What do investors think about investing in Startup Studios?

What I like about the studio is you can evaluate the people that are launching the business a lot more as operators/builders as opposed to VC firms and a fund deploying capital investments.

If a studio is going to pursue an idea, they are putting labor into the mix which is an additional lever of accountability, so it seems a bit safer as an investment compared to a VC fund.

Early-stage startups are the most risky investments, but could have great returns. Similar fashion to studios, you are investing more in the founders and a little in the product/service at an early stage. I assume startup studio people have more experience than first time startup entrepreneurs (just an assumption).

Careful selection and funnel supplemented with significant backup and support functions for the investees. On the financial instrument side, the studios also appear more flexible, minority or majority stakes are seen.

You get in early and have the potential to shape the journey and in some cases hypercharge the 0 -> 1 growth with the right partnerships / connects.

Startup studios can be more profitable for investors because the studio ends up owning a bigger percentage of the company, and in some cases, they own all of it.

They also have the infrastructure, resources, capital, and relationships to set up their companies with the best chance to succeed right from the outset.

Better and more sustainable longevity of the startups produced within venture studios.

Startup studios have a ready team to create a new product, access to investment, and work experience compared to other startups.

The theory is that companies that have a strong team backing them up will be less risky than those who have to discover everything themselves.

Startup studios are made up of people who have already developed their own successful businesses. They have teams already put together, tools established, partnerships made, and money on hand. All of these resources become the resources of the startups they're working with, to ensure the success of those startups while investing in the same.

It’s a safe and diversified investment for anyone injecting capital into the studio.

Tax benefits (depending on the incorporation structure) when investing in a Studio Holding Company.

Investing in a VC fund spreads the wealth across multiple companies so the return, while smaller, is more affirmed as opposed to directly into a startup (riskiest).

Startup studios sound like less capital investment to begin.

The investor receives better terms for the higher risk/reward dynamic of the studio starting ventures from scratch.

The startup founder can rely on a broad team to help with Proof of Concept, usually faster than doing so independently, and certainly cheaper.

Higher ownership per startup vs VC

These models can be less organic and more cookie-cutter than a traditional startup. That's because the ideas are usually born within a think tank and chosen from a range of filtered ideas rather than organically emerging from the core experiences or problems experienced directly by a founder.

The teams are then formed around the idea and installed for success. It's certainly more structured, but it also is less serendipitous and may lack the "magic" or storytelling power that helps other startups build their culture and attract new investors & customers.

It's much tougher to build the "lore" around a startup's founding story when it was born in a lab.

The shares owned by venture studios in proportion to the ones the founders have.

Smaller returns. Selective, smart investing in singular company stock might lead to higher returns.

It gives some restrictions when outside capital is needed and the risk of inside rounds.

A team might bring distraction to founders / EIRs instead of needed help.

I prefer to be on the cap table of a company vs an LP.

A venture studio is the earliest stage, heaviest lift, and highest risk.

Capital burn is not taken as a serious relative to runway.

Studios are a little more difficult to invest in because its unknown what the focus will be.

You typically pay higher management fees.

Very difficult to find a team that builds well and equally difficult to find a good team to take over once the project is ready to spin off.

• I have to be bullish on the niche itself, be it stage, geo, industry or vertical.

• My personal preference:

> Industries = large, fragmented, underinnovated but ripe for disruption, where tech can act as a sustainable growth lever.
> Relatively quick turnaround / clear exit strategy: availability of capital (decent amount of VCs within my network whom I could see they'd invest on the niche; or PEs where they could eventually acquire, or venture debt that could be strategic upon growth stage).

• Studio founder has to have a tremendous track record for their chosen niche.

• Founder and team should have countless ideas, talent, and partnerships in their pipeline where capital is the only bottleneck.

My focus is on strong founding teams developing solutions to real, relatable market problems. too often, I find founders reach out with solutions that are in search of the problems. That is too challenging.

So, I look for the proper depth of customer discovery, and problem/solution validation (or product/market fit), before making investment decisions.

Keep an eye on the cap table, making sure the CEO has sufficient equity that will keep him motivated for the long haul and that provides confidence to investors for seed and Series A rounds and beyond, and evaluate the team dynamic and clear expectations regarding the resources provided by the studio.

If the studio possesses specific industry domain expertise & if they do, does the studio then have the optimal resource framework to find solutions for real-world business with real-world pain points?

What is the amount of shares held by VS, or how it's going to be decreased to a market level?

You need the studio owner to either be an amazing salesperson or super connected.

I invest when I strongly believe in teams and especially if I can be of help.

I'd invest if I have a close relationship with the folks selecting the startups and running the venture studio.

I'd want to know they have a great group of follow-on funds that lead the next round when they spin out.

When I invest, I like to be actively involved, so I’d be looking to put my own knowledge and skills at work.

No focus, diversity is the key in all investments.

Positioning themselves as VC friendly, and thus creating a clear and transparent ownership structure, from the launch, or creating a way how to get to it without hurting any of the sides involved.

Very strong operational experience building companies. A secret sauce creating compounding value in the ideation <> validation process (ultra-niche, strong support network within a specific domain, repeating games with same buyers, strategic partnership with buyers in advance).

A strong track record, having previous founders as investors.

Thick ownership, without any path to decrease it.