I had an interesting drink with Oussama Ammar from The Family a few days ago in London, as they try to replicate their French success in London and Berlin, so let me share with you what I learnt.
Their business model is actually very different from traditional startup accelerators or VC. They take little equity and don’t offer office space. But they look to systematically mutualize their startup portfolio’s largest cost lines, in order to create for them a competitive advantage on the cost side of their PnL : Here are a few examples.
Cloud Server / hosting cost: 50 startups together have more bargaining power than 1 when it comes to negotiate with Amazon / Microsoft Azure & co, resulting in very significant lower bills. That’s what The Family does for its portfolio.
Legal support: Many early stage startups have similar legal needs like negotiating terms sheets and sales contracts, setting up European subsidiaries,… doing that for many helps building a benchmark and again more bargaining power.
Hiring quality “startup grade” staff: They pivoted a couple of times on this one (specialized headhunters, meet up groups,..) until they finally started LION this summer.
Oussama claims to have done about 10 of these, from 100+ mutualizable needs they identified so far...
And here is the genius : When these services become really effective, they ... spin them off into a fully owned startup (eg “Made in Law” for the legal support above), and not only serve The Family 's startup portfolio, but anyone on the market. Often at marginal incremental cost. Which is in essence the same model Amazon used 10 years ago when creating AWS.
For those not aware of how this works, have a look at this (and look up for "Lego building blocks").