The Scientific Method: Tech studio Science Inc.’s plan to build startups with repeatable results

The Scientific Method: Tech studio Science Inc.’s plan to build startups with repeatable results ...

LA-based technology studio Science Inc. recently moved to a new office in Santa Monica, so we stopped by to chat with co-founders Mike Jones and Peter Pham about how the operation is going.

In just two years, Science has built up a significant portfolio of rapidly growing companies like Dollar Shave Club and Dog Vacay. However, the studio’s strategy has changed since it first began.

“We’ve evolved a lot. We originally thought we were going to spin everything out,” Jones said.

But, as the startups Science built became profitable, the team realized that it was better off just keeping them in-house. The organization grew into a central hub of highly-specialized experts that could quickly turn ideas into businesses.

“The more we invested in Science’s core infrastructure, the better our entire portfolio got.”

Science has three main approaches: it builds its own companies, takes small positions in companies that it can advise and help grow, and it acquires startups to bring them in-house.

According to Jones, the studio has benefitted from keeping a narrow focus on consumer products in three specific categories: online brands, shared economy marketplaces and infrastructure-oriented ad technologies and platforms.

Science got its start with a $10 million round in 2011. Earlier this year, it took on $30 million from Hearst Ventures. In addition to Science’s own fund, Pham noted that the studio’s portfolio companies have raised almost $70 million from outside investors.

The firm’s companies have had their share of struggles, too. Kids clothing subscription box startup Wittlebee had some fundraising trouble earlier this year that led CEO Sean Percival to step down.

Jones and Pham don’t describe their operation as an incubator, venture firm or an accelerator, calling it a technology studio instead.

“The word hands-on has a whole new meaning here. We’re highly involved, for better or for worse,” Jones said.

“We’re a company that builds companies,” Pham explained.

Given its name, I was curious whether Science is ready to produce repeatable successes. Jones and Pham admitted that it’s still too early to tell, but they were optimistic about the collective experience and knowledge of the team.

“Whether we can have replicable results, I don’t know. We’ve got a lot of knowledge stepping into deals so there is some pattern recognition for what to expect,” Jones said.

Pham added: “Every month we’re learning more, every month we’re building more. We’ve built a lot of infrastructure that we didn’t have a year and a half ago.”

“Science is very much a platform-oriented business,” Jones said. “If you think about these capabilities, there’s a lot that can grow on top of it. If we keep taking bets, investing the knowledge…I think we can get pretty big.”

Jones noted that the venture investments Science’s startups have attracted are validating the studio’s efforts.

“There’s no way we would have thought that we would have had $110 million in venture behind the things we’re working on,” Jones said.

As the Science family grows, new additions to the portfolio have the potential to instantly add value across a number of businesses. Pham pointed to Science’s recent investment in interactive video startup Fuisz as an example.

“We can leverage that against everything we’re building at Science,” Pham said. “It can also apply to everything we’re doing instantly. We can immediately test things same day.”

Same-day testing is just one of the benefits that Science gains from keeping most of the portfolio in the same 16,000-square-foot space.

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“As one company discovers that they found gold, then everyone immediately does it,” Pham noted.

If keeping portfolio companies largely under one roof sounds complicated, that’s because it is.

“It’s always messy. We’re fixers,” Jones said. “There’s no startup we’ve ever looked at where under the covers it wasn’t just about to fly off the rails. It’s the same with every big deal.”

“Running our own companies as individuals was hard, but this is a different level,” Pham said. “We’re always just switching, trying to decide whether the decisions we’re making can benefit that company and ancillary benefit everyone else.”

Jones said that a common thread among the companies Science builds are that they’re all “tied to needs that we see in the market, personally feel, or that the founders feel.” Dog Vacay founder Aaron Hirschhorn, for example, loves dogs more than anyone else that Jones has ever met.

“Great companies are built by people that feel very personally connected to the problems they’re trying to solve,” Jones said.

Pham also emphasized that the practicality of the studio’s startups arises because the team is, from the start, looking at how to make money and generate revenue.

The two co-founders also said that they’re staying away from projects related to sectors they’ve worked with in the past. Jones, who formerly served as the CEO of MySpace, says Science isn’t planning on jumping back into social, and Pham, who worked on Photobucket and (briefly) Color, has sworn off doing any more photo startups.

Science believes that, by taking advantage of its infrastructure, startups can get up and running with half the amount of capital that most startups would need.

“We’re really efficient at deploying capital,” Pham said, citing one example where the firm brought a company in-house and cut its core expenses by half.

The caveat, though, is that Science’s infrastructure, which includes a lawyer, operations and finance, a five-person design team and traffic acquisition experts, is tailored for e-commerce businesses, so it wouldn’t necessarily be a good fit for a hardware startup.

Two years in, Science has honed its core operations to, well, a science. The firm has yet to have an exit, but, from the way things look, it’s only a matter of time.

Header image credit: Shutterstock / YanLev

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