Ben, there's been serious proliferation of venture studios, and more's coming in 2025.
3 big things LPs will seek, avoid at your peril.
1. Proven Operational Success: LPs are gonna demand evidence that venture studios can successfully create, launch, and scale companies. They’ll eyeball fund managers transitioning to the studio model without prior operational expertise. Studios MUST showcase case studies of successful portcos companies, highlight their team experience, and deliver clear early wins to instill LP confidence.
2. Transparency: Clarity in structure, cost, and equity allocation will be must-haves. LPs expect detailed breakdowns of how capital is used across ideation, company creation, and follow-on funding. Regular reporting on performance metrics like company milestones and studio-wide IRR will reassure LPs of strong alignment. Don't have it? Good luck.
3. Differentiation: In a crowded market, LPs prioritize studios with strong thesis and niche focus, like as domain expertise in climate tech or AI. Studios that highlight competitive edge through partnerships and unique deal flow stand out.
While LPs will remain skeptical of new entrants, they favor studios with transparency, ops rigor, and a clearly defined value prop. If you deliver results, you get trust and checks.
Another fantastic post! Have you seen VC’s ask the startup to renegotiate the terms that they had with the Venture Studio in order for the VC to invest?
Yes. It's complicated but doable. You can't take equity away that's been earned/vested, but you can look at creating a bigger option pool before the VC invests (which dilutes everyone, including the studio) and then issuing more options to the founder / founding team. The studio may be willing to sell some of their shares to the VC / company as well.
Great article. I have always been bearish on venture studios for 2 reasons:
1) the “studio slice” at the outset which you address.
2) selection bias: i think “real founders” with an itch to scratch start their own cos. Studios are attracting “founders” who are more drawn to a derisked venture analogous to a franchise. Data? No. Vibes? Yup.
I've realized there's no such thing as a "real founder" - it's a story perpetuated by hero worshipping big time winners, which I get, but lots of successful people have built businesses differently.
Many venture studio founders have won before (going through what you describe as "real founder mode") and realize how brutally hard it is, and see the potential of having more resources at the table at the outset, to accelerate the super painful beginning. To each their own though...
Ben, there's been serious proliferation of venture studios, and more's coming in 2025.
3 big things LPs will seek, avoid at your peril.
1. Proven Operational Success: LPs are gonna demand evidence that venture studios can successfully create, launch, and scale companies. They’ll eyeball fund managers transitioning to the studio model without prior operational expertise. Studios MUST showcase case studies of successful portcos companies, highlight their team experience, and deliver clear early wins to instill LP confidence.
2. Transparency: Clarity in structure, cost, and equity allocation will be must-haves. LPs expect detailed breakdowns of how capital is used across ideation, company creation, and follow-on funding. Regular reporting on performance metrics like company milestones and studio-wide IRR will reassure LPs of strong alignment. Don't have it? Good luck.
3. Differentiation: In a crowded market, LPs prioritize studios with strong thesis and niche focus, like as domain expertise in climate tech or AI. Studios that highlight competitive edge through partnerships and unique deal flow stand out.
While LPs will remain skeptical of new entrants, they favor studios with transparency, ops rigor, and a clearly defined value prop. If you deliver results, you get trust and checks.
Another fantastic post! Have you seen VC’s ask the startup to renegotiate the terms that they had with the Venture Studio in order for the VC to invest?
Yes. It's complicated but doable. You can't take equity away that's been earned/vested, but you can look at creating a bigger option pool before the VC invests (which dilutes everyone, including the studio) and then issuing more options to the founder / founding team. The studio may be willing to sell some of their shares to the VC / company as well.
Great article. I have always been bearish on venture studios for 2 reasons:
1) the “studio slice” at the outset which you address.
2) selection bias: i think “real founders” with an itch to scratch start their own cos. Studios are attracting “founders” who are more drawn to a derisked venture analogous to a franchise. Data? No. Vibes? Yup.
@kennywgrant
I hear you.
I've realized there's no such thing as a "real founder" - it's a story perpetuated by hero worshipping big time winners, which I get, but lots of successful people have built businesses differently.
Many venture studio founders have won before (going through what you describe as "real founder mode") and realize how brutally hard it is, and see the potential of having more resources at the table at the outset, to accelerate the super painful beginning. To each their own though...
Ya. I’d like to see data.
My head says you’re right. My heart says no.