customer websites that suggests other Web destinations as visitors exit; and Bumblecast, a marketing platform intended to help event organizers drive signups through online networking.
After helping Saban Brands sell San Diego-based KidZui to children’s learning and entertainment company LeapFrog last August, Bettencourt said he had been thinking about going into venture capital.
“I was really trying to figure out if it was better to join a firm or to set out on my own,” Bettencourt recalled. As he listened to entrepreneurs make their pitches to VCs, Bettencourt said he realized he was still an operator at heart.
“Jon and I got to know each other by helping startups around town,” Bettencourt said. “We just always had good conversations when we were together.”
Belmonte, who was making angel investments through his Cedar Ridge Ventures fund, had been going through a similar process, and said he had been thinking about the venture studio model for a while. In his conversations with Bettencourt, Belmonte said, “We each had our respective sticking points on whether the [venture studio] model would work. But within two or three weeks of hashing things out, we really helped each other work through those issues.”
One of the challenges of the venture studio model is that there is no straightforward way for outside investors in the venture studio to realize returns on their investment, Bettencourt said. “Nobody is sure when money should flow back to investors, and so you have to continually raise more money to fund more startups.”
So the co-founders developed a recipe for what Belmonte calls “a highly prescriptive capital distribution” that determines within six to nine months whether a new company should be shut down—or if it has shown enough revenue and customer growth to justify putting more capital, resources, and people into the business.
“What we’re trying to do is create incentives to get early wins,” Bettencourt said. Under their distribution formula, a percentage of each sale goes back to Cursive Labs to sustain its business. The rest is returned to both common and preferred shareholders. Another goal of the distribution formula is to align the interests of the common and preferred shareholders, Belmonte said.
Cursive Labs plans to take the lessons from each startup effort, good or bad, and apply them in a disciplined and metric-driven process to identify new startup ideas in subsequent rounds.
The entire process is intended to ensure that the team spends its time only on the projects that customers find valuable, and that reinvested proceeds enable Cursive Labs to sustain its operations.
That may be easier said than done, of course. In any event, Bettencourt and Belmonte maintain that Cursive Labs’ model represents a unique approach even among venture studios. With $2.2 million in initial funding secured, investors have essentially placed their bets. Now it’s just a matter of time to see if this is a model that works.
