WHITE PAPER

Venture Studios:
The Future of Venture
Capital and Startup Creation
CONTENTS 01

Table of Contents
EXECUTIVE SUMMARY 02
INTRODUCTION 03

WHAT IS A VENTURE STUDIO? 05

STARTUP SUPPORT MODELS: A COMPARISON 07

SUCCESS OF THE STUDIO MODEL 09

LIFECYCLE OF A STARTUP STUDIO VENTURE 10

KEY FACTORS FOR SUCCESSFUL VENTURE STUDIOS 12

DESIGN OF THE VENTURE BUILDING PROCESS 14

IDEATION

FOCUS

WORKING WITH FOUNDERS?

STARTUP STUDIOS VS 17
TRADITIONAL STARTUPS: INVESTORS

CONCLUSION 19

REFERENCES 20
EXECUTIVE SUMMARY 02

Executive
Summary
The "venture studio" model is an innovative approach
to entrepreneurship that systematically creates new
business ventures. Venture studios serve as
"business-building factories," using specific
methodologies to identify market opportunities,
generate business ideas, assemble founding teams,
and support the growth of these businesses from
inception to spin-off.

This white paper provides a comprehensive analysis

of the venture studio model, highlighting its key
operational elements and distinguishing it from
other ecosystem enablers. Through this analysis,
readers will gain a thorough understanding of the
venture studio model's potential to transform the
entrepreneurial landscape. The paper aims to
demonstrate the effectiveness of the venture studio
model and showcase how it can serve as a
game-changing innovation engine.

The analysis delves into the characteristics and

structures of venture studios, as well as their
advantages and challenges from the perspective of
venture investors. Additionally, the paper considers
the future of the venture studio model and its
potential impact on the broader entrepreneurial
ecosystem.

Overall, this white paper offers a clear and valuable

analysis of the venture studio model and its potential
to revolutionize the creation and support of new
businesses.
INTRODUCTION
Introduction
In recent years, advanced technology startups have
disrupted traditional business models and ousted
established players. To support these startups, a
dynamic and interconnected ecosystem has
flourished, with a diverse array of players providing
financial resources, guidance, and connections.
Venture capital firms, accelerators, and incubators
are among the key players in this ecosystem. In
addition, incumbents have experimented with
different models to avoid being left behind, leading
to the emergence of the "venture studio" model.
Although venture capital has been around for
centuries, the institutional venture capital industry
that we see today can be attributed to Harvard
Business School Professor Georges Doriot, who
founded the American Research & Development
Corporation in 19461. Over time, venture capital firms
have been joined by incubators and accelerators to
support rapidly expanding technology startups.
These firms differentiate themselves by focusing on
different funding stages, sectors, or geographies, or
by outdoing their peers in activities such as offering
better terms or having a broader network. However,
in a world where capital is abundant and investors
are developing an appetite for riskier bets, this
approach is no longer effective. The success rate of
startups and venture capital funds is very low, with
only 0.1% of startups and 10% of VC funds
considered successful2.
To adapt to these changing times, some venture
capital firms are thinking strategically and doing
1
Lerner, Josh, and Ramana Nanda. “Venture Capital’s Role in Financing Innovation: What We Know and How Much We Still Need to Learn.” Journal of Economic Perspectives, vol. 34, no. 3,
Aug. 2020, p. 238. DOI.org (Crossref ), doi:10.1257/jep.34.3.237
2
Startup Studios - Innovating Innovation. Enhance Ventures
3
Poleg, D. (2021, February 17). Pulling a Bezos: Lessons From Amazon's HQ2 Fiasco.
4
Muñoz Abreu, N.D. (2021). Venture Studios: Analyzing a New Asset in the Venture Ecosystem.
03
activities their competitors are not. Investors are
increasingly supplementing financial capital with
human capital, to support and educate less
experienced founders. One notable example is
Andreessen Horowitz (A16Z), which is transforming
from a venture capital firm into a venture corporation
by building a new type of company with a thick
management layer that supports its portfolio
companies with marketing, legal, lobbying, and
technical resources3.
Despite these transformations, entrepreneurship
remains a notoriously risky and difficult endeavour,
with only a small percentage of startups ever
reaching sustained success. The search for the
perfect founding team remains elusive, and many
investors suffer from decision biases due to noisy
deal flow. With the competition to become the
trusted partner of top founding teams growing more
intense, some players are now asking, "What if
instead of just supporting founding teams, we build
them ourselves?" This led to the emergence of the
venture studio model, with firms seeking to stand
out and increase their success rate by building new
technology ventures themselves4.
The origin of this model can be traced back to the
practices of risk-takers from centuries ago, and it
has since matured into a key player in the
entrepreneurial ecosystem. Idealab, regarded as the
first venture studio, was launched in 1996. The next
wave of larger, Idealab-inspired Venture Studios
didn’t come until years later, with Betaworks and
INTRODUCTION 04

Rocket Internet starting in 2007. Many others soon

followed5.

Today, there are over 720 venture studios worldwide,

with half located in Europe. In both North America
and Europe, many venture studios in non-major cities
are funded by government agencies to stimulate
local growth, sometimes with matching donations
from companies. These studios have different
metrics than Venture Studios whose limited partners
are private family offices or venture capitalists6. They
are a novel way to build startups, develop venture
ideas internally, conduct initial testing, build early
MVPs, hire the founding team, and even provide
subsequent funding. Whereas traditional startup
founding may look like an individual entrepreneur
focused on developing a single idea, venture studios
instead aim to build at scale7.

This white paper provides a comprehensive analysis

of the venture studio model, highlighting its key
operational elements and distinguishing it from
other ecosystem enablers. By delving deeper into the
venture studio model, readers will gain a thorough
understanding of its potential to transform the
entrepreneurial landscape. Through this exploration,
we aim to demonstrate the effectiveness of the
venture studio model and showcase how it can serve
as a game-changing innovation engine.

5 The Rise of Startup Studios. Global Startup Studio Network, 2019, p. 8.

6 Blank, S. (2022) Entrepreneurs, is a venture studio right for you?, Harvard Business Review. Available at: https://hbr.org/2022/12/entrepreneurs-is-a-venture-studio-right-for-you
(Accessed: March 28, 2023).
7Peterman, M. and Kannan, S. (2022) Venture Studios Demystified: How venture studios turn the elusive art of entrepreneurship into repeatable success.
WHAT IS A VENTURE STUDIO 05

What is a
venture studio?
A venture studio is an organisation that creates and
develops multiple startups either by generating
ideas internally or partnering with entrepreneurs with
existing ideas. They provide initial capital, resources,
and a team to develop and test products, as well as
strategic direction and shared services. In exchange
for their contribution, studios are granted
co-founding equity in the launched companies.
Three fundamental elements
define a venture studio9:
Much like the traditional factory turns raw materials
into finished products by putting them through a
manufacturing process; venture studios seek to take 1. Studios operate as founders of their companies,
the raw materials of ventures namely a market trend, dedicating substantial time and effort to
a new technology, or an entrepreneurial team- and ideation, testing, and prototyping. This early
turn them into fully fledged companies8. They aim to work is sometimes done in partnership with a
do this by putting said raw materials through chosen entrepreneur, while other times, the
venture-building processes, which separate the life studio conducts it independently.
of a given project into discrete stages that go from
ideation to growth and spin-off. 2. Studios develop a repeatable venture-building
process that enables them to launch company
after company. They design their processes
specifically to reduce the probability of failure,
including evaluating product-market fit upfront
via user research and implementing stage gates
to prevent bad ideas from advancing too far in
the process. Additionally, studios tend to be
founded by investors or previous founders, who
have experience identifying and overcoming
common mistakes new founders often make.
They leverage these learnings to increase the
chances of company success.

3. Studios take a founding equity stake in their

launched companies in exchange for their
efforts. Compared to venture capital, where
investors get access to companies after their
creation and some level of development, studio
equity is priced at nearly $0 at issuance. This
provides a strong financial upside to studios
that hold large initial shares of venture
ownership.
8
The Rise of Startup Studios. Global Startup Studio Network, 2019, p. 2.
9
Peterman, M. and Kannan, S. (2022) Venture Studios Demystified: How venture studios turn the elusive art of entrepreneurship into repeatable success.
WHAT IS A VENTURE STUDIO 06

Beyond the attractive financial aspects, studios
positively contribute to entrepreneurial ecosystems.
Because studios initially fund venture ideas,
entrepreneurs who join studio companies do not
have to worry about bootstrapping or pulling from
savings. As a result, studios open up the
entrepreneurship experience to individuals who may
be more financially constrained. Studios also share
support and expertise with aspiring entrepreneurs
who feel they do not have adequate experience to
build a startup themselves.
Venture studios provide a powerful way for
developing ecosystems to grow quickly by
expediting the process from company formation to
building successful ventures. They are uniquely
positioned to help MENA startups overcome
challenges such as limited access to capital, talent,
and expertise10. By offering a variety of resources,
including funding, mentorship, and operational
support, venture studios can help startups achieve
their full potential and have a positive impact by
addressing the problem of a lack of regional startup
deal flow.
The recent launch of two new venture studios in
theMENA region is a significant step towards filling
the gap in the current startup ecosystem. The Dubai
International Financial Centre (DIFC)'s venture
studio, developed in partnership with Enhance
Ventures and Silicon Foundry11, focuses on digital
asset technologies12. Shams Valley, a joint venture
between Sharjah Media City and GrowValley
Ventures, is also centred around digital asset
technologies. These new initiatives demonstrate the
growing importance and acceptance of the venture
studio model by governments in the region. They are
providing startups with the necessary resources and
support to overcome obstacles and achieve their full
potential.

Sonali Goila, Head of Venture Capital & Private Equity

at Panthera Capital Investments, the investment arm
of Fujairah Holding, explains that venture studios
offer startups "an accelerated pace of growth in the
early stages, which standalone startups find difficult
to achieve - especially in our market, which is at an
inflexion point of innovation." The shared resources
and expertise within the venture-building system
streamline the process, making it easier for startups
to succeed.

10
Arabian Business. (2021, February 3). How venture studios are emerging as the new go-to partners for start-ups in the Gulf. Arabian Business, https://www.arabianbusiness.com/start-
up/457443-how-venture-studios-are-emerging-as-the-new-go-to-papartners-for-start-ups-in-the-gulf.
11
Wamda. (2022, April 3). DIFC launches venture studio platform to develop fintech in Dubai. Wamda, https://www.wamda.com/2022/04/difc-launches-venture-stu-
dio-platform-develop-fintech-dubai
12
Wamda. (2022, April 3). Sharjah launches media-focused venture builder Shams Valley. (2022, December 14). Wamda. https://www.wamda.com/2022/12/sharjah-launches-media-fo-
cused-venture-builder-shams-valley
STARTUP SUPPORT MODELS: A COMPARISON 07

Startup Support
Models: A Comparison
Venture studios have emerged as a unique model in access to a team of experts who can help develop
the entrepreneurial ecosystem, offering and scale the startup. However, the tradeoff is that
comprehensive support services to startups. To fully venture studios typically take a higher equity stake,
appreciate their distinctive features, it's important to which can range from 30% to 80%, compared to
understand how they compare to other startup accelerators and incubators.
support models such as accelerators, incubators,
and venture capital funds13. Venture capital funds, on the other hand, are primari-
ly focused on providing funding to startups rather
Accelerators and incubators typically provide than operational support. Although they may offer
mentorship and resources to startups but with a some level of mentorship and advice, it is generally
focus on different stages of development. on an ad hoc basis, and they are not involved in
Accelerators work with startups that have already day-to-day company operations.
developed a basic product or concept and help them
move towards customer acquisition. Incubators, on The table below compares the four models of start-
the other hand, work with earlier-stage companies, up support: accelerators, incubators, venture capital
providing support through mentorship and basic funds, and venture studios. It summarizes the
resources such as co-working spaces and purpose, stage of involvement, type of support,
operational support. equity stake, and duration of engagement for each
model. The graphic depicts the level of involvement
In contrast, venture studios offer a wide range of for each model across the stage of involvement (life
support services to startups, starting from ideation of a startup).
to customer acquisition. These services include
mentorship, funding, operational support, and even
13
Peterman, M. and Kannan, S. (2022) Venture Studios Demystified: How venture studios turn the elusive art of entrepreneurship into repeatable success.
STARTUP SUPPORT MODELS: A COMPARISON 08

Comparison Table: Venture Studios, Accelerators, Incubators, and Venture Capital

MODEL PURPOSE STAGE SUPPORT EQUITY TIME OF

ENGAGEMENT

Short-term Basic concept or

product to valida- Active participation in the
Accelerator program to help 5-10% 3-6 months
tion to customer program
startups grow
acquisition

Mentorship through
Help earlier stage Idea stage to
network, co-working
Incubator companies with product develop- 2-15% 6-12 months
space, and some opera-
existing ideas ment
tional support

Venture Established Support through network

Provide funding and community, advice on
Capital companies seeking Varies Until exit or IPO
for startups product or strategy
Fund investment to scale

Idea stage to
Ideation through Until exit or IPO
Venture established Significant support
customer 30-80% (spin off)
Studio companies seeking post-launch
acquisition
to scale

Note: The equity percentage range for venture studios is not explicitly stated anywhere. It could be less or
higher than this range. It's also worth noting that the duration of engagement may vary based on individual
circumstances and agreements between the startup and the support provider.

High

Studios
On the right is a graphic that highlights some of the
key differences.
Incubators
Accelerators
Overall, these four models offer different levels of
Early Late
support and engagement for startups at different
stages of development. By understanding the
LEVEL OF INVOLVEMENT

differences between these models, entrepreneurs

VCs
and investors can make informed decisions on which
model would best fit their needs.
STAGE OF INVOLVEMENT

Low

Matrix Comparison of Stage and Level of

Involvement among Venture Studios,
Accelerators, Incubators, and Venture Capital
SUCCESS OF A STUDIO MODEL 09

Success of a
Studio Model
Venture studios is designed to generate returns by
acquiring substantial ownership early in the venture
lifecycle. They do this by building or co-building
ventures themselves and getting in at a company's
"ground floor" when valuations are minimal and
equity is cheap. By controlling the initial company
vision, product, and leadership selection, studios
can significantly de-risk the venture and increase the
likelihood of success. Even exits at $50M or $100M
represent significant returns, and studios can target
overlooked segments of the VC market downstream
while maintaining their unique value as they later
move upstream.
The table below shows a comparison between
traditional startups and studios, based on the
findings of the GSSN report14.
According to the GSSN report, startups founded out
of studios are more likely to succeed than traditional
startups. The report found that 60% of startups
founded out of studios successfully reach Series A,
which is 44% higher than non-studio-founded
companies. The data also shows that 84% of
startups created within a studio graduate to an
institutional seed round, and 72% of these startups
successfully progress from seed to Series A.
Venture studios have already given rise to several
successful companies that either have exited or are
showing remarkable growth. Here are a few exam-
ples of companies that have emerged from venture
studios or have been developed in a venture studio
structure:

Comparison Table: Studio Startups vs Traditional Startups in Key Areas

STARTUPS CREATED
TRADITIONAL STARTUP BY STUDIOS

Average IRR 21.3 % 53%

Total Value/Paid In 1.6x 5.8x

Time from Zero to Series A (mos) 56 25

Time from Zero to Seed (mos) 36 11

Time from Seed to Series A (mos) 20 15

Source: Internal analysis from a survey GSSN conducted with participation from 258 studio startups. Disrupting the Venture Landscape. GSSN Whitepaper. November 2020. https://ww-
14

w.gssn.co
SUCCESS OF A STUDIO MODEL 10

Lifecycle of a
startup studio venture
Studios are organizations that use a systematic process to quickly and cost-effectively reduce the risks
associated with new business ideas. This process includes various entrepreneurial techniques, such as
human-centred design, lean startup, and agile prototyping, applied in a logical sequence of stages that
include ideation, validation, acceleration, growth, and spin-off15.

The ideation stage is the initial stage where new

business ideas are generated and transformed into
early business concepts. Different studios use
different approaches to ideation, such as sourcing
ideas from their team members or third parties and
ideating around specific problems, market trends, or
new technologies. Human-centred design is a
common technique used to gain a deep
understanding of potential customers and their
needs.
Validation is a critical stage for studios seeking to
gain confidence in their concepts' desirability,
feasibility, and viability with minimal investment. To
achieve this, studios engage in "low-fidelity" proto-
typing, preliminary technical research, and initial
business model designs. Target market feedback is
then gathered to validate the concept. At GrowVal-
ley, we take validation seriously and ask questions
such as, "Who is the right partner to help us launch
this?" and "How quickly can we launch an MVP?" We
value user and customer feedback and use it to
validate our concept further.

During this stage, we focus on developing an

efficient business model and creating a minimum
viable product to demonstrate the concept's poten-
tial and gather additional feedback. We aim to
ensure that the product or service is desirable,
feasible, and sustainable.

15
Muñoz Abreu, N.D. (2021). Venture Studios: Analyzing a New Asset in the Venture Ecosystem.
SUCCESS OF A STUDIO MODEL 11

Once the business concept is validated, the team

begins the race for product-market fit. The team
executes the concept, potentially with non-studio
employees joining, and a higher level of investment
coming into the project. Execution follows the Lean
Startup movement, with the team cycling through
the "build-measure-learn" loop repeatedly until a
product version that matches the market's
requirements is identified.

Once product-market fit is achieved, we have every-

thing necessary to iterate successfully and scale the
product. This is the beginning of the growth stage. It
focuses on perfecting the venture's scalability,
seeking to confirm its ability to grow quickly and
profitably. The unit economics of the model is
analyzed, including the costs of acquiring a new
customer and the customer's lifetime value, as well
as ways to improve both. At GrowValley, we identify
and onboard the appropriate leadership to take the
venture forward, increase customer acquisition and
retention, and launch additional features across
various platforms.

In the final stage of the process, the venture created

spins off from the studio. Here, the studio finally
discharges its distinctive burden of execution on the
new venture's team. While the new venture's team
may count within its ranks some employees who
were previously part of the venture studio, from this
point on, the studio as an institution is not
responsible for the execution of the venture's plan.
As part of this stage, studios can complete a funding
round for the new venture, often adding outside
investors to the startup’s capitalization table for the
first time.

In conclusion, creating a successful venture is a

complex process that involves multiple stages,
including validation, product-market fit, growth, and
eventual spin-off from the studio. Each stage is
critical, and careful attention must be paid to
customer and user feedback and the analysis of unit
economics to ensure that the venture can grow
quickly and profitably. At GrowValley, we prioritize
these aspects and work diligently to develop
efficient business models, create minimum viable
products, and identify the appropriate leadership to
take the venture forward. By doing so, we can create
successful ventures that meet the needs of our
customers, investors, and stakeholders.
KEY FACTORS FOR SUCCESSFUL VENTURE STUDIOS 12

Key Factors for

Successful Venture Studios
According to a primer on venture studios by Vault fund, three key factors drive successful outcomes for
venture studios: talent, ownership and process16.

Talent is a critical success factor for startup studios, Ownership is a crucial determinant of success for
particularly those led by serial entrepreneurs who startup studios, as it enables them to generate
have a track record of driving companies to exit and significant returns at exit. To achieve this, Formation
achieving significant scale. These founders bring Studios typically retains 30% or more of each
valuable experience, playbooks, and networks to the portfolio company, including common equity, from
table, which they leverage to launch a new portfolio the outset. This early-stage ownership creates a
of companies in a related space. Additionally, the highly capital-efficient buy-in and anchors the
studio's success depends on its ability to attract and economics and life-cycle control of the venture,
retain talented individuals who can contribute to idea driving higher multiples of return even at modest
validation and development, as well as operate exits.The level of control and equity that a studio
early-stage companies. A strong network of holds depends on the level of capability, funding, and
executives and operators with industry experience time provided to the founders. Typically, studios that
and insights is crucial to ensuring the success of offer longer-term support to the founders have
these companies. This is where venture studios higher levels of control than those that take on more
shine, providing speed to market, shared services, of an accelerator role. In addition, studios have the
and financial support that are highly attractive to flexibility to use equity as a motivator to attract top
both experienced and emerging talent. As a result, talent and resources to the venture. This provides
founders can rapidly build and scale from 0-to-1, the studio with a competitive edge in building and
delivering a significant impact in a shorter time scaling successful companies.
frame.

16
Vault Fund. (2021). Venture Studio Primer. Available at: https://vaultfund.com/venture-studio-primer/
KEY FACTORS FOR SUCCESSFUL VENTURE STUDIOS 13

However, the studio model has also seen financial
limitations, as exits can take a lengthy time to
materialize, and all company building costs are
front-loaded. The studio needs to find patient
ources of capital to fund its operations for several
years before seeing returns. Although a studio may
start with a ~30-45% equity stake at the founding,
over time, that stake is diluted as VCs and new
employees take pieces of the pie. At exit, a studio’s
ownership stake could be as low as 5%. In response
to these limitations, we have seen a convergence in
the models as studios are raising investment funds
of their own. This can provide benefits in a few key
ways. First, if studios charge management fees,
those fees can often fund a substantial part of
studio operating expenses. This helps extend the
studio runway and reduces the need for short-term
liquidity events from portfolio companies. Second,
participating in subsequent post-Seed financing
rounds enables studios to capitalize on their pro-rata
allocation and maintain their ownership stake rather
than being heavily diluted.
Lastly, Effective process management is a key
component of the success of startup studios.By
employing a repeatable process with intense
testing, studios can mitigate early-stage risks and
achieve greater success rates. For example, when
developing new consumer technologies, studios
stress-test factors such as unit economics, price
sensitivity, latent demand, and customer acquisition
costs before investing capital. This approach helps
to quickly eliminate underperforming ideas while
accelerating the time to market for viable products,
thereby reducing overall losses.
Importantly, the process employed by a venture
studio must focus on the exit pathway for each
startup. Given the studio's ownership and role, they
often have greater control over driving future funding
terms and exit opportunities than traditional
investors. Therefore, the iteration, development, and
scaling process must establish the necessary
conditions for providing liquidity for the portfolio in
the long run. By doing so, the studio can maximize
the value of its portfolio and deliver returns to its
investors.

In summary, the success of startup studios relies on experienced talent, a significant ownership stake in
portfolio companies, and a repeatable process that mitigates early-stage risk and focuses on the exit pathway
for each startup. By leveraging these factors, venture studios can create an environment that is attractive to
both founders and investors alike, leading to a higher likelihood of successful outcomes.
DESIGN OF THE VENTURE BUILDING PROCESS
Design of the venture
building process
Ideation
Venture studios often adopt a design thinking
process that involves rapid prototyping, testing, and
a "fail fast" approach to minimize costs and extend
their funding runway. This methodology enables
studios to quickly test ideas and discard those that
are unlikely to succeed. However, the specifics of
this approach vary across studios, including the bar
for what constitutes a "good enough" idea to launch.
For example, at GrowValley, we have a specific target
for market validation before investing further in the
acceleration stage of a venture. For example: when
building our recent project Soorago, we built with
clear metrics for the validation of the concept -
achieved through user testing and design sprints -
and the validation of the project - a target of 100
paying customers. These metrics ensure that we
make informed decisions and maximize the potential
for success of any of our portfolio companies. By
using this method, we ensure that our investment
17
Peterman, M. and Kannan, S. (2022) Venture Studios Demystified: How venture studios turn the elusive art of entrepreneurship into repeatable success.
14
decisions are grounded in research and data, rather
than purely speculative ideas, increasing our chanc-
es of success.
According to Kanan and Peterson (2022), a typical
studio requires an ideation funnel that ranges from
30 to 107 top-level ideas to launch one company. A
more efficient funnel leads to lower costs per idea as
each launched idea requires less time and effort
from studio team members. Startup studios have
the option of generating ideas internally or sourcing
them externally. At Growvalley Ventures, we have a
sophisticated process in which we research and filter
ideas internally. However, we also leverage the power
of community and consider ideas from external
sources, such as founder networks or large
corporations suggesting ventures in which they
would become the first partner.
DESIGN OF THE VENTURE BUILDING PROCESS
Focus
Focus is a critical factor for startup studios, with
some specializing in specific industries and others
operating as generalists. While some studios choose
to specialize to minimize costs and develop special-
ized knowledge, others prefer to remain industry
agnostic. One possible reason for this is that there
are only a limited number of promising ideas in each
focus area, and studios can quickly exhaust
opportunities if they focus too narrowly. Given that
around 30-100 ideas are needed to produce a single
launched company, studios are limited by their staff
size and creativity18. Traditional venture capital firms
can source potential investments from
entrepreneurs and visionaries worldwide, while
studios that focus on in-house ideation typically only
have their employees to draw from. As competition
increases, we may see more studios become
industry-agnostic to remain competitive.
Furthermore, a studio's focus is often influenced by
the founders' network and expertise. If founders lack
specialized industry knowledge, they may be more
likely to find generalized studios. For example, at
GrowValley, we collaborate with the entrepreneurial
community and industry experts to research and
ideate feasible ventures that require specialized
knowledge. While our philosophy is generalist, we
bring in expertise as needed to support our
ventures.
18
Peterman, M. and Kannan, S. (2022) Venture Studios Demystified: How venture studios turn the elusive art of entrepreneurship into repeatable success.
15
Working with Founders?
Venture studios heavily rely on external talent, which
is a crucial aspect of their operations and value
proposition for co-founders. According to "Venture
Studios Demystified" by Shilpa Kannan and Mitchel
Peterman, studios employ three main approaches
for working with external founders: structured
founder programs, assigning founders to estab-
lished concepts, or utilizing founders in limited
full-time positions. Each approach has its own set of
advantages and disadvantages, and choosing the
most appropriate path is determined by the studio's
philosophy and goals.
Structured founder programs are based on a
repeatable process that selects a specific type of
entrepreneur and facilitates their success. Although
these programs require significant upfront
investments, they are easily scalable. On the other
hand, assigning founders to established concepts
usually involves a robust internal ideation process,
which allows studios to make a greater investment in
an idea and justify a higher equity stake.
The middle path, which involves utilizing founders in
limited full-time positions, strikes a balance between
the two approaches. Studios that operate using this
path have internal ideation programs and bring on
founders for specific use cases. However, since
these studios are not specifically designed to
manage external founders, founder-led ideas may
have a higher risk profile.
DESIGN OF THE VENTURE BUILDING PROCESS 16

Ultimately, the appropriateness of each path depends on the studio's philosophy and desired ROI. While
there is no superior path, studios must consider which approach will result in the largest number of
high-quality launched companies for the lowest cost. The table below highlights the pros and cons of the
three approaches 19.

Comparison Table: Founder Programs

DESCRIPTION PROS CONS

formalized program to - Very Scalable - highest upfront

Structured founder programs select and onboard a specific - Lowest incremental investment
type of entrepreneur. investment per required
Entrepreneur

Studios have internal - Attractive to high - Founder-led

ideation programs and bring on quality founders ideas may have
Limited full-time positions
founders for certain use cases, higher risk
typically 2-4 at a time profile

- Robust internal - Required most

Studios do upfront ideation
ideation process tailored effort
Assigning founders to and testing. Once an idea is
established concepts far enough, studios recruit an
external founder.

Overall, venture studios prioritize external talent and incorporate it into their operations in various ways. The
choice of approach depends on the studio's objectives, as well as its ability to scale and manage the ventures
it creates.

19
Peterman, M. and Kannan, S. (2022) Venture Studios Demystified: How venture studios turn the elusive art of entrepreneurship into repeatable success.
VENTURE STUDIOS VS TRADITIONAL STARTUPS: INVESTOR 17

Startup Studios vs Traditional

Startups: Investor Perspective
Investors seeking high returns while managing risk
are increasingly turning to venture studios as a
promising solution in today's rapidly evolving
business landscape. Venture studios offer a unique
economic model that provides sustained high
ownership, enabling portfolio diversification and
Powerful de-risking tool: Venture Studios
generating significant returns. They also de-risk
provide a de-risking tool for institutional
startup creation and shorten the timeline to scale
investors by enabling the testing and iteration
early ventures, making them an efficient and
of multiple ideas within their portfolio. Unlike
effective way to support startup success.
traditional startups, studios are not bound to a
single idea and can quickly eliminate less
According to Francois Lafortune, CEO of Diagram
promising concepts before significant capital is
Ventures, venture studios' high "batting average"
invested. This shared infrastructure enables
and overall portfolio distribution result in better
studios to launch new companies at a fraction
risk-adjusted returns for both investors and
of the cost, making them more
founders20. Similarly, Vault Fund believes that com-
capital-efficient.
pany creation funds can create a significant depar-
ture from traditional venture capital by leveraging
the advantages of a repeatable playbook, shared
services, emerging talent, and a faster path to
startup scale. According to their primer, here are
some key advantages of investing in venture
studios21:
Speed to liquidity: Startups developed by
studios typically reach Series A metrics within
12 months, reducing the time to reach
institutional Series A rounds by up to 50%.
Additionally, studios come in at a low entry
Direct access to experienced founders: LPs valuation, which means they are well-positioned
benefit from backing proven founders who have to sell a secondary stake once a startup
a successful track record of launching and reaches a threshold valuation, providing faster
exiting previous companies. This expertise can returns for investors.
be applied to launch a new portfolio of related
businesses, creating a diverse portfolio of
founder’s equity. Additionally, the founder's
established network of talent and expertise can
be leveraged to develop and scale the startups
in the portfolio.

20
Peterman, M. and Kannan, S. (2022) Venture Studios Demystified: How venture studios turn the elusive art of entrepreneurship into repeatable success.
21
Vault Fund. (2021). Venture Studio Primer. Available at: https://vaultfund.com/venture-studio-primer/
VENTURE STUDIOS VS TRADITIONAL STARTUPS: INVESTOR
Reduced traditional management fee exposure:
The studio model reduces traditional
management fee exposure for LPs, with many
different structures available that fall
somewhere between holding companies,
traditional 2/20 venture fund models, and
hybrid models. This means that on an aggre-
gate basis, studios reduce the management
and carry fees paid by LPs for access to top
entrepreneurs, resulting in zero management
fees and zero carry in some studios.
High ownership: Studios aim for high
ownership, with a target of over 30% on
average, including founder's equity. This
anchors the economics and life-cycle control
from inception, giving the studio greater influ-
ence over a startup’s pathway to exit and
liquidity. Additionally, studios have more control
over terms set in follow-on rounds, reducing
risk for early-stage investors.
18
Inverted valuation risk: The Venture Studio
Model provides an inverted valuation risk, with
studios compensated as company founders
through common shares and preferred shares.
Any increase in initial equity provides upside to
the studio, inverting market risk as average
valuations rise. This, coupled with high
ownership and lower capital loss ratios, leads to
increased returns, with early industry data
showing average net IRRs at 53% and an
average TVPI of 5.8x. The upper quartile of
venture studios produces even stronger
results, vastly outperforming both public
indices and traditional venture capital. An
example of this is the successful exit of Science
Inc., a venture studio that has produced 15 exits
and has an IRR of 82%.
Overall, venture studios offer numerous advantages
over traditional venture capital, including access to
experienced founders, powerful de-risking tools,
faster speed to liquidity, reduced traditional
management fee exposure, high ownership, and
inverted valuation risk. These benefits translate to
increased returns for LPs and make venture studios
an attractive investment option.
CONCLUSION
Conclusion:
The Path forward
In conclusion, the rise of venture studios has disrupt-
ed the traditional approach to startup creation and
early-stage investment. With their unique approach
to building companies from scratch and providing
shared resources and expertise, venture studios
have proven to be an effective way to launch new
companies, increase the success rates of portfolio
companies, and generate significant returns for
investors.
As the venture studio model continues to evolve, we
can expect to see a greater emphasis on specializa-
tion in specific industries or technologies, allowing
for even greater value to be provided to portfolio
companies and investors. This trend will likely result
in the emergence of new industries and the creation
of more successful startups.
Moreover, the increasing focus on diversity and
inclusion within the venture studio ecosystem is a
positive development that will benefit both the
startup community and society as a whole. As the
venture studio model gains traction, we can expect
to see a greater focus on promoting inclusivity in
terms of gender, race, and socioeconomic back-
ground, leading to more equitable opportunities for
entrepreneurs and investors.
19
Another trend to watch is the convergence of
venture studios and traditional venture capital firms.
As more traditional venture capital firms adopt
elements of the venture studio model, we can expect
to see more experimentation and innovation in this
space, leading to new opportunities for entrepre-
neurs, investors, and society at large.
In the future, the success of venture studios will
depend on their ability to adapt and evolve in
response to changing market conditions and emerg-
ing technologies. The ability to provide unique value
to portfolio companies and investors will be crucial in
maintaining the appeal of the venture studio model.
Overall, the future of venture studios looks bright, as
they represent an innovative and effective approach
to early-stage investment and startup creation. As
the startup ecosystem continues to evolve, venture
studios will play a significant role in shaping the
future of entrepreneurship and early-stage invest-
ment. By staying ahead of the curve and embracing
new trends and technologies, venture studios can
continue to create value for entrepreneurs and
investors alike.
REFERENCES 20

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Enhance Ventures. Startup Studios - Innovating Innovation.

Global Venture Studio Network. (2019). The Rise of Startup Studios.

GSSN Whitepaper. (2020). Disrupting the Venture Landscape.

Lerner, Josh, and Ramana Nanda. “Venture Capital’s Role in Financing Innovation: What We Know and How
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