Meet Michael Borg. He used to be an archer and was incredibly passionate about the sport. Unfortunately, a debilitating injury put an end to his athletic career. But Michael hasn’t given up on his love of archery. He now wants to get back into the athletic world with a tech solution. The product would help professional archers enhance their performance and prevent the injuries Michael experienced himself.
Michael is only just starting out on his journey as an entrepreneur. And like many people on this bumpy road, he has numerous questions and concerns. Together with Michael, we’re going to search for answers to the most frequently asked questions. So strap in and let’s get started!
There’s not a startup out there that hasn’t faced the same problem at one point or another. Some early-stage entrepreneurs throw in the towel after a couple of unsuccessful attempts and say there’s no money for them. But here’s the reality: there’s plenty of funding available. It’s all about finding the right door to knock on. Together with Michael, let’s explore different funding options and find that door.
Venture capital is the first option that comes to mind for many early-stage startups. Venture capitalists have created a compelling narrative, with multi-million-dollar investments and stories of college dropouts going from zero to billionaire in no time at all. No wonder many entrepreneurs, including Michael, want to recreate this story for themselves.
In reality, VC funds are the least accessible source of investment for startups. They’re very selective. They usually work with startups that have already gained traction and can show a minimum viable product (MVP) and a growing customer base. Yes, sometimes they invest in an early-stage startup that still has little to show yet. But this usually happens when a startup has big return potential. Compare this with Michael’s case: our friend is targeting a very specific niche market. There won’t be millions of users simply because there aren’t millions of archers.
But, of course, some fortunate startups hit the investor jackpot. So, what does a VC fund get in return from those lucky few? Well, they can take up to 50% ownership of the new company. This can create big challenges for the startup. When someone owns such a significant share in a startup, they undoubtedly have a say in many matters. This can make it challenging for founders to stick to their own vision and strategy, especially if ideas clash.
Another problem may lie in the VC’s expectations. They might want to start getting returns from the investments as soon as possible to keep their own business rolling. This means they may demand high growth rates from the start, push a startup into making unwise decisions, and pressure them to spend too much, too fast. It’s not rare to see startups suffer and fail because of this pressure.
“Not every business is a venture business. VCs are not looking for someone who will 10x their money; they want you to 100x their money.”
Chris Howard, Founder and CEO at Softeq
When Michael thinks about his first steps, he probably thinks about accelerators. He likely has a picture in his head of a supportive community where like-minded, motivated people help a newcomer like Michael build a product and even give some money for it. Then, they introduce him to a serious VC who is so excited about Michael’s pitch that he writes him a big cheque straight away.
Now let’s get back to reality. First of all, it’s hard to get into a reputable accelerator. Big ones like Y Combinator and 500 Startups receive thousands of applications and only accept tens of startups per batch.
Those that have been accepted participate in an accelerator program, which usually lasts three to six months. During this time, participants meet professionals who help them refine and polish their projects. Accelerators also provide some funding to support this progress.
Big investment may be waiting at the end of the program. An accelerator hosts a demo day where startups get the opportunity to pitch their ideas to investors. Usually, about 10% of the participants from each batch succeed and secure funding.
On average, an accelerator receives a 5–10% ownership stake in a startup. This is much less than what venture capitalists demand. But it’s worth remembering that accelerators provide relatively small funding: tens, not hundreds of thousands of dollars. An accelerator’s mission is to help a startup secure a big investor.
Venture studios are often known as “startup factories.” They come up with ideas and put them to the test; then, they build a startup around the most promising idea. When it’s been set up, they bring in an entrepreneur who takes charge and launches it into the real world with the resources and support provided by the venture studio.
At this stage, a venture studio may need someone like Michael to execute their idea. Their, not his. For example, they might have tested a similar idea for an archery training product and think that it could work. So they may recruit Michael as a founding CEO, provide him with resources, and let him run the project.
In return, venture studios take a high percentage of ownership. On average, the stake ranges from 30% to 35%. But, this percentage can go up depending on the level of their involvement. If a venture studio provides a vetted idea and full support, their share may be as high as 90%.
Upon evaluating all three options, Michael decides to remove VCs from his list. The main reason is that he doesn’t have much to show to attract fundraising from VCs. Besides, even if he succeeds, he’ll give away too much of his company. Michael doesn’t like this idea. While he’s just starting out, he wants to keep as much control over his creation as possible.
Now just two options remain: accelerators and venture studios. Michael keeps looking for the best one.
Building a team around a startup is hard. It takes a lot of time and effort to find a co-founder whose expertise adds to yours and whose vision aligns with yours. Attracting employees is another challenge. And when you don’t have enough money in your bank account, it gets even tougher.
This is the case with Michael. He has no money to pay expensive technical specialists. Also, he hasn’t yet found a reliable partner who might also have tech expertise. So, he’s working solo. Michael hopes to build a team when he secures funding, but there’s a catch: to secure funding, some might say he needs a team.
Let’s see how Michael’s two remaining investor options would approach this issue.
Big names like Y-Combinator, Techstars, and 500 Startups prefer teams over individuals. They believe that co-founders can back up and complement each other and achieve more as a result. They also hope that a startup with diversely skilled experts will tackle many tasks internally.
While this doesn’t mean Michael has zero chance of being accepted into an accelerator, it does decrease the likelihood.
A key strength of venture studios is their focus on resource sharing. It goes well beyond quick tips or a few cookie-cutter ideas. Venture studios are matchmakers: they find the right experts and connect them with startups. Those experts are part of the venture studio’s team and get paid by the studio. So even if Michael doesn’t yet have a team, it’s not a dealbreaker. The venture studio has the resources to make things happen.
So it looks like both options could work for Michael. Now, let’s hear if he has any other questions or concerns.
Many entrepreneurs with tech product ideas come from a non-technical background, and this can be a bit worrying for some investors. Ultimately, they want to be sure that a startup knows what kind of product they want to build and how it can be done.
Let’s see how Michael’s case may work out.
Accelerators typically prefer to accept a startup where a founder or co-founder has technical skills, or there’s a tech expert on the team. The reason is that their resources are limited. Yes, they can help an early-stage startup enhance and refine an existing product, but they can’t build a whole new product from scratch. That’s why renowned accelerators look for startups with a solid tech architecture and an MVP. Or, at the very least, they expect the team to have a good understanding of the technical aspects of their upcoming project.
Unlike accelerators, venture studios want to build a product from scratch. They’re ready to allocate tech experts who will develop and validate an MVP. This might seem encouraging for Michael, but there’s a downside he should keep in mind. Venture studios get full control over the technical aspects of the project. They can shape it according to their own vision rather than Michael’s.
So, since Michael has neither a tech background nor an MVP, his chances of getting into a reputable accelerator seem low. A venture studio looks like the only viable option left for Michael, but he has some doubts about this path.
Here comes his final and, on a personal level, most significant concern.
For Michael, creating a solution to help fellow athletes avoid injuries is a kind of mission, not a side hustle. That’s why he’s extremely motivated and willing to work hard to turn the idea into a product. He knows the domain and has many contacts in the field, which helps him understand the product he wants to build.
That sounds great, doesn’t it?
If we’re talking about a traditional venture studio, Michael’s commitment to his idea can be a problem. A venture studio may have other plans. Even if they agree to implement another person’s idea, they will act more like a co-founder than an investor. That means that, in most cases, a venture studio will exercise control over Michael’s decisions.
This doesn’t work for Michael. He wants autonomy at the very early stage of his startup to build the product he wants.
So, here’s Michael’s situation. It seems that venture capitalists, accelerators, and traditional venture studios may not be the right fit for him. His strong points are a clear vision and extensive knowledge in his field. But, the absence of a team and technical skills seems to outweigh his strengths.
But wait, is it time to give up? Or is there another solution for Michael?
Before, we were talking about traditional venture studios. But not all venture studios work in the same way. Some take a hybrid approach, meaning they offer a mix of support, capital, and human resources. They combine features from the accelerator and traditional venture studio models. Also, depending on the resources they can offer, they select startups differently. That’s why they can be a perfect match for a startup that doesn’t suit other investors.
This is what happened to Michael. Purely by chance, he stumbled upon a startup event when he was passing by Houston. There, he met the team from the Softeq Venture Studio—and that was that. Their approach totally resonated with his own. Yes, they mentioned their tech expertise in software and hardware development and their previous work for big names like HP and NVIDIA. But they also spoke of a healthy and motivating startup ecosystem that would help different types of promising startups. Their concept, “a rising tide lifts all boats,” made Michael believe his startup wasn’t doomed and that there could be people who would agree to support him at this very early stage.
Here’s what he heard about the Softeq Venture Studio model.
In return, the Softeq Venture Studio gets between 6–10% equity in a startup. This percentage is determined on a case-by-case basis.
So, the Softeq Venture Studio has a lot in common with VCs, accelerators, and other venture studios. In the end, this mix makes the Softeq Venture Studio quite a unique place for early software and hardware startups.
Now, let’s find out how the Softeq Venture Studio answers Michael’s most urgent concerns.
The Softeq Venture Studio accepts up to 20 startups per cohort. Many of them are in the very early stages and often have no MVP. For many founders, it’s their first entrepreneurial experience. We help them by providing initial funding in cash and development services.
But it’s not just about money—it’s about smart money. In addition to funding, we provide tech expertise, mentorship, and consulting services.
We looked at a bunch of different options, including Techstars, and we ended up going with the Softeq Venture Studio because of the combination of services and capital. They will try to find the solution that works, whether it be customer acquisition or a technical challenge.
Peter Haas, Founder, Avendly (H1 2023 cohort)
One of the participants in our recent cohort said that being an entrepreneur is a lonely journey. But it doesn’t have to be this way.
At the Softeq Venture Studio, we offer a support system for solo entrepreneurs. Throughout the program, startups work in close cooperation with different experts. Sales, marketing, product development—you name it. Startups can work on every area they need to succeed in the long run.
The thing about the Softeq Venture Studio that really resonated with me was the community. To have that incredible support from marketing to software development to business development is what clinched the deal for me.
Ghazal Qureshi, founder and CEO, UpBrainery Technologies (H1 2023 cohort)
On the tech side, the Softeq Venture Studio can provide the services of a CTO and an engineering team for each startup in a cohort. Together with the startup’s team, they will establish the product’s key technical needs. Then, they find ways to solve them within the three-month duration of the program.
The Softeq Venture Studio is ready to provide the level of mentorship that each individual startup needs. The studio works with both startups without any tech expertise and those that are technologically savvy.
For example, the engineers from the Softeq Venture Studio cooperated with the tech-savvy FitLift team. The founders had a solid grasp of the technical side of the solution. Our role was to deepen and enhance the existing architecture.
The Softeq Venture Studio also works with startups that have a great idea and no tech expertise. In this case, they create a tech roadmap and build a viable product.
I’ve been on the starting line for a while but haven’t been able to get our tech to where we wanted it to be. At the Softeq Venture Studio, within a few days, we solved two years’ worth of tech problems.
Christina Billotti, Co-Founder and CEO, Atlas Coaching (Fall 2021 Cohort)
The Softeq Venture Studio likes partnering with founders who have deep knowledge of their niche. Here’s how it works. Founders bring their unique knowledge and insights to the table. In return, the Softeq Venture Studio brings their expertise in turning those ideas into a tangible reality. That expertise includes tech consulting, software and hardware development, marketing, and so on. In the end, this powerful synergy brings the startup to life.
Maybe an award-winning architect doesn’t know how to do the technology. But they know how to make the world’s most beautiful garden. The result is an extremely diverse group of people that are doing something that could change the world.
Bill Grandy, Director at the Softeq Venture Studio
So, to sum up, what can the Softeq Venture Studio offer to Michael?
You might be wondering why we came up with this story about Michael and his dreams. Well, it’s because Michael is our hero. His expertise is priceless. First of all, he knows the ins and outs of his field. Second, he suffered an injury himself, so he’s motivated to build a product that can help other people avoid similar injuries. In other words, Michael wants to make an impact on the world. And third, he has direct access to potential customers through his own contacts. He can talk to athletes, learn more about their needs and challenges, and quickly validate his ideas. That’s quite rare to find. All this can make Michael’s product best-in-class in the market.
If you think the Softeq Venture Studio could be the right fit for your startup idea, don’t hesitate to apply for the next cohort. It’s always better to change the world in good company.