Nestled off a quiet side street near Downtown Decatur is an office ready to launch the startups both you and your neighbors will be talking about next.
Neighborhood Studios officially came out of stealth mode this week. And its goal is very focused: Launch hyperlocal startups.
Building a “hyperlocal” venture might sound counterintuitive to some founders, who are often looking to scale their businesses as big as possible to customers around the globe. But don’t let the term fool you. Local does not limit the scalability options for these startups.
Hyperlocal companies are best understood as ones in which “supply and demand are in the same city,” Dave Payne, the Studio’s co-founder, explained. “Hyperlocal startups all start the same way. They all start with a founder having an idea, sharing it with their neighbors close to them, and then their neighbors use it a lot…and then it kind of goes from there.”
That includes household names like Uber, Nextdoor, Yelp, Doordash, and Taskrabbit. Hypepotamus readers will be familiar with some hyperlocal ideas already incubating right here in the Southeast, like Hux, MyPanda, Offline, and DashStylist.
Other examples include Scoutmob and Switchyards – two Atlanta-based companies Payne also co-founded.
The Venture Studio Model Take Off
Payne and his team are looking to build hyperlocal startups within a Venture Studio model.
A Venture Studio differentiates itself from a Venture Capital firm or a startup accelerator in one very key way. While VCs and accelerators work with founders who already have a product or a full business, Venture Studios start with an idea in-house.
“[The Studio] does some form of de-risking the idea…then they’ll go recruit a founder, spin the company off, and fund it,” said Payne.
Well-known Studios across the country include Pioneer Square Labs in Seattle, High Alpha in Indianapolis, Science in Los Angeles, and Atomic in San Francisco. Atlanta is home to several, including Atlanta Ventures’ Studio, Rule 1Ventures, alongside newly-launched W3 Studio and Savvy Tinkers Studios.
(If you want to dive in more on the model, the Harvard Business Review has a good guide up on their site. Or follow Atlanta-based Matthew Burris from Savvy Tinkers to learn why he is bullish on the model as a way to build scalable, investable ideas).
Step Inside Neighborhood Studios
The Neighborhood Studios team gave Hypepotamus a tour of their Decatur office to get a better sense of how it will grow the next hyperlocal startup success story.
Walking in, one of the first things you’ll notice is a wall with several 8.5×11 pieces of paper pinned up. Each piece of paper not only represents a startup idea; it is the culmination of an extensive research and vetting process.
The Neighborhood Studios team starts by exploring a list of 250 “different spaces or sub verticals” representing all aspects of daily life. Those verticals include things like storage, furniture, babysitting, tutoring, and local shopping.
The team researches what major pain points exist in each vertical and what technology solutions are missing in the market. The studio aims to look at “about 1,500 or 2,000 raw ideas a year,” which Payne said will be narrowed down to one larger experiment each month.
Those get pinned to the idea wall and then the testing gets underway. A polished MVP is put into the hands of a dozen or so Atlanta-based beta testers living within a single neighborhood.
The goal, Payne added, is to run 12 full experiments each year with “a few of them to be good enough to spin out” as full-blown, venture-backed businesses.
Building Neighborhood Studios alongside Payne is Tapan Patel and early early employees Whit Anderson, and Gabe Hart.
The Studio’s early investor list reads somewhat like a “who’s who” of the Atlanta technology scene. Garrett Langley (Flock Safety), Kat Cole (Athletic Greens), David Cummings (Atlanta Ventures), and Nick Miller (Gather) are just a few of the names backing the venture early on.
Early Signs of Success In The Neighborhood
Neighborhood Studios has already seen signs that this model is working. A startup that went through this iteration, Homegrown, just snagged the Studio’s first pre-seed investment.
Homegrown is an investment platform that “provides growth capital to the best neighborhood businesses” to help brick & mortar businesses scale.
“Right now, those businesses finance expansion by cobbling together small amounts of savings, debt and equity in order to expand. The debt amounts are small and difficult to get and require personal guarantees. And equity – like all equity – lasts forever,” added Payne.
As a new marketplace, Homegrown looks to bring a new type of revenue-based financing product that gives small businesses more flexibility while creating a new asset class for savvy investors.
Atlanta-based Overline VC is leading the pre-seed round.
For Partner Sean O’Brien, Homegrown platform is a “compelling option” for neighborhood business owners and investors alike.
“Even before recent challenges in the U.S. banking system, financing options were limited for these entrepreneurs, with high process burdens, restrictive terms, personal guarantees, and in many cases, a requirement to give up equity in their business,” O’Brien told Hypepotamus.
While this is the first deal Overline has done related to a Venture Studio, the team is ready to dive in.
“Dave and Tapan are both experienced founders themselves, and they have mentored countless other entrepreneurs; they have deep expertise in helping businesses scale at their earliest stages, from “zero to one.”