An emerging trend in venture capital is the venture studio model, which aligns advisory services with investing to help accelerate the progress of early stage startups. This approach demonstrates how greater returns can be generated by investing early if there is a hands-on approach to forming and scaling commercial ventures. Rather than funding established startups, as a traditional venture capital firm would, venture studios employ teams to help form, manage and validate new technologies.
The studio team typically guides the day-to-day activities of a fledgling startup until there is enough traction to raise capital from outside investors, functioning largely in the role of a founder. As an example, here is the approach that University Hospitals Ventures and JumpStart are taking with the $8 million Healthcare Collaboration Fund launching this summer. The fund combines capital, advisory services and resource connections to drive the formation of new startups.
- Like-mindedness. Our organizations’ investment teams share a common a goal of accelerating the commercial potential of innovative ideas while generating a return on invested capital and improving the quality and value of health care. Collaboration can be better than one organization working alone, as it brings broader perspective and more efficiency to the diligence process.
- Differing opinions. A partnership can tap uniquely different perspectives. The UH Ventures team has unique access to teams within the UH system and others across the country that can provide tremendous value and insight before and after an investment. Perspectives on purchasing, clinical impact, hospital operations and patient satisfaction are essential elements that a startup must consider in the health care space. The Healthcare Collaboration Fund encourages looking at opportunities through multiple perspectives, thereby more directly tying investing to the voice of the patient and the voice of the clinician. This is extremely valuable when collaborating in early stage deals that not only need capital but are seeking to validate clinical, operational and/or economic proof points needed to attract follow-on and growth capital.
- Money matters. Sharing financial risk and return helps galvanize the investing teams around a shared economic goal and provides an incentive for both parties to bring advisory and clinical resources to hasten the commercialization timeline.
- Derisking pre-seed. Close access to the voice of the customer, combined with an investment return orientation, enables a more cost-effective, efficient construct for validating early stage ideas through UH’s Living Laboratory. Accelerating early stage validation while accepting fast fails offers a cost-effective approach to mining early stage opportunities.
The venture studio approach is an example of a growing trend to link capital, services and connections more tightly together to amplify economic vitality in our region. Shared resources and cross-organizational collaboration can truly establish Ohio as a world-class location for launching innovation in health care.
And this approach is not restricted to health care. Collaborations tied to a venture studio model can accelerate innovation and commercialization in other sectors in which Ohio has strength, such as advanced manufacturing, sports science, or insuretech. There will be developments very soon in our region on those fronts, too.
Jerry Frantz is Chief Investing and Services Officer at JumpStart Inc.