With start-up success ratio in India quite low, a lot of incubators and accelerators have mushroomed to help entrepreneurs taste success. Of late, a fresh model has emerged - start-up studios.
Unlike incubators and accelerators, these venture studios buy equities in the start-up they work with and nurture it as one of the co-founders. "It is a deeper engagement," says Fahad Moti Khan, founder and CEO of a Delhi-based start-up studio T9L. Founded in 2014, the company has popular start-ups such as NirogStreet, Hospals, CrownIt and Docquity to its laurels.
Digicita, SAP Startup Studio, and Prototyze Venture Studio are some other start-up studios working in India.
Start-up studios versus accelerators, incubators
Accelerators select batches of start-ups, put small amount of money and provide advisory-networking services. However, they do not promise execution. They don't handhold beyond a point, so it is a non-intimate association, says Khan. Incubators are the same, and also provide some office space.
However, a start-up studio not only helps with office space but also in funding, brand-building, KPI definition, business pitch creation, team selection, creating product and access to network.
"We basically fill the gaps that a small start-up team might struggle with. You come to us with some pieces of a jigsaw, we fill in the rest and complete the picture; that's our goal," Khan explains.
An accidental start
T9L was launched in 2005 as an IT servicing company building apps and websites. A lot of start-ups used to approach them to build tech, but were not in position to pay them. "Some of these start-ups were very exciting and we wanted to be part of these stories. So, we decided to work with these early stage companies even at less money. We helped them raise funds and we took equity in these companies," Khan says.
"Till that point we didn't know that something like start-up studio exists. When we discovered that the concept is quite popular in the West, we re-launched ourselves as a start-up studio in 2014. So, it was an accidental start," he adds.
T9L takes 5-25 per cent equity in start-ups, depending on how deep the involvement is and at what stage the start-up has come on board. So far T9L has worked with 34 start-ups.
How does T9L select start-ups?
More than 90 per cent start-ups who approach them don't get to join T9L's family. Apart from soft qualities in entrepreneurs such as hunger for success and passion towards the business idea, T9L evaluates the applicability of the product in the Indian market. "India is a very value-conscious market. We have 90 per cent success rates of start-ups but, 100 per cent success rate in products. We have never failed in the product," Khan says.
When asked about the challenge, Khan says, awareness about start-up studios is quite low in India despite having a massive start-up ecosystem. "Our ongoing battle is to make all stakeholders from founders to investors aware of it. Those who have worked with us have benefitted, so 100 per cent of our portfolio is through reference."