This is one of the deepest conversations about the venture studio model I have ever had. Here are some key insights from Ben Yoskovitz, a co-founder of Highline Beta, a $10M+ venture studio that has built 9 startups since 2019, created $70M+ of equity value, and had 1 exit.
Ben has been in the tech industry for 28 years, launching his first digital agency in 1996, during the early days of the web. Later, he joined a startup that was acquired by Salesforce. In 2010, he began partnering with entrepreneurs and investing capital to launch companies. They called it Year One Labs and built five startups, one of which was acquired by Airbnb.
1. At Highline Beta, they invest up to $500K in cash in addition to providing 6 months of hands-on support from a 14-member studio team. They take 10% equity as co-founders and 8% for the first $250K, then invest $250K on market terms with other investors. “That differentiates us from other studios that are more in the 30, 40, maybe 50% range.”
2. They don’t charge for their services. “I've always found it awkward to give somebody money but then require them to give you some of the money back for services.”
3. Unlike VCs, studios don't always need to raise large funds because many companies they build from zero are capital-efficient. However, to scale your model, you might need more funds and a strong team.
4. “The studios don’t really compete with each other, not in the same way that VCs compete. There is a tendency that more and more studios are emerging with a vertical, focus on a very specific industry or a niche. So, the founders in one niche will look for the studio that also addresses that need.”
5. Attracting founders is every studio's number-one challenge and risk. The company's success or failure depends on the founder or the founding team.
6. Dual revenue-generating and equity-generating business models help sustain the studio’s operations and fund further venture activities.
7. Companies started with corporations often face difficulties securing funding later on.
8. Even if you start a company independently, your network of corporate partners can help with validation and attracting initial customers.
9. The studio’s role is to provide more resources (a mix of development and capital) than less. You can do this in-house or bring in partners (freelancers, dev shops, agencies) for equity or cash to meet your founders' needs.
10. It could be too expensive to have the full dev team in the studio, as you might not know what the needs of your future founders are or what the best resources to deploy are.
11. Many studios, investors, and founders will benefit from some standards: “There is a need to try to standardize some of the language around venture studios. That's important as an asset class because otherwise, investors can't compare apples to apples, and founders can't compare apples to apples”.
12. But there should also be variability in the studios. “Nobody has the perfect formula for building companies. If we had a perfect formula, everybody would have just copied it, and everybody would be winning, which makes no sense… I called it, like different flavors of ice cream.“
13. The advantage of being an agnostic studio is staying open to great founders with great ideas and being able to change your strategy. The downside is it creates more opportunity noise and makes it harder to build a long-term advantage in a specific vertical.
14. One of the ways to scale up a studio is to have a central platform and different vertical industry pillars with specialized teams and strategies.
Recently, Ben launched the project
Jobs at Venture Studios, which aimed to help studios hire professionals and help people find jobs in venture studios.