The promise of Venture Studio

Building an Impact VC Fund

Venture Studios is a new emerging innovation in the field of venture capital. It's a very close structure to the high-touch venture-capital model, which follows a concentrated portfolio strategy and provides beyond capital support, primarily value-added services + human capital.

Why are Venture Studios promising?

There are two arguments to it:

Financial Performance: The three distinctive characteristics which make it attractive are:

  1. Increase ownership in the venture

  2. Increase participation in the enterprise, and hence

  3. Increase the chances of success. The exit rate is higher in studios (~ 35%) than in accelerators (~ 20%), which seems to confirm that a venture created by a studio fails less often than any other venture. According to the GSSN, a studio startup can achieve TVPIs of 10.

Impact: Build tech-ventures in the spaces that are generally ignored by tech ventures and entrepreneurs, as they are still catering to the top 1% of the population.

The Venture Studio model

  1. Source ideas, ventures, and innovators (or founders, talents)

  2. Act as second co-founder, act as Chameleon

  3. Provide hands-on support (engineering, product, marketing, etc.)

  4. Rapid Prototype' Y' venture ideas [Larger Funnel]

  5. Build, Invest and Scale 'X' ventures [Promising ones]

  6. Spinout the venture in 'Z' months, keeping equity stake + Board role

  7. Exits

Credits: Photo by Keagan Henman on Unsplash

Types of Venture Studios and potential structures + models

  1. Internal Ideas and team: The studio team comes up with an original idea to build a venture.
    Model: VC Fund structure, Concentrated portfolio, and VC High-portfolio support

  2. Investing and building with a talent/founder: Venture Studio acts like a founder or supporting-founder (Chameleon) to construct the venture from scratch. 
    Model: VC Fund structure, Concentrated portfolio, and VC High-portfolio support

  3. Cross-border replication: The studio replicates ventures from one geography to another by creating a joint venture with the parent company and investors. 
    Model:
    (i) Venture Studio creates a new entity or SPV, which splits equity with the parent company and any new investors if able to onboard. 
    (ii) The money from investors and IP, money, and other resources from the parent company will kick-start the operation. 
    (iii) From there on, Venture Studio takes the ownership of contextualizing the product, hiring & managing the talent, finding product-market-fit, GTM fit, and, most importantly, running the core business.

  4. Corporate venture studios: Venture Studio sees itself as an extension of corporate-innovation and acts explicitly as corporate-venture-studio. 
    Model:
    (i) Venture Studio identifies potential clients and goes with a proposition to build a venture for them, which is strategically aligned to their core business or operation. 
    (ii) Venture Studio expects a certain amount of capital infusion initially, for which the corporates enjoy the healthy equity percentage. The venture will be built from scratch by Venture Studio. 

Curated resources for further curiosity

  1. [Blog] Venture Studios 101

  2. [Report] Startup studios emerging as a growing force by Charles Perrard, Sparkling Partners

  3. [Podcast] Building The Berkshire Hathaway of The Internet with Andrew Wilkinson (Co-founder, Tiny Capital), by Venture Stories, Village Global

  4. [Podcast] Cultivating More Entrepreneurs For Social Impact with Matt Clifford and Alice Bentinck (Co-founders Entrepreneur First), by Venture Stories, Village Global

  5. [Podcast] The Venture Studio (Scott Dorsey)

  6. [Podcast] Cross-Border Investing (Michael Goldberg)


I am continuously looking for first-time fund managers looking to create their first-time impact funds with an edge or a differentiated value proposition in emerging economies. If you are building one, please do write to me. I would love to learn more from you and would be happy to help in any way.

With Love,

Sagar


"first followers" is founded by Sagar Tandon, a founding member at Moonshot Ventures. You can reach him at sagar@firstfollowers.co.

Occasionally, he blogs about responsible investing, tech for good, venture capital, investment thesis, conscious capitalism, collaborative consumption, community, and humane lifestyle.

Share

Share first followers