Numbers of startup studios. Excitement and criticism of venture studios: "There was $5M here just a moment ago. Where did it go?”

Author: Max Pog
Big Startup Studios Research 2023
Date: Sep 4, 2023
Numbers of startup studios. Excitement and criticism of venture studios: "There was $5M here just a moment ago. Where did it go?”
Author: Max Pog
Big Startup Studios Research 2023
Date: Sep 4, 2023
Startups created in venture studios achieve seed funding twice as fast and exit 33% faster than conventional startups. From 2018 to 2023, the number of startup studios has doubled to 877. Long-time players in this field include Peter Thiel, Marc Andreessen, Jeff Bezos, and Richard Branson.
A startup studio is an organization that routinely creates startups, typically from the ground up. It generates and tests ideas, invests money, allocates resources and the studio team among various projects, and attracts co-founder entrepreneurs to create startups. The studio usually retains a 20-40% stake in each company, sometimes more, rarely less.
I am Max Pog, an entrepreneur. For the past 7 months, I've been researching everything I can get my hands on about startup studios. I've had conversations with founders of studios from the US, UK, EU, UAE, and CIS countries and also reviewed popular resources on the topic. I took the Venture Studio Index Database (407 studios and their 1840 startups) and gathered additional data about venture studio startups to analyze their traction. Finally, I conducted a small survey among 30 angel investors in the US regarding their attitude toward investing in startup studios.

After publishing an announcement on LinkedIn and getting 2000+ comments from people awaiting this research, I (felt impostor syndrome) and decided to add more data sources and polish it, which took 1 additional month of hard work. Though I can confidently call this research one of the most detailed and broad analyses of startup studios as of September 2023, it’s still imperfect, and I’m open and even eager for criticism (as Ray Dalio advocates in Principles :grin:).

Max Pog


I am Max Pog, an entrepreneur. For the past 7 months, I've been researching everything I can get my hands on about startup studios. I've had conversations with founders of studios from the US, UK, EU, UAE, and CIS countries and also reviewed popular resources on the topic. I took the Venture Studio Index Database (407 studios and their 1840 startups) and gathered additional data about venture studio startups to analyze their traction. Finally, I conducted a small survey among 30 angel investors in the US regarding their attitude toward investing in startup studios.

After publishing an announcement on LinkedIn and getting 2000+ comments from people awaiting this research, I (felt impostor syndrome) and decided to add more data sources and polish it, which took 1 additional month of hard work. Though I can confidently call this research one of the most detailed and broad analyses of startup studios as of September 2023, it’s still imperfect, and I’m open and even eager for criticism (as Ray Dalio advocates in Principles :grin:).

Мах Pog
The major part of my work is based on 17 primary sources (and 120+ additional ones – all links are inside the report) that provide the most comprehensive data on startup and venture studios:
  1. Venture Studio Index Database, James Moran (2023)
  2. Additional data I collected about venture studio startups through Crunchbase based on Venture Studio Index Database and my US angel investors’ survey (2023)
  3. Book Startup Studio Manifesto, Farhad Alessandro Mohammadi, Manuela Maiocco, Ferdinando de Blasio di Palizzi (2023)
  4. White paper Redesigning Entrepreneurship, Matthew Burris, Farhad Mohammadi, Manuela Maiocco (2023)
  5. White paper Understanding the Impact of Company Creation Fund Structures, Vault Fund (2023)
  6. GSSN Data Report 2022 (not publicly available; however, I’ve been granted permission to share some figures within my research, thanks, Morrow!) + Startup Studio Boot Camp by Morrow (2023)
  7. Book Venture Studios Demystified: How venture studios turn the elusive art of entrepreneurship into repeatable success, Shilpa Kannan, Mitchel Peterman (2022)
  8. Webinar recording with lots of numbers State of the Venture Studio World, Enhance Ventures, Vault Fund, Silicon Foundry, DIFC, GSSN (2022)
  9. White paper Bringing ideas to life, Mamazen (2021)
  10. White paper Disrupting the Venture Landscape, GSSN (2020)
  11. White paper Understanding Startup Studio Structures, FutureSight (2020)
  12. Blog of StudioHub (2019-2023)
  13. White paper The Rise of Startup Studios White Paper, GSSN (2019)
  14. White paper Startup Studios - Innovating Innovation, Enhance Ventures (2019)
  15. Book Startup Studio Playbook: For entrepreneurs, pioneers, and creators who want to build ventures faster and with a higher chance of success. Master the studio framework and start building, Attila Szigeti (2019)
  16. Blog of the founder of startup studio Builders, Michael van Lier (2017-2023)
  17. Blogs of founders of startup studio eFounders (Hexa) Thibaud Elziere and Quentin Nickmans (2013-2022)
We have 17 sections ahead to learn (almost) everything about startup studios, review the sources, and contemplate, “Should I get involved?”

The icing on the cake will be my vision for launching & funding new studios (sections 15-16) and calls to action (section 17): 1. I’m seeking a partner to establish a VC fund to invest in new studios, 2. I'm inviting aspiring studio founders to launch a studio together, 3… you’ll know in the end :grin:.
How to read?

  • Have just 10 minutes? Look at all the pictures inside the report and read section 15 – must-have. Have five more minutes – section 16.

  • Have 25 minutes? All pictures + sections 1-3, 8, 12, 15-17.

  • Plan to launch, invest in, or manage a startup studio? Read it all – I put 1000 hours into this research to save 99.9% of your time.

Prefer a PDF version of this paper? Access it here (it doesn't include all the updates).

This research in other languages: French, Portuguese, Italian, and Korean.

Venture Studio Resources:

  • Watch the recordings of our Venture Studio Online Conferences (1000+ regs each).

1. Skepticism, criticism, and disadvantages of startup studios. Where did the $5M go, and what’s the almshouse connection?

Some startup founders, angel investors, former and current studio founders, and VCs I've spoken to have criticized the startup studio model differently. Here are the main problems:
It's hard to attract experienced co-founders to startups
Why would competent founders surrender 40% (not to mention 80%) of their equity to startup studios when they could secure a funding round from a VC fund for 10-20%? Some venture studios offer salaries to founders (in addition to equity) – but this doesn't always attract them. For instance, a founder I know in New York (who previously ran a VC-backed startup with $10M+ investments that eventually closed down) was offered $1M in investment by a venture studio Fractal to launch a new startup. From this, he could have paid himself a yearly salary of $150K (as well as a second co-founder, CTO), but he turned down the offer.
Capital requirements
To establish a startup studio, you need at least $1-2M or, better, $5-10M+.

As per the GSSN Data Report 2022, the median annual budget for a startup studio is $1.36M, the average – $2.49M. A venture studio co-founder in California revealed that they raised $2.5M in 2021 to create 4 companies and $6M in 2022 to create 6. Meanwhile, a co-founder of a startup studio in Luxembourg shared that it takes about €200K to launch one startup to the point where it can attract external seed investment.
Broken cap table and complexities with future rounds
The larger the initial share of the studio, the more questions future investors in a startup have. A recent article about the venture studio Fractal, which seeks a 47.5% stake in companies, was headlined Founders Say the Deal Structure Has Led VCs to Blacklist Them. The article says that only one out of 130 created startups received Series A funding. Update (October 4, 2023): after the publication of my paper, Fractal's team contacted me to explain that only one company has attempted to raise a Series A, and it succeeded:
  • "Given that the first Fractal company was founded in late 2020 and the vast majority are under 2 years old, there's no expectation that any company would have raised an A round at this point.
  • Given that several dozen Fractal companies have raised seed rounds, many from top tier VCs, it's clear many investors are not concerned about studio cap tables."
Studio-created startups also attract funding rounds, including late-stage ones. For example, in March 2023, startup Ring Therapeutics from venture builder Flagship Pioneering raised $86.5M in a Series C round. Another company, Moderna (remember Covid?), has raised $3B so far.
It's challenging to attract funding to a startup studio
Not all investors understand the structure and operations of startup studios, which makes raising money for the first batch or the studio's initial fund challenging. However, raising subsequent funds becomes achievable if the studio has a good reputation and has built several successful companies. News from May 2023 – Venture studio Atomic attracted $320M in investments for its fourth fund. Previously, in 2017, among the first investors were Marc Andreessen and Peter Thiel.
The difficulty is exponential
As one founder of a startup studio explained: starting a business is tough, unpredictable, and often unprofitable. Starting a startup is even more challenging, with increased risks and stress. Launching multiple startups simultaneously inevitably means that something will go wrong somewhere, resulting in chaos (especially without refined processes and a specific industry focus, which was the case).
Limited data on the effectiveness of startup studios as an asset class
There are only a few studies on its effectiveness. The three mentioned reports were conducted by Global Startup Studio Network – a community of startup studios that later merged with Morrow. They were based on ~40 studios that participated in the survey and their 200+ startups. I've spoken to several investors and startup studio managers who were skeptical of GSSN's figures, primarily due to affiliations. I believe GSSN is a reputable organization, but it's important to understand that their selection of studios for the research was somewhat filtered by their criteria, such as a minimum 2-year runway and the ability to provide $200K+ per company, among other factors. Additionally, in the study Venture Studios: Analyzing a New Asset in the Venture Ecosystem, it was mentioned that the GSSN report's findings on studio performance might exhibit survivorship bias. This could occur if data was collected solely from ventures backed by studios, potentially inflating the studio's perceived overall performance.

Adding to the complexity of research is that some venture studios have funds that can invest not only in their startups (created from scratch) but also in third-party companies, such as the B2B SaaS venture studio High Alpha. The Venture Studio Index Database addresses this limitation by counting all startups created or incubated inside all types of VC firms (not only by “true/only” venture studios). It’s based on 407 venture studios in the database and their 1843 startups (except those funded by VC firms without active involvement in the development). Still, the number of studios is higher (at least 877 that Enhance Ventures counted), so the database does not include all co-founding companies and investments in their startups.

Studios also refer to themselves using 7 different names, and their structure can pivot: a VC fund may launch a studio, or a studio might transform into an accelerator or a fund, etc. As many companies around the world call them in different ways and use names interchangeably (as I do in this article), I see a tendency to differentiate startup studios (as entities without sidecar funds) and venture studios (as organizations with funds). The term “venture builder” seems to be often used in the context of corporations and typically refers to a model where the builder owns majority equity (even if not always).
Not everyone succeeds
The 500 Startups accelerator announced the opening of the 500 LABS startup studio in 2016 – but since then, there's been silence, and the website is no longer functioning. The Techstars accelerator planned to create Techstars Studio in 2019 – since then, there has been no news, and the studio page redirects to the main page. Of the 9 startup studios interviewed (mostly in 2016) for the Startup Studio Playbook, only 3 are still active, 2 are inactive (but hold stakes in startups), and the remaining 4 have closed.
How 500 Startups explained their decision to create a startup studio, a screenshot from the article.
Success of a startup can kill a studio (not a bad scenario :grin:)

Sometimes, the reason for terminating or at least slowing down startup studio activities is the creation of a highly successful startup, which then becomes the primary focus for the studio's founders. Max Levchin, a former PayPal co-founder, launched the startup studio HVF and became the CEO of its company Affirm (went public) in 3 years. Ev Williams, a co-founder of Obvious Corp, a studio that gave birth to Twitter, later became its CEO.

An entrepreneur I spoke with, who had launched a startup studio, spent $1M and tested 20 ideas before landing on a truly successful startup, after which they halted all other activities to focus solely on this venture.

Jack Abraham explains that instead of jumping into a company that got a massive hit in a studio portfolio, you must let your co-founders (of startups) shine and credit them for this success.
Ready for harsh comments? Eugene Kalinin, angel investor and startup mentor, says that the most common refrain from startup studio founders is: “There was $5M here just a moment ago. Where did it go?” :joy: He continues: to understand what a startup studio is and what it typically does, one needs to refer to Wikipedia and look up an article about an almshouse. Here it is. Yes, do read it. There will be no spoilers here.
Most studios face challenges not only from difficulties in attracting investors and co-founders during their initial stages but also from various design choices that hinder long-term progress. Some of these include:
Lack of a narrow focus on a specific vertical or niche,
often pursuing multiple verticals and models simultaneously, especially in the early years of operation. This dilutes the development of expertise in a specific niche, such as FinTech in Real Estate or IIOT for Renewable Energy, weakening the startup studio effect. More importantly, it doesn't provide compelling advantages for seasoned entrepreneurs to join a studio.
The non-lean approach
can lead to insufficient initial funding to build at least 5-8 companies. Additionally, too attractive salaries to founders from the start can attract more salary-oriented professionals than entrepreneurs with a founder’s mentality.
Taking too large a studio’s equity stake
while accelerator-level (much lower than startup-studio) support hinders future funding and demotivates co-founders.
Later in sections 15-16, I suggest my vision for startup studios, which can cope with many issues.

2. Why are startup studios still growing by leaps and bounds, and the author hasn’t yet lost his enthusiasm?

Below are the main advantages of creating companies through startup studios compared to the traditional approach of establishing startups.
Speed – an assembly line is more efficient than manual production
By developing frameworks for generating and validating ideas, creating an MVP, and launching the product to the market, the process becomes faster. Additionally, having capital on hand to finance pre-seed or seed rounds when startups reach these stages accelerates traction. Based on the GSSN Data Report 2022, 79% of studios offered starting capital to companies they built, with an average of $476K per company.

My research indicates that studio startups reach seed rounds twice as quickly compared to conventional startups (1.49 vs 3.03 years). 41% less time to Series A (2.75 vs 4.68 years), 44% to Series B (3.7 vs 6.65 years), and 47% to Series C (4.59 vs 8.67 years).
Faster exits

Based on 182 studio startup acquisitions and 22 IPOs, my study indicates that it takes 5 years for studio startups to be acquired, 33% faster than non-studio startups, and 7.5 years to IPO, 31% less time.

A prominent example of a successful exit is from the studio Science Inc. Their startup, Dollar Shave Club, was acquired by Unilever for $1 billion. It took five years to establish and grow the startup before the sale. One of their current companies Liquid Death (founded in 2017) was valued at $700M after the Series D round in 2022 and plans to IPO in 2024. Very fast exits also occur – it took 8 months for a Slimmer AI startup Biller to be acquired.
Accumulation of industry experience + data sharing among portfolio companies (better than within VC funds)

Launching the 7th startup in agritech or legaltech is much simpler than the first. Dozens of case studies have already been performed, problems identified, databases of partners and clients accumulated, licenses obtained, and metrics calculated. Startups can share this data, facilitating faster development of each other. As a startup studio acts as a hands-on co-founder, such data exchange is more manageable than among VC fund portfolio startups.
Savings and sharing of the studio team – 3-4 times cheaper than outsourcing

A startup doesn't need many full-time specialists. While startups can outsource tasks like marketing, design, or development, hiring agency specialists costs three-four times more. Even contractors have a significantly higher hourly rate than full-time employees. A startup studio is like having your agency at a cost price.
Investment efficiency – higher IRR due to cheaper equity at the start, less dilution at exits, and more frequent exits

Instead of investing $500K as an angel investor or as a pre-seed VC fund for a 10% stake in a startup (supposing $5M post-money valuation), you can put this money into building a company that will be valued at $10M in 18 months while holding a 25% stake in it. In this example, you have a TVPI of 5x.

What might be even more important is the ability to retain this stake through successive rounds until the exit. Snowflake, which had one of the most notable IPOs with a $70B market cap at the time, saw Sutter Hill Ventures owning more than 20% because they incubated the company from its inception and consistently co-invested throughout its development.

The white paper Bringing Ideas to Life by startup studio Mamazen shares: in 2020, a study analyzed the performance of 186 startups from startup studios and 607 from VC funds. Performance was based on valuation at exit and years from foundation to exit – data below:
The research was done by StudioHUB and was also described in the book Startup Studio Manifesto by Farhad Alessandro Mohammadi.
Reduced risks due to the ability to test multiple ideas and quickly discard the ones that don't work

Venture studios test hundreds of ideas, discarding what's unnecessary and focusing on promising ones. Often regarded as the first startup studio, IdeaLab explored over 5000 ideas, which resulted in 150+ companies and extraordinary 50+ exits.

Many studios employ the stage-gate model in their workflow: several gates open access to future funding and processes. If, at any stage, the idea receives a “red light,” investment ceases, and attention is shifted to the next concept.
Example of a stage-gate model of a startup studio Builders. Thanks, Michael van Lier, for sharing. You can delve deeply into how the stage-gate model works by reading Michael’s post The Math Behind Our Startup Studio
Entrepreneurs in traditional startups often find it challenging to change an idea or pivot due to their deep emotional attachment to their original concept (which they believe will change the world :grin:). It leads to exhausting funds before pivoting. Studios pivot cold-bloodedly.
Entrepreneurs can dedicate more time to core business tasks
because studios handle the routine and offer industry expertise and marketing or development teams to help a startup reach product-market fit faster. Instead of managing administrative duties like company registration, crafting initial client contracts, setting up domain emails, bookkeeping, hiring contractors, and spending 3-6 months on pre-seed and seed fundraising, studio startup co-founders can concentrate on launching, sales, client interviews, product development, and scaling.
Networking opportunities comparable to accelerators and VC Funds

Venture studios have an extensive network of investors and entrepreneurs. Regular entrepreneurs may not have the same level of interest or connections with investors, making it more challenging to attract investment rounds and strategic partners.
Psychological compatibility – parallel entrepreneurship instead of serial

Bill Gross, the founder of IdeaLab, shares that rather than creating one company, selling it, and then creating another, he wanted to develop them in parallel. This led to the birth of the world's first startup studio and the concept of parallel entrepreneurship. Jack Abraham explains that the smartest people fall into one of two camps: either very focused on one thing (and they absolutely have to crush it) or working on many things with a lot of different people and getting energy from doing zero-to-one.
Why am I so obsessed with startup studios?

I sold my first business when I was 17. By 30, I experimented with 30 business ideas, many in parallel. I counted only those where I put at least 2 weeks of my attention, even if most were started without capital. Since my teenage years, my mind has been overflowing with business ideas that came to me effortlessly – my eyes light up immediately, and I love initiating new projects. I quickly become obsessed in the initial months of launching a project – this is my forte. That doesn't mean I can't play the long game: it took me four years (2010-2014) of struggle, effort, and humiliation :grin: before my second company POGUMAX turned profitable. Then my next (parallel) company reached profitability in one year.

Before I discovered the startup studio world, I had dreamt of a team that systematically tests ideas and turns the most promising ones into startups. If I could only do it professionally as a startup studio, I could probably test much more than 30 ideas with a much higher than 10% success rate!

Max Pog


Why am I so obsessed with startup studios?

I sold my first business when I was 17. By 30, I experimented with 30 business ideas, many in parallel. I counted only those where I put at least 2 weeks of my attention, even if most were started without capital. Since my teenage years, my mind has been overflowing with business ideas that came to me effortlessly – my eyes light up immediately, and I love initiating new projects. I quickly become obsessed in the initial months of launching a project – this is my forte. That doesn't mean I can't play the long game: it took me four years (2010-2014) of struggle, effort, and humiliation :grin: before my second company POGUMAX turned profitable. Then my next (parallel) company reached profitability in one year.

Before I discovered the startup studio world, I had dreamt of a team that systematically tests ideas and turns the most promising ones into startups. If I could only do it professionally as a startup studio, I could probably test much more than 30 ideas with a much higher than 10% success rate!

Мах Pog

3. Investors’ interest in startup studios and doubled IRR

To show some notable studios and their investments in the picture below, I took the original table of Enhance Ventures and updated the data: a $320M deal in May 2023 at Atomic and a $200M deal at Expa in 2022. Added Juxtapose with $500M AUM and High Alpha with $260M across their funds and studios. It illustrates that studios can raise hundreds of millions from many VCs, including Marc Andreessen (Atomic), Peter Thiel (Atomic), Jeff Bezos (PSL), and Richard Branson (Expa, founded by Garrett Camp, the co-founder of Uber). Science launched its Rolling Fund on AngelList. This list is incomplete and misses some studios due to a lack of open data.
Credit: Enhance Ventures for the original table. Additional data was collected from Crunchbase and the websites of the studios.
Startup studios have raised $21 billion in funding, but the distribution is highly concentrated, with the top 5 funded studios receiving half the money and the top 20 receiving 80%. This trend is starting to change, with more and more venture capital studios getting funding thanks to the model's increasing recognition.” – StudioHub, State of The Venture Studio Ecosystem, 2022.

Alper Celen
Founder of Enhance Ventures
According to the Venture Studio Index Database, 823 (out of 1843) startups of the venture studios attracted a total of $70B.
What about IRRs? In an interview, Jack Abraham, co-founder of Atomic, revealed their studio's impressive IRR (Internal Rate of Return) of 65%.

Carlos Gamboa, the managing partner at Fisher Venture Builder, shared in the interview that their first investors got 50x+ returns. Alper Celen, a co-founder of the startup studio Enhance Ventures, disclosed their IRR of 72%. I interviewed Polina Flink, the managing director of the venture builder Digital Native, which boasts an IRR of 100% due to several successful exits.

The GSSN surveyed 258 startups created by studios in their community and compared the Internal Rate of Return and Total Value to Paid In with traditional startups – results in the table below. Additionally, we can compare TVPI with the accelerators’ performance. Studio startups’ TVPI of 5.8x is equal to the same 5.8x number of Y Combinator’s 2010-2020 startups, according to the PitchBook research Quantifying the Success of YC and the Largest Accelerators: Takeaways for VCs, LPs, and Startups, and is higher than Techstars’ 2.3-3.3x, 500 Global’s 3.0x, and SOSV’s 2.2x.
Research unrelated to startup studios but conducted amongst 850 VC funds also yields favorable results for startup studios. The VC Platform Global Community study shows a correlation between VC funds having a significant proportion (over 10%) of “platform” roles inside a fund team and an increased net IRR. Platform roles are specific non-investment functions to help portfolio startups – from marketing and community building to recruiting and business development.
“Firms with Significant Platform produce 1,100 basis point improvements in Net IRR and 0.5x TVPI compared to firms with No Platform in the last decade.”
How many studio startups receive investments?

A substantial 84% of startups launched by studios secure seed round funding, and 72% of these ventures progress to secure a Series A round, according to GSSN. Traditional startups, on the other hand, have less impressive numbers: only 42% of those that make it through the seed round proceed to a Series A.
Series A investments receive 60% of all startups released by the studios. Data from the GSSN white paper Disrupting the Venture Studio Landscape
The progress of the startup studio eFounders (now a part of Hexa) developing future-of-work B2B SaaS startups is particularly fascinating – 3 unicorns (Spendesk, Front, Aircall) out of 35 companies. The timeline below showcases their development over the years – from revenue growth, the number of launched companies, and workforce size to the total value of the companies they've created:
Startup studio eFounders (Hexa) and its numbers for 12 years of development (source, where you will also find links to a series of annual letters from Thibaud Elziere, a co-founder of eFounders). If you look at the numbers on the chart, you will notice that valuation and ARR increase exponentially.
“It made us realize that by starting a company with a Hexa startup studio you increase your chances of building a unicorn by 1000. No less.”

Thibaud Elziere
Founder of Hexa
I am very impressed with what eFounders’ founders Thibaud Elziere and Quentin Nickmans decided to do. After establishing the initial studio, they launched two more, each targeting a different sector (FinTech and Web3). Now, they’re creating a "meta-studio" called Hexa. I'm inspired and also plan to launch something interesting for studios: a fund investing in startup studios and an incubator for studios (more details in section 17).

4. VC fund, accelerator, incubator, and startup studio: difference and comparison of investment efficiency

Venture capital funds
invest in startups that have already exhibited traction and hold the potential for hundredfold growth. They don't usually intervene in the startup's operations, but they can offer expertise and networking opportunities. VCs are the furthest from the startup studio model among the models discussed.
take on startups with a prototype or MVP and sometimes the first revenue – they boost them within 3-6 months and help attract investments. The assistance from an accelerator typically concludes once the startup begins to attract clients or holds a demo day with investors.
engage startups at earlier stages and assist with refining the idea, building a team, and launching. Typically, incubators and accelerators offer a structured educational program that dozens of startups can participate in simultaneously.
Startup studios
do more than merely support startups. They create them with entrepreneurs together and allocate their resources across multiple projects. They take on the responsibility of business and its development as full-fledged co-founders, from inception to achieving PMF, reaching self-sufficiency, attracting external investments, or any other stage determined by the studio itself. For example, eFounders spends 12-18 months working on each startup to make it independent. As noted in the GSSN Data Report 2022, studios support their startups for 11-24 months at no cost to the companies.
To explain the difference between models, we can refer to the description of the venture studio Palta (below on the screenshot). They created the most popular women’s health app Flo with 280M+ downloads; video & photo editing apps Prisma and Lensa (total of 100M+ downloads). In 2021, Palta raised $100M Series B.
Returning to the question of investment efficiency, Sarah Anderson, the founder of the Vault Fund – a fund for investments in venture studios – illustrates the difference between the format and efficiency of investments in studio funds, incubators & accelerators, and early and late-stage VCs:
Based on Vault Fund's pipeline data. From the webinar State of the Venture Studio World, 2022
In the following slide, Francisco Gomez, a partner at the Vault Fund, highlights the difference in return on investment using the $1.6 billion listing of Hims & Hers as an example. Atomic, the venture studio that launched the startup, provided a 150x+ return to its investors, whereas Forerunner Ventures, which invested in the same startup at the Series A stage, returned 22x.
From the webinar State of the Venture Studio World, 2022

5. Why do venture studios take a larger % of the company compared to accelerators?

Incubators and accelerators receive 5-10% equity. They work simultaneously with 20, 50, or even 100+ startups. The last Y Combinator batch, for example, included 210+ startups. With such a workload, providing hands-on involvement in each startup is impossible. Startup studios usually launch 3-5 new startups annually; mature studios can aim for 10+ new ventures every year.

The studio team engages far more deeply with startups than accelerators regarding employee time, resources, and responsibility. Every startup receives support from a studio team equivalent to 2-5 full-time employees during the active studio involvement period. For this reason, as full-fledged co-founders at the outset, venture studios typically hold a stake of 20-40%, sometimes more, rarely less.

Some venture builders may take as much as 80% of a startup, especially when they don't need to attract external investment and are prepared to invest up to the exit, as might be the case with corporate studios. A studio's major (50-90%) equity stake makes it very challenging to attract external investments and strong co-founders with a business owner's mentality.
Startup studios are like parents who give birth to a baby, then raise the baby themselves, make their own decisions for him/her, and prepare their child for an independent life as an adult.

Attila Szigeti
Author of the Startup Studio Playbook
The startup studio eFounders, whose startups reached a total valuation of $5B last year, initially took 66%, later moved to 50% – the studio received 25% equity as the third co-founder as well as 25% as an investor for €250-700K; the remaining 50% went to startup’s two co-founders. In 2017, they kept 33%, giving 66% to co-founders.

Builders, a startup studio based in Rotterdam, also implements the model of splitting equity between the CEO, CTO, and the studio, each getting 33,33%.

According to the GSSN survey, on average, startup studios take 34% of equity.

6. Sources of ideas in startup studios

Matthew Burris, a partner at Venture Studio Associates, states 4 roles of studios: founder (validating ideas and then bringing a co-founder or CEO to a startup), co-founder (starting together with entrepreneurs), late co-founder (joins a startup team with initial traction), re-founder (acquires a startup or technology and relaunches a company). For the founder and co-founder roles, the ideation process must be established inside a studio.
Funnel: 30-100 top-level ideas are needed to launch one company.
Launched companies: Most studios launch no more than 4 ideas per year.
Data from the Venture Studios Demystified book.
A founder of a startup studio, whom I interviewed, shared that out of 30-40 hypotheses, 3-4 companies are formed. Coming up with new ideas is not a bottleneck in a studio. Founders and studio teams do it efficiently. The list of ideas of the venture studio Atomic increased from 600 in 2021 to 1000+ ideas in 2023.
I came across a long list of idea sources for the startup studio by Max Volokhoff, Chief R&D Officer at a corporation Mitgo including a startup studio, an accelerator, and a VC fund:
External expert interviews.
Company's top management and entrepreneurs in residence.
Organization of topic-specific brainstorming sessions using the GIST and other frameworks and idea matrix.
Crowdsourcing: promotion of an idea submission form inside a company; contests.
Area Analyst: researching and compiling lists of interesting projects and ideas in specified areas.
Venture Analyst: monitoring, collecting, and generating ideas from venture sources.
Market Analyst for the Chinese market: keeping up with an environment where there is an overwhelming amount of information.
Data Scientist and Sociologist: determine additional applications based on project data.
Seeking teams with early-stage ideas and inviting them to join the studio for further development and growth.
Copycat? Rocket Internet, famous and criticized for its copycat strategy, was able to build huge companies, some even with a higher valuation than the original ones. But the copycat strategy may not be an excellent long-term strategy. As Jack Abraham comments, this approach attracts different kinds of people: more mercenaries than mission-driven.

AI. Soon, we might see high-quality AI tools for generating startup ideas (better if they were based on real problems). I used GPT-4 a couple of times to generate startup ideas (in unfamiliar areas) and then discussed them with guests in interviews – I didn't get anything valuable. As one of my guests said, “ChatGPT is much better at poetry than at generating new ideas.” :grin:

7. What can a startup studio offer co-founders? Who goes to venture studios? From the perspective of EIRs – entrepreneurs in residence

Co-founders can realize greater earnings or capital gains from exits. Entrepreneurs join a startup studio to gain a fully-fledged co-founder equipped with expertise, financial resources, marketing, and refined processes for validating ideas, creating MVPs, and bringing a product to the market. This increases the likelihood of success and accelerates startup traction, leading to the aforementioned benefits.

Purpose Built Venture Studio built a financial model to help entrepreneurs answer, “Will you make more money with a studio or without?”

With an assumed 3 percentage points increase in the chance of success, a founder working with a studio that might allow you to skip half a round of dilution ends up with a 44% better financial outcome than founding without a studio.” You can play with figures here and get different results.
Thanks to Miles Lasater, CEO & Founding Partner of Purpose Built Venture Studio, for sharing this model.
The model and assumptions can vary, but the ultimate value of a studio for entrepreneurs is getting more money with a greater likelihood of success.

Studio as a partner. Entrepreneurs don't have to risk all their capital venturing into the unknown; they can share risks with partners, increasing the odds of success. Companies with three or four co-founders become unicorns 78% more often, while those with a single founder are 38% less likely. As such, a studio makes for a strong partner choice.
People who join in building ventures with startup studios as co-founders:
Experienced (bootstrap) entrepreneurs who want to build a venture business for the first time and are looking for unicorn ideas
The studio can propose collaboratively implementing one of its ideas and supplement any missing experience in venture projects and fundraising.
Entrepreneurs with venture experience (unsuccessful*)
Aware of the challenges of building startups and fundraising, these entrepreneurs can mitigate risks, save money, and delegate many operations and fundraising tasks to the studio. *Otherwise, if they had a successful exit previously, they might be better off starting a startup studio themselves :grin:.
Experts in a specific niche without entrepreneurial experience
Steve Blank, the author of the Customer Development concept (later popularized by Eric Ries in his book The Lean Startup), recommends that a rising star working in a mid-level manufacturing company opt for a startup studio over an accelerator or incubator.
Chief executives with 10+ years of experience who decided to create ventures
CTOs, CPOs, CMOs, and even CFOs (particularly if they're joining a venture builder focusing on FinTech) can bring a wealth of competencies and network in their area but may lack entrepreneurial experience.
Leaders with exceptional business development skills who aspire to establish tech startups but lack technical competencies
Such individuals can either seek a CTO or join a studio where, in addition to streamlined processes for launching a startup (+ operations), they can get access to a development team.
Granting a significant company share to a studio creates a similar dilemma for entrepreneurs between starting alone or with co-founders.

I'd consider the prospect of joining a studio from the perspective of what would enhance the chances of success – one or several co-founders or a studio with its advantages. Matthew Burris demonstrates that a founder can have 4% more nominal equity (which is 23% more in relative terms) after a Series A round if they choose to partner with a studio instead of an individual co-founder.

8. What three kinds of entrepreneurs do startup studios look for? Ideal Co-founder Profile

Contrary to what one might assume, it's not only novice entrepreneurs who gravitate toward startup studios. From the resources above and my conversations with startup studios, they primarily seek (and do it successfully) experienced founders.
Recruiting the best people for eFounders and for our companies. We do our best to recruit “A-people,” meaning people better than us. It’s our #1 rule because we know that if we start to recruit B-people, the company will be full of C very soon.” – Thibaud Elziere in the eFounders Letter #1

The same approach to recruiting A-players is advocated in the book Who: Solve Your #1 Problem.

Thibaud Elziere
Founder of Hexa
The categories of potential co-founders for startups in studios, viewed from the perspective of startup studios, are:
Serial founders with exits.

Many VCs “almost blindly” invest in founders with previous exits because of the 2x+ probability of exit by 4-5th company in comparison with the first startup; nearly 80% of unicorns had at least one co-founder with previous founding experience; VCs generate higher returns when backing serial entrepreneurs.
Analysis of Benn Stancil, founder & CTO at Mode, based on Crunchbase data
Attracting exited entrepreneurs to startup studios can be tough, given they see less value in studios with many VCs eager to support them. However, the research indicates that although top-tier VC firms generally enhance the likelihood of success, a company founded by a proven entrepreneur doesn't necessarily benefit more from funding by a top-tier VC than from any other source. This allows startup studios to showcase their worth to experienced founders. How to engage them? I'll discuss this in sections 15-16 while sharing my vision for new studios.
Experienced founders without significant achievements or with past failures

As one of the startup studio founders shared, they understand the fundraising difficulties and the startups' inherent unpredictability; hence they see considerable benefits in starting with a studio. Usually, every next venture has a higher likelihood of fundraising, as shown in the table below. “Despite these early failures, serial entrepreneurs' later companies are more successful than companies started by one-time founders.”
Analysis of Benn Stancil, founder & CTO at Mode, based on Crunchbase data
Senior executives and experts in a particular area without entrepreneurial experience

Senior executives and experts in a particular area without entrepreneurial experience. Some venture studio founders deem this the riskiest category, as being a great specialist and an entrepreneur require different skill sets. However, this can work if:

  • The executives meet the criteria: have some skills and experience studios look for. I’ll elaborate on this in Ideal Co-founder Profile below. While researching the topic, I came across a list of quotes from VCs on how they evaluate repeat versus first-time founders. Although many firms don't consider first-time founders a deal-breaker, they set a higher bar for them regarding unfair advantages, coachability, pedigree, and market opportunities.

  • Another option is if a studio appoints the CEO role to another experienced entrepreneur and brings in a niche expert (or CTO) as a second or third co-founder.

  • What if we mitigate this “first-time” factor by focusing on 45-50-year-old professionals, who have nearly double the business success rate of those who are 30 years old? It might be an underestimated hack :grin:.
James Moran, a co-founder of YipitData, investor, and author of Venture Studio Index, shares that, according to their data, CEOs of the most successful venture studio startups tend to be:

  1. Prior founders who are looking to build again and
  2. VPs of major groups at a medium to large tech company.

Ideal Co-founder Profile. The CEO of High Alpha Innovation, Elliott Parker, shared that they’re principally interested in two things: “1) the ability to build and manage a team, and 2) the ability to persuade investors, partners, employees, and customers to get on board and support the company. Can a founder candidate build a team, lead it, and tell a good story?”

From one studio, I heard a straightforward answer they try to get while evaluating an EIR candidate: “Is the founder fundable?” Another studio shared their only question to a co-founder during an interview: What was the most significant hack you've implemented in a company?” Entrepreneurs must be adroit in identifying unconventional solutions to uncover significant opportunities.
The list of criteria from the Venture Studios Demystified book
Regarding roles, studios mainly seek a CEO; a CTO is also frequently targeted. If we consider the studio as a hipster within the hipster, hustler, and hacker model – all roles will be addressed.

In the interview for the Startup Studio Manifesto book, Elliott Parket described, “When we start hypothesizing to create a startup, there are three roles we need to fill. We have to find someone to make decisions for the business, someone to be responsible for the product, and someone to take charge of customer experience. Sometimes these three roles might be filled by just one person, and other times we need three or more. Generally, we strive to launch companies with at least two co-founders.
How to build a funnel to attract founders? Startup studios run special programs akin to incubators and accelerators to identify suitable entrepreneurs. Having an extensive network is essential, but it's equally crucial to establish consistent sourcing of candidates from different sources: advisers, job postings, ad channels, and word of mouth. Finally, running your own YouTube channel or a podcast and inviting founders & investors for interviews is a great strategy (if you know what I do :grin:).
When a venture builder achieves success, finding entrepreneurs becomes easier. The startup studio eFounders, after five years of operation, received 1800 resumes per year but still aimed to build its own "employer" brand to draw more top-tier candidates from whom the best could be selected.

9. Three main structures of startup studios: a holding company, a fund, and a dual-entity model

Let's briefly examine the different structures of startup studios. For a detailed overview of startup studio structures, advantages, and disadvantages, refer to the article Understanding Startup Studio Structures by John Carbrey, the founder and Managing Director of FutureSight, and the Vault Fund's white paper.
Holding company

This structure is simple: a studio that creates and funds startups, taking a stake in them. Initially, the studio attracts investments by offering a stake to LPs (Limited Partners or investors) in the holding company. If the jurisdiction is the US, the setup generally involves an LLC as the parent company, with subsidiary C-corps for startups. By the way, I interviewed a startup/VC lawyer discussing the structuring and tax implications (as well as qualification for a $10M tax exception) of startup studios in the USA.
Fund as a startup studio

This is a simple and understandable structure for LPs, making it easier to attract investor funds. There is the opportunity to receive a management fee (typically 2% per year of the capital for 10 years) and earn a carry (usually 20%) – a portion of the investment profits after returning the initial amount to investors. However, for the management fee to cover the operational costs of the studio (assuming $1M a year), the fund volume should be at least $50M. All funds, including the founders' money and capital acquired from investors, are contained within the fund. All shares of the companies also belong directly to the fund.
Dual-entity model: holding company + fund (considered the most efficient structure)

This is a dual structure where the studio and the fund are separate entities. The studio receives common shares upon launching startups, while the fund receives preference shares when investing in startups. To cover the studio's expenses (a 2% fee is usually not enough), the studio can either draw some capital from the fund (thus, the fund will own a share in the studio) or separately attract investors independent of the fund.
The holding and dual-entity models are the most common for forming startup studios. It might be easier to start with a holding company and, after proving the studio-market fit, shift to the dual-entity model, as I'll suggest in section 16. Setting up a fund near a studio can cost $30-200K in legal fees, so the size of a fund has to justify the expenses. Allocating $100K for legal expenses from a fund starting at $10M+ can be a reasonable choice.

Other variations, like adding an angel syndicate (club deals) for subsequent rounds through SPVs to keep voting power and monetize pro-rata rights via carried interest, are described in the articles Sidecar funds, corporate vehicles, club deals by Quentin Nickmans, a founder of eFounders (Hexa), and Understanding Startup Studio Structures by John Carbrey.

10. What revenue streams support a startup studio beyond investments? 5 sources of studio cash flow

Exits via M&A or IPO are the primary way of generating profits, which most startup studios count on
Exits via M&A or IPO are the primary way of generating profits, which most startup studios count on. But waiting for exits can take a while and can be risky with a small number of companies, so there are other ways to sustain studio operations:
Billing back – invoicing the startups for services
Once a company becomes independent (e.g., after receiving external seed or Series A investment) and uses the studio's services, a studio can invoice them to cover their own costs. This practice is common, according to the authors of the Venture Studios Demystified book. Some studios charge startups, right after incorporation, which raises the question: why did they take a stake in the first place? Most studios charge after spin-out, often for specific services that are usually much cheaper than external agencies or provided at cost.
Management fee + carry
Startup studios with a fund in their structure can charge a fee for managing the funds of their LPs. This typically amounts to 2% per annum of the fund's volume, as in traditional venture funds. Also, in case of successful investment by the fund, the studio can get carry, a reward for success, usually 20% of the profit after returning investments to investors.
Corporate co-builds, consulting, and outsourcing the studio's team
Some studios, evolved from existing agencies, continue to generate income from external projects while dedicating team time to develop their own products. For example, the Portuguese digital agency Dengun, which had exclusively worked for others since 2009, launched its own startup studio in 2019.

Sometimes, the situation can be reversed. A thriving venture builder might catch the eye of corporations and other firms, leading to requests for a “startup on demand” or consulting services. At least two startup studios I've communicated with have accepted such offers. They noted that the contract revenue covered their entire team's expenses, leaving them ample time for their proprietary projects.
Cash flow from startups, dividends
The studio can potentially earn income from dividends: creating companies that will eventually pay for themselves and generate profit. Digital agencies, considering the creation of their own products, usually count on this approach.

Mobile app developers, game studios and publishers, production studios, publishing houses for books, and educational centers producing multiple online courses also adopt the strategies of startup studios. They utilize established methodologies to streamline the creation and launch of new products, usually focusing on maximizing dividends (while it might not be a priority to increase a company valuation).

11. How much capital does a startup studio require? 5 sources of funding for studios

Attila Szigeti, author of the Startup Studio Playbook, believes that a successful venture builder should have sufficient funds to cover operational expenses for 10-15 startups launched in the first 2-3 years. The estimated capital required to start a venture studio ranges from $2M to $10M, according to different experts (with a maximum I heard of $25M). I’ll suggest a more lean approach in sections 15-16 (Did I create enough intrigue? :grin:)
The co-founders' money
is the most logical initial funding source for the early stages, as attracting investors for a largely unknown asset without any traction can be challenging. Most successful startup studios, like Idealab, Science, Rocket Internet, and eFounders, were launched using the founders' own capital.
Angel investors and family offices
with faith in your team can also provide initial capital. After getting traction and launching promising startups, raising funds from a wider circle of venture investors will be possible. According to Dianna Lesage, a startup studios expert and Community Manager at Metaversal, most studios raise from $2M to $5M in the first round during a 6-12 months fundraising period.
VC funds and funds for studios
Though some VC funds can invest in studios (for example, 14 VC firms invested in PSL Studio), specialized funds that invest only in venture studios are scarce in number: there is the Vault Fund as a pioneer (they’ve made 5 investments as of July 2023 and plan to do 5 more), Alper Celen, a founding partner of Enhance Ventures, shared plans to launch a $25M fund for studios in partnership with GSSN. I also plan to launch a fund to invest in studios, currently looking for a partner (calls to action in section 17).
Corporate money
Large companies create their own startup studios, for example, P&G Ventures and Jaguar Land Rover, which in 2016 launched InMotion Ventures created two companies and invested in 21 startups (6 exits). Some studios focus on creating startups for corporations, for example, Coplex, BCG Digital Ventures (part of BCG X), and Corporate Lab (a subsidiary of the VIKO group of companies).

According to the GSSN Data Report 2022, 20% of studios run inside corporations, and 44% co-build with them.

Jordan Schlipf, the co-founder of Rainmaking Venture Studio, stated in the interview that corporations that build startups internally have a success rate of only 8%. Furthermore, it takes them twice as long and requires 4 times the investment compared to a startup in the market. This underscores why corporations need partners – Rainmaking states their 81% success rate of pilots between corporates and startups.
However, Polina Flink, the managing director of venture builder Digital Native, shared that partnering with corporations when creating startups can result in conflicts of interest: 1) a corporation might want a startup to cater specifically to its needs, whereas a venture builder creates products for a broader market; 2) a venture builder aims to increase the valuation of the startups it creates, whereas a corporation may want to acquire the startup at a lower price.
State support programs
for venture ecosystems are available in many IT capitals worldwide. To learn more about these programs, click on the links for each city: New York, San Francisco and Los Angeles, London, Boston, Beijing, Shanghai, Bangalore, Paris, Tel Aviv, Berlin, Tokyo, Sao Paulo, Singapore, Dubai, Amsterdam, and Lisbon (I interviewed a Portuguese tech entrepreneur who shared that you can get x4 money on initial investments for R&D and impact startups in Portugal). To delve deeper into venture ecosystems, I recommend downloading the Global Startup Ecosystem Index 2023 by StartupBlink.
The number of startup studios is growing fast. Today, there are 877 on the Studio Map of Enhance Ventures

12. What do US angel investors think about investing in startup studios? Insights from my survey

I surveyed US angel investors on LinkedIn about their attitude to investing in startup studios and received 30 responses to the following questions:
  • Are you familiar with the format of startup studios/venture studios?
  • Have you invested in them?
  • What are the advantages and disadvantages of investing in startup studios compared to investing in accelerators, VC funds, and individual startups?
  • Are you considering (or planning) investments in startup studios, and if so, which specific factors are important for your investments?
Some numbers to grab attention :grin:, even if the sample is small:
  • 77% (23 out of 30) of my respondents were familiar with startup studios. The sample might not be representative, as it possibly attracted those already familiar with startup studios, despite not targeting them specifically. I guess the actual awareness of a studio model is less.

  • 22% (5 out of the 23 familiar with studios) have already invested in studios.

  • 70% (16 out of the 23) are open to considering investment opportunities in startup studios. Notably, investors emphasized the importance of a competent founding team and their expertise in the studio's chosen focus area.
Investors highlighted the following advantages of investing in startup studios:
Lower risk compared to VC funds since one can evaluate the competence of the studio's founders
as operators/builders and infer the potential success of future projects, unlike venture funds that merely distribute capital. Similar to investing in startups, when investing in startup studios, you invest more in the team than in the startup ideas, which may evolve multiple times.
Higher returns on investment
(compared to accelerators and funds) due to a larger initial share in the created companies and higher success rates facilitated by the availability of capital, network, processes, and a strong team.
Better control over the results of startups
as the studio is an active co-founder, offering more oversight than other investment formats.
Reduced risk
(like VC funds) compared to investing in individual startups due to diversification.
One-time assessment of a competent founding team
rather than evaluating the skills of founders for each individual startup.
However, investors also pointed out several disadvantages:
Studios need a strategy to maintain their initial shares
in subsequent investment rounds, as heavy dilution can affect studio founders.
Potential returns are lower
(like in VC funds) than with direct startup investments.
Startups created can be more stereotyped
as they undergo standard idea filtering processes, making the emergence of "unicorns" less likely. Crafting an engaging narrative and captivating storytelling for a startup, particularly for investors, is more challenging if it has been "laboratory-born."
Startup studios tend to attract less experienced entrepreneurs
as co-founders in startups.
If a startup studio does not have a focus
it is more difficult to decide on investments.
None of these investors participated in my survey, but I'd love to discuss it firsthand on my podcast. If you can, please introduce us! :grin:

13. Choosing a thesis for a startup studio: industry-agnostic vs single-focus

When formulating a venture studio's thesis, there are two options:
Operating across various industries and ideas
Specializing in an industry, technology, or business model:
Generative AI, Fintech, Biotech, Energy, Transportation, EdTech, Gaming, B2B SaaS, Marketplace etc. I like the table with several types of specialization and benefits described in the Redesigning Entrepreneurship 2023 white paper:
According to Enhance Ventures, 36% of startup studios focus on one sector, and another 36% on two sectors:
Data from the Enhance Venture presentation at the State of the Venture Studio World webinar.
With a narrow focus, the emphasis is on an in-depth understanding of the industry, duplicating the business model or approach, and leveraging a rich network and other resources that can be utilized across multiple projects.

Portfolio companies operating within a single industry can share insights, partnerships, and ideas. The downside of a very narrow focus is that, in some cases, there might not be a lot of opportunities for unicorns. Also, if the industry is subject to economic fluctuations, all studio projects will be impacted (or Web3 startups might have to pivot into AI startups :joy: which is not a bad scenario). There's also a temptation to broaden the studio's focus when interesting ideas in related areas emerge.

Agnostic studios have broader idea selection and adaptability, leading to a varied startup portfolio and less industry-specific economic reliance. However, this diversification increases costs due to varying expertise needs and (in my opinion) negates the startup studio effect making it harder to attract co-founders and investors. I’ll share more thoughts in section 15.
67% of all investments in startup studios went to those focused on a single area, even though they represent only 36% of all studios. This means that single-focus studios are 3.6 times more likely to raise financing than multiple-vertical or agnostic ones.

14. Roles in launching a startup studio. Find yourself and contact me :wink:

According to StudioHub's research, in 2021, 79% of start-up studio founders were and still are entrepreneurs, 16% were investors, and 5% worked in consulting firms.

Most commonly, startup studios (as well as VC funds) are established by former entrepreneurs. A group of 2-4 founders pools their experience, network, and capital to launch a venture studio.

In my view, an ideal founding team for a startup studio should include all three described below roles to cover all studio processes: raising funds for the studio and startups; attracting co-founders (CEOs, CTOs, etc.); generating and validating ideas, creating MVPs, and scaling companies. It's hugely beneficial if founders have expertise in the domain of a venture studio.
Serial Entrepreneur
You've already created several successful businesses, earned money, and perhaps sold companies. And now you're looking for an opportunity to repeat success by launching startups in a stream and having stakes in different startups. Advantages: generate ideas and inspire others; experience in finding PMF, launching and running a business from scratch; ability to assemble a team and survive crises.
VC or Angel Investor (with previous entrepreneurial experience)
Ideally, a former GP who has attracted LP money to a fund or managed a syndicate perhaps organized an incubator or accelerator. Advantages: the ability to manage assets and attract money to the fund; network in the VC ecosystem; loyal LPs, exposure to startups and founders.
CTO (with co-founder experience in startups)
You've built products from scratch, coded, and worked as a CTO co-founder in several startups. Advantages: evaluate potential technical co-founders for startups of a studio; put together technical teams and effectively organize agile workflows to develop MVPs and iterate regularly & rapidly.
Other roles are possible depending on the startup studio's thesis:
  • Experts from consulting firms can leverage their corporate networks to launch a corporate startup studio.

  • Scientists. I had a conversation with the founder of a UK-based studio, a scientist with connections to universities who effectively collaborates with them, sources other scientists, conducts R&D, and creates deep tech startups.

  • Exceptional CPOs / CMOs / CGOs (with co-founder experience in startups) who have successfully built managed teams to test hundreds of hypotheses in startups and scale companies can also be a good fit.
In the Startup Studio Manifesto book, Alex Maleki, former Managing Director of IdeaLab, was asked: “What characteristics are required to be a good startup studio founder? What kind of network should a founder have?”

In response, he stated that the two essential questions any founder should ask themselves are: Can I assemble a team?” and Am I capable of raising funds?”

Alex Maleki
Former Managing Director of IdeaLab

15. My vision for startup studios that will rock :speaker:! Niche-niche lean-lean approach

You can't definitively conclude “I should start a startup studio” just by reading this research. Similar to any extraordinary startup, a startup studio must have unfair advantages, for example:
An incredible team with unique domain expertise; access to funding on preferential terms; insider information; the ability to attract excellent co-founders for startups (and mastery of hypnosis techniques :grin:); a source of chief executives and senior specialists at a 67% discount; a unique approach that provides significant advantages to startups.
The approach I’ll outline implies starting a studio without huge capital or a well-known brand. Both of these usually offer significant advantages in attracting talent and the ability to be agnostic for pursuing major trends, where decacorns might emerge. Atomic, with $750M funding across their four funds, and Sutter Hill Ventures, which originated 20 companies – 8 worth more than $1B, including 2 decacorns ($10B+), successfully exemplify a different approach than mine.

The biggest problem of studios. Naval Ravikant, whom I deeply respect and admire, criticized the venture studio model because you cannot recruit the best entrepreneurs (the scarcest resource), taking a significant (40%) equity for providing an idea, office space, operations, and a fairly small amount of capital. I agree – an average studio, even with a co-founder level of support, will attract average founders. Though it may still be viable in some cases, we strive to boost the chances of
creating new unicorns (and save them from extinction, especially given the 93% decline in their new offspring :grin:).

What conditions are necessary to attract first-tier founders, aside from taking a lower (20-30%) equity stake? If there is the best-performing team with extraordinary expertise in a niche – every founder considering launching a startup in that field will gravitate toward this attraction center (studio), creating even more gravitation for future founders, investors, and experts.

You’re right; the same network effects (thanks, NFX for the amazing course & bible) work inside a startup studio – the concentration of niche expertise will attract more expertise. Or, to put it in Naval Ravikant's terms, compound interest is attributed to both the studio's experience and its knack for creating unicorns.
So, the only North-star question for every studio must be,“In which niche can we become the #1 in building startups by gathering the most qualified niche team (partners, founders, investors, advisers, and experts) to make it unreasonable for top-tier founders to launch startups in that field without us?”
A startup studio has to build an expertise monopoly in its niche, echoing Peter Thiel's Zero to One philosophy. By being the unmatched expert in a niche, studios can attract top-tier founders.

I suggest my own vision for creating startup studios – a niche-niche lean-lean approach:
Niche focus
Not a vertical, but 10% of a vertical in a specific geography. You can find intersections of an industry with a business model, target customers, or technology, as described in section 13.

In 3 years, every startup studio must claim,“We’re the best at building [such] startups in [this niche] in [this geography].”

If you cannot say this, you must narrow your focus until you can and until there are still opportunities for building unicorns. Studios also can start with a beachhead market, as recommended for startups in the books Crossing the Chasm and Disciplined Entrepreneurship, and then enter adjacent markets. By creating the best factory possible for specific types of startups, you enhance the startup studio effect, resulting in higher venture success rates and returns.
Niche team

The 2019 study Age and High-Growth Entrepreneurship concludes that founders with both close and extensive experience in the specific industrial sector of the startup have significantly higher success rates. Analyzing 2.5 million entrepreneurs, the study found that founders with 3+ years of niche experience (based on 6-Digit Industry Classification) are 2.17 times more likely to establish a top 0.1% high-growth startup than those without experience in the sector.

Because a studio has a narrow focus, it’s easier to attract niche experts, co-founders, advisers, and investors. Such niche expertise (of all stakeholders) increases the chances of finding big problems in this domain, creating solutions, and achieving PMF. A niche team activates network effects which attract more and more expertise.
Lean startups

A studio must have fast iterative processes, allowing its startups to find PMF faster than conventional startups. I would integrate the 22 points of the Y Combinator's essential startup advice into the studio’s playbook. Do you think it’s possible to substitute the first Ideation stage with Launch Now :grin:?

GSSN Data Report 2022 states that, on average, studio startups reach revenue in 9 months. I would try to challenge it and focus studio processes on reaching revenue at least 2 times faster (maybe except biotech and deep tech startups).

In general, startups should have positive unit economics with an LTV:CAC ratio of at least 3:1+, not to mention having revenue to fundraise (however, since startups are not part of Mediocristan, there're always exceptions).
In 2022, the number of startups that generated revenue before securing Seed rounds was four times higher than in 2010, according to Wing’s sixth annual V21 study (2023).
Lean Studio

Covid (1), AI revolution (2), and the startup studios boom (3) must change the way studios are launched and operated:

  • Geographic arbitrage – mixing teams with remote people. First, you don't have to compromise on niche expertise. Without being strictly tied to a specific IT hub, a greentech startup studio specializing in AI for reforestation can attract the top experts in the field worldwide. Second, by hiring senior specialists in marketing, engineering, and design from abroad for US junior salaries, you can either extend your runway or, with the same budget, amplify support to startups by doubling the team from 8 to 16.

  • AI tools to constantly improve studio playbooks. AI significantly boosts productivity, so the time from ideation to PMF and scale must shrink, as well as the cost of every stage. Maybe we need a new profession, the playbook enhancer, who will perpetually review, refine, and innovate on existing playbooks integrating new AI tools. Since embarking on this research, both GPT-4 and Perplexity AI have profoundly transformed my workflow, it’s scary to remember how I was able to live without them :grin:.

  • The stage-gate model, but applied to studios themselves (not only for startups). As startup studios continue to grow in number (though I think that in terms of the adoption lifecycle, they still remain in the “early adopters” phase), there should be an optimal way to launch and fund them. It will minimize risks and optimize a studio structure according to the stage (and will help to cross the chasm :grin:). I’ll elaborate on the stage-gate model in the next section.
NNLL approach: Niche focus, Niche team, Lean startups, Lean studio. What was surprising to me – several days after formulating this vision, I checked my old post where GPT-4 gave pretty similar advice for building a unicorn startup studio, including 1) focus, 2) strong VC/co-founders network, and 3) cost efficiency. It also speculatively counted my chances of 25-30% to build a unicorn startup studio (it just didn’t know about this research and massive interest in it :grin:).

16. LEAN stage-gate model for creating & funding startup studios

You can easily attract top-tier founders if your studio shows an extraordinary track record and expertise in a specific niche. How to get there? Step by step, diminishing the risks for you and your investors.

I propose a 4-stage track for studios:
Launch – unite stakeholders around your vision
As in any network effects product, there is The Cold Start Problem (love the book by Andrew Chen) – co-founders, advisers, experts, and investors are not likely to join a studio that doesn't yet offer value for them. Entrepreneurs are looking for substantial expertise and funding; investors – for a great team & top-tier founders. A studio has to become a uniting platform for both sides.

During this stage, you must define a niche and startup studio thesis, gather a core team of studio founders around your vision, and solve the chicken-egg problem. At the same time, you have to spark and convince investors and founders to join your studio around your vision. It might be a good option to start by attracting niche advisers and then use this expertise to persuade founders and investors. If you’re able to solve the cold start problem and get first commitments from the stakeholders, then:
Execute – prove the ability to multiply money by converting it into equity
Bootstrap and attract initial funding from angels & VC funds of $0,7-2M (depending on your location and initial team size) for the first 24 months to launch 5-8 startups. The first investors accepting the biggest risks can get 15% of your studio with a preferred 1x payout (or even with a multiplier or participation if it helps to attract investors during this VC winter) from the first exit of a studio. Then investors continue to participate in future exits/dividends of the studio according to their shares. Quentin Nickmans described the approach in detail.

You’ll also need to partner with early-stage VC funds and syndicates for pre-seed and seed rounds because, with limited capital, you’ll be unable to fund the startups on your own. But the upside (beyond the ability to start with lower capital) is that you’re not pushing your startups to rounds if they are not valued by the market. What is more important – it will fairly evaluate the execution skills of your team, which in turn will help you to attract more investors and launch a Studio Fund I.

In 24 months, you must show to your current and future investors that you converted the initial capital into shares of your startups, which are valued several times more. TVPI of 3-10x+ would be a good target for 2 years, meaning that total studio equity in its portfolio must be valued at $5-15M+. The total valuation of the startups must be 4-5 times more, considering initial studio equity of 20-30% before pre-seed rounds.
Advance – switch to the dual-entity model and get to the first exit
Raise a fund of $10-25M+ for the studio, depending on your traction, location, and thesis. Use management fee and additional fund investment into the studio to cover 4 years of studio operations. The fund will get a part of your studio, but the main part of the capital will be invested in pre-seed and seed rounds of your startups. It will help to accelerate the investment process, enhance the studio's oversight of its portfolio, and yield additional carry to the studio upon fund closure.

You must already have a strong brand & niche expertise, making it unreasonable for top-tier founders to launch startups in your niche without your studio, as described in the previous section. During this stage, it’s favorable to have the first exit to become independent and not dilute the studio equity (of a holding company) for future operating years.
iNdependence (sorry, but there’s no appropriate word beginning with N :grin:) – it’s your turn to iNnovate, iNspire, and iNfluence; tell the world your own story!
After your studio gets independence, you have a full house of options:

  • Increase your productivity (by growing your team or enhancing your playbook) to launch more startups annually or help your portfolio companies.

  • Incorporate new Funds (probably bigger) to start more companies and cover later stages like Series A / B.

  • Investors' shares could be bought out by studio founders, or conversely, a portion of the studio might be sold – as in July 2023, Rainmaking announced the acquisition of their APAC business by Bain & Company. Or even selling the whole studio – the same month Silicon Foundry exited to Kearney.

  • Initiate new markets by expanding the studio's focus to adjacent niches or activities, such as investing in external startups.
What if a startup studio’s traction is slow, or you can’t reach the goals of each stage? As with startups – pivot, reduce burn rate, raise a bridge round (didn’t want to write this, but the last option is “close” :grin:).

LEAN stage-gate model for startup studios: Launch, Execute, Advance, iNdependence.

6-7 years is needed for a startup studio to reach maturity and become self-sufficient.

17. Calls to action :speaker:: seeking a partner to launch a fund for studios and founders to create new studios. And more…

In the two previous sections, I outlined my vision for the NNLL startup studios (niche focus, niche team, lean startups, lean studio) and suggested the LEAN stage-gate model for launching & funding studios.

For the first stage (Launch), I plan to create an incubator to help new startup studios solve the cold start problem. For the second stage (Execute), I will create a fund to back studios.

Call to action 1: Looking for a partner to create a VC fund for studiosDM or email me a few words about you and your experience. I aim to collaborate with someone who has dedicated 10K+ hours to raising funds from LPs and managing VC funds. Preferably the US (I plan to move there in a couple of years), but the UK and EU are also interesting; though, I'm open to partnering with other geographies as well – Asia, Latam, MENA, etc. (open to positive black swans :grin:).

Call to action 2: Looking for aspiring & emerging studio founders – fill out a 2-minute form to join a waitlist if you want to launch a startup studio, find co-founders (partners) to launch a studio together, or solve the cold start problem during the initial studio stage. I’ll be happy to help you personally or through my future incubator & fund for startup studios. I have several great entrepreneurs aiming to launch a startup studio and currently seeking partners (I can be your matchmaker :grin:). Update: just join The Venture Studio Family – a paid community where studios share their numbers, documents, & investors.

Call to action 3: Looking for experienced studio founders for a podcast / inviting you as an adviser as part of the incubator / and some secret thing – DM or email me. Update: and join The Venture Studio Family – a paid community where studios share their numbers, documents, & investors.

Call to action 4: Looking for sponsors for the next researchDM or email me if you might be interested. Next year, I plan to organize an analytical team to create a much more professional study (with fewer emojis :grin:). During these 7 months, I encountered a lot of opportunities to gather more precise statistics on studios’ performance and, with more confidence, answer the question, “Are studio startups more successful than non-studio ones? If so, by how much?”

Call to action 5: Want to translate this research into your language to find partners, launch a studio, or just spread insights in a local community? DM or email me, and I’ll be happy to collaborate.
Comment, criticize, share your thoughts, and answer the question here: LinkedIn post to engage

For all who comment (even if it's just "+") – I'll invite you into an invite-only startup studio group for p2p content sharing (e.g. financial models of studios, decks for fundraising into studios, links to studio content).
Wow! I’ve just finished it. It’s incredible :speaker:!
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The information, data, thoughts, and opinions expressed in this document are solely for informational and educational purposes and do not constitute professional legal, financial, or investment advice. The reader should conduct their own due diligence, consult with appropriate professionals, and exercise caution before making any business or investment decisions. Any action taken based on this content is strictly at the reader's discretion and risk.

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