleviates costs among the studios projects, providing enormous benefits in terms of efficiency. - - An easy way to categorise todays existing venture studios consists in segmenting them in accordance with the flexibility of their operational frameworks, as well as their provision of financial and human resources. For frontier tech, value-driven studios are a booming sub-category: they operate in specific ways, being more guided from the outset of ideas by strong links with industrial groups or universities who submit specific innovation themes to them.
GENERATIVE VENTURE BUILDERS
KEY TAKEAWAYS The 7 pillars of the model A powerful human and financial capital. Venture studios are all about sharing resources and talents from the start, and leverage hands-on these capabilities on a portfolio of startups. A prolonged support period. This duration is generally long for a venture studio, often several years from the idea stage to the profitable commercial development of the startup. A high level of specialization. To guarantee the performance of their operational teams, venture studios specialize in creating several startups per sector, often choosing one. A long-term venture alignment. The studio, at the origin of the projects and "third founder" is, by nature, totally invested alongside the managers in the success of each startup. A solid and flexible capital holding. As the creator of projects, a venture studio starts up with 100% of an idea, while an accelerator or a fund starts up with 0% when it does. A natural propensity to collaborate. A venture studio thrives on shared solutions, shared talents and shared growth, which in turn result in reduced costs and better applied efforts. A balanced repartition of risks. The core team and partners usually search for hotspots for innovation and proactively conceive new businesses, spreading the risk over the value chain to ensure traction and defensibility. 13 Generative venture studios: building frontier tech startups from the ground up GENERATIVE VENTURE STUDIOS
THE SINGAPOREAN FRONTIER TECH SCENE* Academia and national agencies Active corporations National supporting bodies Local industrial clusters Non profits and clubs Venture capital firms Accelerators and accelerator VCs 14 Generative venture studios: building frontier tech startups from the ground up * Non-exhaustive list
GENERATIVE VENTURE BUILDERS CONCLUSION Frontier tech is no longer the primary purview of deep pockets or of the scientific community. Scientific innovation is a much more fragmented and diverse endeavour than ever before - geographically, functionally, and industrially. Clearly, a new frontier tech ecosystem is taking shape worldwide, with big ramifications for all players, most notably corporations, investors and entrepreneurs. While the US and Europe have been the forerunners in those fields, Asia has started to catch up. Singapore in particular aims to become a global node of frontier technologies, innovation and enterprise. The country is already acknowledged as a global leader in scientific research and IP protection, and boasts a dynamic and growing startup ecosystem. Recently, a string of national schemes have helped catalyse frontier tech investments and made the risk more palatable for investors to consider shifting their investments from general technologies to frontier tech. But this is just the beginning, and a major cultural shift is expected to strengthen these first efforts. Looking at the current generation of local frontier tech startups, we predict a bright future for venture studios in Singapore. The model constitutes a new approach to creating innovative businesses which has learned from the recent but rich history of hundreds of incubators and accelerators. Studios set themselves apart through deep expertise, bespoke resources, approaches and cultures. We strongly believe that venture studios are relevant in addressing the technicalities, complexities and risks involved with the frontier tech fields. Nowadays it isnt enough to work hard. One must work smart to achieve exponential successand venture studios emerge in this exact scenario. In order to thrive and be impactful, venture studios should not remain a collection of independent initiatives but seek to become a sector that is structured and developed. While sharing stories and best practices, venture studios will confirm their model relevance with the emergence of the first frontier tech unicorns and decacorns. 15 Generative venture studios: building frontier tech startups from the ground up
AM2 is the first Singapore-based venture studio that creates and strengthens science-startup projects in the advanced materials and advanced manufacturing fields. We are on a journey to build eight companies over five years. Will you join us? www.am2.sg Hello Tomorrow Asia Pacific is a mission-driven global organisation that aims to accelerate the transfer of deep technologies to solve some of our most pressing industrial, environmental and societal challenges. www.hello-tomorrow-apac.org About ANTONIO CASTRO NETO SCIENCE PIERRICK BOUFFARON VENTURING FLORIAN DOETZER INDUSTRY XINYI TOW INVESTMENT ERNEST XUE ECOSYSTEM CONTRIBUTORS 16 Generative venture studios: building frontier tech startups from the ground up Disclaimer The information, analysis and opinions (the Content) contained herein is provided as a source of information. While the authors endeavour to ensure that the Content is correct as of the date of publication, the authors do not warrant the accuracy or completeness of the Content. The authors shall not be liable for any indirect, incidental, special, punitive, or consequential damages or expenses (including loss of profits or revenue, business interruption, loss of data, or failure to realise anticipated savings or benefits) arising from or related to the Content. AM 2 About
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White Paper - Generative Venture Studios.pdf

  • 1. Building frontier tech startups from the ground up GENERATIVE VENTURE STUDIOS White Paper ADVANCED MATERIALS + MANUFACTURING AM 2 S I N G A P O R E
  • 2. AM AM2 is the first Singapore-based venture studio that creates and strengthens science-startup projects in the advanced materials and advanced manufacturing fields. We are on a journey to build eight companies over five years. Will you join us? www.am2.sg 2 Hello Tomorrow Asia Pacific is a mission-driven global organisation that aims to accelerate the transfer of deep technologies to solve some of our most pressing industrial, environmental and societal challenges. www.hello-tomorrow-apac.org About About
  • 3. GENERATIVE VENTURE BUILDERS Building frontier tech startups from the ground up GENERATIVE VENTURE STUDIOS CONTENTS 04 Executive summary 06 The challenge of frontier tech 07 Key learnings in frontier tech 08 Understanding the venture studio model 09 A value-booster for frontier tech 11 Current state of operations 13 Key takeaways 14 The Singaporean scene 15 Conclusion 03 Generative venture studios: building frontier tech startups from the ground up
  • 4. GENERATIVE VENTURE BUILDERS EXECUTIVE SUMMARY The turn of the 21st century has brought about the accelerated digitization of the global economy. Among an abundance of high tech, startups and fundraising, one indicator has remained stable: nine out of ten startups still fail in their first two years of existence. In this context, Singapore is no exception. Over the last decade, more than 200 incubation and acceleration structures have been created in the Little Red Dot. Accelerators and incubators provide startups with timed support including advisory, expertise and infrastructure. They work closely with local investors who provide financial resources, such as venture capital funds, family offices and business angels. This has worked well in the digital space, but we have yet to see the same results for frontier technologies. We believe the dual vision of supporting startupsconstrained timing on the one hand, money on the othergenerates discontinuous, incomplete and ultimately insufficiently effective coverage of the needs of frontier tech entrepreneurial projects. Financial support is challenging as investors favor low technical risks. The local frontier tech ecosystem is still nascent and coming to terms with how to adequately support the kind of big idea, research-driven innovative solutions Singapore needs to be developing. The venture builder modelaka startup factoryseeks precisely to rethink this relationship and fill the space. By enacting a much more hands-on and collaborative approach, venture builders actively make investments in frontier tech projects safer while supporting entrepreneurs who need more time to develop disruptive solutions. This white paper explores the venture studio model. In doing so, we present the venture studio as a new generative framework central to boosting frontier tech ecosystems. Seen by many as an emerging asset class, venture studios efficiently reframe the dynamics between time to market, resources allocation, and capital structures that frontier tech startups need to become the next unicorns. 04 Generative venture studios: building frontier tech startups from the ground up
  • 5. KEY HIGHLIGHTS 01 The frontier tech scene is morphing A new frontier tech ecosystem is taking shape, with big ramifications for all players, most notably companies, investors and startups. While the US and Europe have been the forerunners in those fields, Asia has started to catch up. 02 Singapore is a regional tech leader Singapore is acknowledged as a global leader in scientific research and boasts a dynamic startup ecosystem which will mature over the next decade, embracing its role of regional tech beacon and anticipating the next waves of innovation. 03 New translational capabilities will be key to further frontier innovation Local operational forums whereby industry, investors, entrepreneurs and researchers can rigorously interrogate R&D and go-to-market pathways are still rare in the region. 04 Writing collectively a Singaporean frontier tech playbook Most accelerators and venture capital firms today do not work on the kind of frontier tech big idea, research-driven solutions that the Singaporean academic elite produces. Universities Institutes Research Corporations Investors Market Generative Venture Studios Fundamental Science Applied Research Product Development Prototyping Production Industrialization Scalability Bring business to science Turn ideas and brain power into industrial products and solutions. Bring science to business Raise awareness about frontier tech in the business world and collaborate. 05 Generative venture studios: building frontier tech startups from the ground up
  • 6. GENERATIVE VENTURE BUILDERS THE CHALLENGE OF FRONTIER TECH 06 Generative venture studios: building frontier tech startups from the ground up In many countries, an obsession with digital technologies and exponential growth has captured entrepreneurial mindsets and current innovation discourses and, with it, the economic and political life of their ecosystems. The venture capital model largely inherited from a US market-centric philosophy and risk perception strongly influenced how new ecosystem entrepreneurial thinking has been globally rationalised and operationalised. As a consequence, the appetite for fast tech became the norm motivating technological entrepreneurship. Exponential growth thinking has also permeated public policy globally in the search of solutions for innovative statehood. However, politics of exponential growth does not embrace politics of technology when it comes to frontier tech. While frontier tech technologies offer society the opportunity to solve grand societal challenges, the road to market is a high-risk venture that requires massive investments and hybrid venturing lenses. The long gestation period means returns are typically slower to materialize, unlike for general consumer tech. Across Asia, Singapore has one of the most advanced startup ecosystems. Still, frontier tech investments are still few and far between. New innovation vehicles are necessary to keep pushing the entrepreneurial scene forward. Three areas need some collective attention: A new approach to market timing. Frontier tech research and go-to-market pathways require lengthy gestation periods. Behind each discovery is years of research, requiring large repeated rounds of funding. New hybrid models such as venture studios, indie hard tech funds and public-private partnerships will be crucial to bring world-class research to market. More must be done to leverage the fantastic efforts made over the last two decades to build a rich and dynamic fundamental science ecosystem. Availability of talent. The number of available experienced professionals with both industry and supply chain knowledge of how to commercialize frontier technologies is a large obstacle. Consequently, frontier tech valorisation channels tend to stagnate, as the ecosystem still lacks simultaneous depth and breadth found in other high-tech hubs. A special emphasis on talents and amalgamation of local and international expertise is essential. The dawn of a local frontier tech venture scene. The absence of a sophisticated frontier tech community in Singapore results in startups that end up having to look overseas for capital. Few local investors view frontier tech venture capital as a viable asset class. Venture returns are still largely unproven in Singapore, while returns for traditionally non-liquid, such as real estate, are high. New models will help demonstrate the value of hard tech.
  • 7. GENERATIVE VENTURE BUILDERS KEY LEARNINGS IN FRONTIER TECH Frontier technologies are novel and offer significant advances over technologies currently in use. Advanced materials, biotechnology, blockchain, artificial intelligence, drones and robotics, quantum computing as well as photonics and electronics make Hello Tomorrow and BCGs list of top sectors. They all require substantial R&D to develop practical business or consumer applications and bring them from the lab to the market. Many of these technologies address big societal and environmental challenges and will likely shape the way we solve some of the most pressing global problems. Frontier tech venturing is more than ever a key endeavour. The central roles in the development of new scientific discoveries and their transfer to commercial applications have traditionally been played by large entities and institutions corporations, governments and universities. These roles are increasingly augmented, and in some instances replaced, by startups. The shape of technology R&D, productization and commercialisation is changing quickly. Nowadays founders can start, test and scale their frontier tech solutions with fewer resources and considerably faster than ever before. They benefit from technological advances that have substantially lowered the ignition costs. Longer development cycles and higher capital needs, however, are still the norm compared to their digital counterparts. A global survey of 400 frontier tech startups carried out by Hello Tomorrow and BCG back in 2017 revealed that the five core challenges faced by frontier tech startups were time to market, capital intensity, technology and scaling risks, and uncertain commercial and regulatory pathways (see figure 1). These challenges essentially stem from three core characteristics of frontier tech startups: Non-conventional value propositions. In frontier tech, product development depends on fundamental research and/or advanced R&D, based on the early combination of unique skillsets, know-how, and infrastructure. Implementation in complex value chains. Many frontier tech products require hardware integration, involving the collaborative work of specific experts and industrial stakeholders to procure, prototype, manufacture, and scale. Intensity of the capital and labour needs. The infrastructure, skills, and resources needed by a frontier tech startup over its lifetime require substantial capital allocation as well as innovative or hybrid financing mechanisms. Over the last years, support organisations such as incubators, accelerators and investment firms have adapted their approach to supporting the needs of frontier tech startups, with limited success. In this paradigm, a new operational model is expanding in most mature tech ecosystems: the venture studio. Time to market underestimated by 40% of startups Other - Conservative market - Find the right contact - Aptitude to scale up production Figure 1: core challenges for frontier tech Source: Hello Tomorrow and BCG survey among 400 startups, 2017 Time to market Capital intensity Technology complexity Uncertain go-to-market Regulatory framework Other reasons 07 Generative venture studios: building frontier tech startups from the ground up
  • 8. UNDERSTANDING THE VENTURE STUDIO MODEL A venture studio is a structured organization dedicated to repeatedly creating startups by providing human and financial capital from day one. A venture studio is an entrepreneurial project with a top-gun team of founders, unique expertise, requisite capital, strong networks and the singular ambition of building on these capabilities to develop and scale ventures over a few years. Most studios originate the ideas and projects they develop. They do not join entrepreneurs or existing projects but initiate and mature them. They generate ideas, establish the base value proposition and engineer possible economic models before spinning off startups that are led by partners and managers within the studio. In order to create and develop successful ventures, a studio acquires long-term assets: teams, methodologies, know-how and technologies. A fundamental characteristic is the provision of everything that is necessary for an idea to come to life from the start, in particular the combination of human and financial resources. This is especially relevant in the frontier tech space. Its no longer the era of fail fast and break things. Instead, we are entering an era of articulated development of technologies that provide long term value- based businesses and performance. 08 Generative venture studios: building frontier tech startups from the ground up The industrial analogy of being a startup factory defines the key principles of a studio: Reducing operational venturing costs. Built around a multidisciplinary team and (often) a technical platform, venture studios make it possible to generate significant synergies, both in market terms (startups share their sectoral knowledge or even their clients) and in terms of costs (pooling of skillsets, know-how and tools). Consolidating the company building processes. Repeating the startup creation journey with consistent quality is a key objective for studios that differentiate them from solo (and riskier) approaches. Balancing project risk and value. For a studio, a project is not "doomed" to become either a major success or a total failure. For example, it can remain small but develop technologies used by other internal ventures. This ability to share between them spreads the risk for studio investors. Mastering market timing. From ignition to exit, based on a flexible and bespoke relay- race approach, the support duration is longer for a venture studio, often several years. This is the opposite of the spray and pray and winner takes all strategies. Gathering the best capabilities, at all times. The multidisciplinary and operational support provided by venture studios involves constant proximity to venture leads. The studios are also often called the "third founder" by reference to the typical pattern of regular entrepreneurial teams. A venture studio can be seen as the hybrid form, within the same initiative, of an investment vehicle, a prototyping company and a long-term accelerator.
  • 9. A VALUE-BOOSTER FOR FRONTIER TECH Highly intensive and generative capabilities 09 Generative venture studios: building frontier tech startups from the ground up As a hybrid asset class, the venture studio model is a perfect candidate to develop and scale frontier technologies, building on its capacity to manufacture companies. The model calls for specialization, the mastery of sectorial value chains as well as portfolio defensibility. 1 A distinctive degree of specialization and market knowledge. In frontier tech, studios tend to offer very advanced technical know-how and a unique access to laboratory and prototyping equipment in addition to traditional forms of support (e.g. strategy, HR, back office). The high levels of specialization, resources, network alongside productization and industry familiarity constitutes a hefty moat against competition. A generative capacity to launch ventures. The venture studio capitalizes on emerging transformational technologies and their capacity to serve as generative mechanisms for disruptive innovation and entrepreneurial opportunities. They reproduce innovation success better than individual entrepreneurial stories, capitalizing on collective best practices, learnings and networks. A manufactured portfolio strategy balancing ambition and collective defensibility. A studio portfolio is able to aggregate assets not meaningful (and often not even conceivable) to an individuals entrepreneurial journey, but whose impact is critical for the whole studio performance. Market and technical expertise both generate and leverage knowledge inside the studio: every learning, action, and failure is internalised, digested and re-used. The availability of human and financial capital from the start. To progress from running lab-based experiments to prototyping products, frontier tech requires investment and support at a very early stage. But typically, significant investment is hard to come by without a running prototype, which puts many founders in a catch-22 situation. On the contrary, the venture studio model brings experience and capital as soon the startup ignition. A collection of projects spearheaded by a top operational team. The scientific and engineering challenges of frontier tech startups are great, and each project requires talentpeople with key knowledge and experience. From the start, studios provide an interdisciplinary team of doers, from product managers to industrialists, and attract managers and entrepreneurs along the way. A degree of internalization calibrated to accelerate the portfolio . To ensure relevant tech- to-market support, venture studios have internal teams that are able to internally support core developmental themes while others are entrusted to partners in their network. For example, studios can internally create hardware prototypes, while individual ventures might need to call on external design offices, studios and laboratories.
  • 10. A different approach to go-to-market and venture alignment. Alongside the potential for wide-reaching applications and problem- solving, science-driven ventures are often distinguished by significantly longer time- frames and specialised resources needed to take their innovations from the lab to a product. As a third founder, the studio is built to support this journey over the years. A scalable process organized as a relay race. The scaling journey of frontier tech is long and arduous, requiring the navigation of multiple phases and challenges. While frontier tech startups are just as likely to exit as regular ones, it can typically take close to ten years to see returns, versus the usual three to seven years. A different approach to pivoting and value generation. Some science startup projects will pivot and change direction altogether. Much more flexible than an accelerator or a fund, a studio, while aiming for success for each project, can adjust its support for each startup, both in terms of duration and resources. A VALUE-BOOSTER FOR FRONTIER TECH Bespoke value and equity story 2 The venture studio model features a business model structured on building startups. It may seem simplistic, but that is exactly what venture studios are about. Unlike investors or innovation programs, venture studios not only provide capital, but are also hands-on and engaged in the startups they co-create. A strategic and operational view of value creation. Venture studios resemble venture capital firms in that they grow a portfolio and own shares of the various businesses they develop. The scope of their activities encompass the entire process of designing, developing and strategically managing the enterprises in which they participate. A strategic view of equity. Shareholding varies a lot at the time of spinout. Most venture studios are in the 40-60% range, especially when working in the frontier tech space or for corporations. Studios closer to the accelerator model tend to keep a lesser portion of shares. This is no surprise. The venture builder keeps a board seat and acts a co-founder. Issues such as employee compensation, key hires and partnerships all require the flexibility to reallocate equity accordingly. A venture studio has the latitude to reorganize the cap table of the spinout in order to be attractive for a roadshow with more traditional venture capital firms or to bring talents in. 10 Generative venture studios: building frontier tech startups from the ground up
  • 11. CURRENT STATE OF OPERATIONS 1 2 3 4 STUDIOS HUMAN CAPITAL FINANCIAL CAPITAL STARTUP FACTORY + - Openopportunisticstudios No specialization, various ideas Mostly external resources (e.g., Bam Ventures, Atomico, Expara) Financial studios Mostly built around financial support Closer to accelerator VCs (e.g., Idealab, Pioneer Square Lab, Science Inc.) Service-driven studios Providing HR and expertise, mostly invoiced Closer from specialized incubators and consultancies (e.g., Colab, venture builder consulting services) Value-driven studios Strong interaction with corporates, governments or universities to ignite and develop projects (e.g., Prehype, Techno Founders, Post Urban Ventures) 11 Generative venture studios: building frontier tech startups from the ground up In maturing markets, venture studios can make up for patchy ecosystems. The ability of studios to attract human capital, to retain knowledge, and to grow networks of potential investors compensates for ecosystems that are not as deep as already mature markets like Silicon Valley, Boston or Shenzhen. Many challenges await the founders and builders in a maturing field or frontier tech space in which problems like lack of calibrated investment culture, excessive bureaucracy, a shortage of skilled labour and long development cycles are commonplace. The venture studio model helps frontier tech entrepreneurs in all these aspects, allowing founders and managers to spend more time on product development and growth. Spinouts from a venture studio can access and leverage the same processes, resources and talents present in mature collaborative ecosystems that facilitate synergistic entrepreneurship. Studios focus on expertise scalability as much as market scalability. The venture studio structure facilitates connections and alleviates costs among the studios projects, providing enormous benefits in terms of efficiency. - - An easy way to categorise todays existing venture studios consists in segmenting them in accordance with the flexibility of their operational frameworks, as well as their provision of financial and human resources. For frontier tech, value-driven studios are a booming sub-category: they operate in specific ways, being more guided from the outset of ideas by strong links with industrial groups or universities who submit specific innovation themes to them.
  • 13. KEY TAKEAWAYS The 7 pillars of the model A powerful human and financial capital. Venture studios are all about sharing resources and talents from the start, and leverage hands-on these capabilities on a portfolio of startups. A prolonged support period. This duration is generally long for a venture studio, often several years from the idea stage to the profitable commercial development of the startup. A high level of specialization. To guarantee the performance of their operational teams, venture studios specialize in creating several startups per sector, often choosing one. A long-term venture alignment. The studio, at the origin of the projects and "third founder" is, by nature, totally invested alongside the managers in the success of each startup. A solid and flexible capital holding. As the creator of projects, a venture studio starts up with 100% of an idea, while an accelerator or a fund starts up with 0% when it does. A natural propensity to collaborate. A venture studio thrives on shared solutions, shared talents and shared growth, which in turn result in reduced costs and better applied efforts. A balanced repartition of risks. The core team and partners usually search for hotspots for innovation and proactively conceive new businesses, spreading the risk over the value chain to ensure traction and defensibility. 13 Generative venture studios: building frontier tech startups from the ground up GENERATIVE VENTURE STUDIOS
  • 14. THE SINGAPOREAN FRONTIER TECH SCENE* Academia and national agencies Active corporations National supporting bodies Local industrial clusters Non profits and clubs Venture capital firms Accelerators and accelerator VCs 14 Generative venture studios: building frontier tech startups from the ground up * Non-exhaustive list
  • 15. GENERATIVE VENTURE BUILDERS CONCLUSION Frontier tech is no longer the primary purview of deep pockets or of the scientific community. Scientific innovation is a much more fragmented and diverse endeavour than ever before - geographically, functionally, and industrially. Clearly, a new frontier tech ecosystem is taking shape worldwide, with big ramifications for all players, most notably corporations, investors and entrepreneurs. While the US and Europe have been the forerunners in those fields, Asia has started to catch up. Singapore in particular aims to become a global node of frontier technologies, innovation and enterprise. The country is already acknowledged as a global leader in scientific research and IP protection, and boasts a dynamic and growing startup ecosystem. Recently, a string of national schemes have helped catalyse frontier tech investments and made the risk more palatable for investors to consider shifting their investments from general technologies to frontier tech. But this is just the beginning, and a major cultural shift is expected to strengthen these first efforts. Looking at the current generation of local frontier tech startups, we predict a bright future for venture studios in Singapore. The model constitutes a new approach to creating innovative businesses which has learned from the recent but rich history of hundreds of incubators and accelerators. Studios set themselves apart through deep expertise, bespoke resources, approaches and cultures. We strongly believe that venture studios are relevant in addressing the technicalities, complexities and risks involved with the frontier tech fields. Nowadays it isnt enough to work hard. One must work smart to achieve exponential successand venture studios emerge in this exact scenario. In order to thrive and be impactful, venture studios should not remain a collection of independent initiatives but seek to become a sector that is structured and developed. While sharing stories and best practices, venture studios will confirm their model relevance with the emergence of the first frontier tech unicorns and decacorns. 15 Generative venture studios: building frontier tech startups from the ground up
  • 16. AM2 is the first Singapore-based venture studio that creates and strengthens science-startup projects in the advanced materials and advanced manufacturing fields. We are on a journey to build eight companies over five years. Will you join us? www.am2.sg Hello Tomorrow Asia Pacific is a mission-driven global organisation that aims to accelerate the transfer of deep technologies to solve some of our most pressing industrial, environmental and societal challenges. www.hello-tomorrow-apac.org About ANTONIO CASTRO NETO SCIENCE PIERRICK BOUFFARON VENTURING FLORIAN DOETZER INDUSTRY XINYI TOW INVESTMENT ERNEST XUE ECOSYSTEM CONTRIBUTORS 16 Generative venture studios: building frontier tech startups from the ground up Disclaimer The information, analysis and opinions (the Content) contained herein is provided as a source of information. While the authors endeavour to ensure that the Content is correct as of the date of publication, the authors do not warrant the accuracy or completeness of the Content. The authors shall not be liable for any indirect, incidental, special, punitive, or consequential damages or expenses (including loss of profits or revenue, business interruption, loss of data, or failure to realise anticipated savings or benefits) arising from or related to the Content. AM 2 About