by: Steve Hayton|
August 28, 2023|
In a recent community call, experts in the venture studio arena convened to discuss the unique aspects, advantages, and hurdles faced by this innovative model. In contrast to the traditional venture capital model which seeks out exceptional individual entrepreneurs, a venture studio is described by Alper Celen as an “institutional co-founder” that actively invests in and constructs ventures with its own industry expertise, proven playbooks, and established methodologies to enhance the likelihood of success. The venture studio model combines the roles of a builder, investor, and manager, creating a support organization for newborn startups.
However, running a venture studio is not without its challenges. One of the most significant hurdles lies in convincing others that multiple ventures can thrive simultaneously under one roof. Additionally, raising capital for the venture studio model can be challenging, as it deviates from the traditional backing of single-founder startups. Lastly, since a venture studio is a learning organization, it must constantly improve upon its ability to build businesses over time.
Despite these challenges, proponents like Atilla Szigeti emphasize that venture studios should be regarded as supplementary elements in an ecosystem, rather than direct competitors with incubators or accelerators. With their collaborative and supportive nature, venture studios offer an appealing alternative for investment in the Morrow Studio Network.
Success in operating a venture studio is contingent upon learning from setbacks and prioritizing people. It is a people-centric business that thrives on networking and problem-solving abilities – skills typically possessed by extroverted individuals. The venture studio model is adaptable to any company type and can achieve success with the appropriate approach. Both the scientific community and academia are slowly recognizing and researching this model, which could be advantageous in commercializing intellectual property and spurring innovation through studios.
Venture studios also present opportunities for junior talent, either as members of their core teams or as entrepreneurs in residence, collaborating closely with seasoned studio founders. Crucial to this symbiosis is the equitable distribution of equity, ensuring founders feel appropriately compensated and motivated. Generally, the equity range for studios falls between 30-60%; however, this can fluctuate depending on individual studio agreements and partnerships.
In summary, venture studios furnish a wide array of services and support to founders. They contribute to the inception, growth, and scaling of businesses while operating differently from traditional accelerators or incubators. By partnering with entrepreneurs as co-founders and offering hands-on support, venture studios can often secure a sizable equity stake, usually around 50%, with the founder receiving a similar amount. This approach allows entrepreneurs to bypass the need for accelerator, angel, or friends-and-family funding rounds and proceed directly to seed investment.
Ultimately, each venture studio deal is distinctive, with its capital structure and studio involvement offering a wide range of possibilities. The most crucial aspect involves ensuring a harmonious partnership between the studio and the entrepreneur that satisfies both parties. This may entail confirming that the entrepreneur has a coachable attitude, receptiveness to guidance, and the capability to work compatibly within the venture studio model.