This is an in-depth look at the Startup Studio venture creation process from idea through execution to launch. Information courtesy of Madrona Venture Labs.
Madrona Venture Labs (MVL) is a Seattle-based Startup Studio that was founded in 2014. If you’re unfamiliar with the Startup Studio space, you can read this article (or watch this video) to learn more about them. For the sake of brevity, all you need to know is that a Startup Studio is a company that creates startup ventures one after another while incrementally improving the startup building process.
MVL is one of the more transparent Studios- meaning they often share their theories and provide in-depth details of their venture building process. They’ve done this with UpLevel, Spruce Up, and many more.
The Studio’s newest spin-off is a company called Zeitworks.
According to the MVL’s press release,
“Zeitworks’ mission is to maximize human potential at work, helping companies improve the efficiency of their operations, exposing bottlenecks, and driving improvements in real-time.”
After reading MVL’s account of building the Zeitworks venture from idea to launch, I decided to break down their process in finer detail in the hopes of giving entrepreneurs a peek behind the Startup Studio curtain.
Phase 1: Idea Validation (3 months)
It all starts with an idea. Zeitworks was a company ideated and developed from within the MVL Studio. According to their website, once an idea is discovered, there is a 3 month incubation period in which the internal MVL team tests and validates the idea.
I can say from experience that 3 months is the average time span for a Studio to take an idea through the initial market research/ validation phase.
During the Validation phase, MVL offers:
Network of experts, enterprises, and other founders
In-house team of product builders, marketers, legal, and designers
Customer surveys, focus groups, and beta testers
Market sizing, business planning, and competitive analysis
Access to mentors and advisors with deep industry expertise
Help recruiting a founding team- both internal and external to the Studio
At any point during those first 3 months, an idea can be killed off due to a variety of factors including lack of demand, poor market-fit, and bad timing.
After some initial market validation, Studios typically pass on an average of 70% of opportunities presented.
With Zeitworks, the Validation phased focused heavily on determining which data processing tasks were the most repetitive and cumbersome for enterprise employees. Through user surveys and market research, MVL found that their target customer would “value a solution that could give them visibility into the efficiency of their existing processes and also help find ways to be more labor-saving and cost-efficient.”
Through this customer engagement, the Zeitworks team- which consisted of Ryan Windham (Studio-based EIR and CEO of another Madrona Venture Labs startup), Ben Elowitz (Managing Director Madrona Venture Labs), Jay Bartot (CTO Madrona Venture Labs) and Keith Rosema (partner Madrona Venture Labs) was able to validate customer need.
Additionally, the team was able to decide on an approach which they describe as “a data-driven, automated, business process analysis and modeling system, later named Zeitworks.”
Phase 2: Accelerating Traction (3 months)
If the idea makes it past the first three months, it’s ready to move to the Traction phase- which also lasts approximately 3 months.
By the time a venture moves into the Transaction phase, it will have:
A solid founding team made up of the original internal Studio team members and 1–2 outside hires if necessary
A go-to-market strategy- inclusive of a business and revenue model
Evidence of customer demand
Typically (but not always) there is some form of an MVP built by this stage
MVL describes how they support the next step in the company building process: “Having established initial product-market fit, we will form and fund your company with its first investment and we work with founders to attract and recruit the core team of people that will build your initial product and acquire your first customers.”
Once Zeitworks moved from the Validation phase to the Traction phase, Jay Bartot and Keith Rosema transitioned out of the “builder team” and back to the internal MVL team.
With the team fully built, it was time to start executing. This is the stage where the product road map is developed and the team begins building an early version of the real product.
Since demand has been proven, the core focus is now on entering the market and testing product features. MVL also helps with growth, financial modeling, partnerships, and sales in this phase.
We provided security and privacy expertise, engaged an outsourced code development team for scale and worked with cloud providers to secure discounts and consulting time — all to get the product off to the strongest possible start. — MVL on helping the Zeitworks team scale
Phase 3: Fundraising (3 months)
According to MVL “By phase 3, your company has put together the team, built initial product and delivered initial customer traction and you’re ready to raise seed funding.”
As a founder, you have so much on your plate but it is your job to handle fundraising. Luckily, when working with a Startup Studio, you don’t have to go through this daunting and often exhausting process on your own. Startup Studios are experts at launching ventures and fundraising is part of that. To say that working with a Studio will accelerate and enhance your fundraising efforts would be a huge understatement.
MVL offers a variety of resources during this phase that makes the fundraising process easier, faster, and less stressful:
Access to their vast network (of VC’s, Angels, and partners)
Advice on how to prep for fundraising meetings
Help with developing the right deal structure
Financial investment (MVL has a startup venture investment arm and is oftentimes the first investor in a startup that was incubated inside of their Studio.)
Zeitworks was an internally incubated idea that went through Validation and Traction phases relatively quickly. Within just a few months the core team was in place, the early-version product was built, and the venture was ready to spin-out of MVL.
Using MVL’s vast resources, the team was able to raise a $4.5 million seed round which closed in early July, 2020. The round was led by the investment arm of MVL and included participation from JAZZ Venture Partners and dot.LA co-founder Spencer Rascoff.
This is a fantastic example of what a Startup Studio can do with focus and solid implementation.
The team at MVL was able to move from idea → validation → market-fit → building core team → traction → scale → spin-off → seed round fundraise, all in under 12 months.