Ben Yoskovitz’s Post

Why work with a venture studio as a founder? Venture studios differ from traditional venture capital by coupling investment with hands-on support for founders. Studios are proving invaluable for founders in the current capital landscape for several reasons: 1. Active Partnership: Traditional venture capital often provides funding but remains uninvolved in the day-to-day operations of a startup. Venture studios bridge this gap by actively co-creating and partnering with founders. This hands-on involvement helps tackle complex challenges sooner and refine products more effectively. 2. Comprehensive Support: Unlike conventional investors, venture studios offer a full suite of seasoned resources, including engineers, designers, and operational experts. This integrated support ensures startups receive the guidance and expertise needed at every stage, from early idea development to institutional funding rounds. 3. Focused Engagement: Venture studios typically work with a select number of startups each year. This focused approach allows for deeper engagement and a more significant impact on each company's success. By concentrating their efforts, studios can provide tailored support and foster stronger relationships with founders. 4. Experience-Driven Growth: Founders benefit from the studio’s experience in launching and scaling successful companies. With a background in building successful businesses, the studio team brings valuable insights and proven strategies that can accelerate growth and navigate common pitfalls. What’s your take on venture studios vs. traditional VC? 🤔 Have you experienced the difference firsthand?

🎯 'Privileged Access' is the secret sauce for any investors consistently outperforming their peers! It is what allows you to differentiate and differentiation is your long term value proposition. Ben Yoskovitz nails it in this post. Check out the comments section for even deeper insights. For me, privileged access is all about leveraging my experience and my network to... 1️⃣ De-risk, accelerate and reduce the costs associated with product development 2️⃣ Expedite fundraising with value-add investors 3️⃣ Facilitate domestic and expedite overseas commercialization As an #investor, you need to know, articulate and live your privileged access. As a #founder, you need to be looking for investors who have a track record of leveraging the right privileged access that will propel your venture forward.

The key to a venture studio's success is privileged access. Privileged access means you (as the venture studio operators) have access to something that others don't. It comes in many formats, but the goal is to shortcut steps. The more access to "stuff" you have, the quicker you can get through steps in the startup / venture building process, which gives you a leg up against everyone else. Without privileged access, what are you competing on? Speed? Execution? Chutzpah? Suddenly you're on the same level playing field as everyone else. If you're building a corporate venture studio (where you're building ventures internally with the option to spin-in or spin-out) you might be behind the proverbial 8-ball b/c of the "corporate tax" you pay on legal, regulatory, security, etc. Building new ventures inside a corporate is always slower than doing it on the outside, which is fine, IF you have privileged access to assets that make it worthwhile to do so. What are some examples of privileged access that are valuable? * Customers: If I start a company in your venture studio and you already have customers lined up as design partners or friendlies, that's awesome. Getting the first 5-10 customers is hard! Being able to reach them, have them take the meetings and work closely with me as a new founder is gold. * Capital: Raising money is difficult. If your venture studio has access to capital (its own, but also an actual network of interested co-investors) that could speed up fundraising. * Acquirers: Founders & venture studios ultimately need liquidity. Given that most venture studios take a higher % equity, they're amenable to early exits. This does a couple things: (1) it changes the landscape of potential funders (not all deals are VC deals, which is OK if the studio has access to alternative capital sources); and (2) it means venture studios need to have relationships with acquirers. Venture studios that are in regular contact with potential acquirers can help facilitate exits (particularly early ones). * Networks: A lot of this comes down to "who you know." There are customers, investors, acquirers, but there are other partners too that can be super valuable. * Technology: It's possible your venture studio has privileged access to technology. This isn't top of my list, but it could be if you're doing deep / hard tech. Maybe your studio has infrastructure that's expensive or hard to normally get. * Data: Again, not top of my list, but definitely relevant. If you can access proprietary data sources (corporate venture studios SHOULD have an advantage here) that could jumpstart new startup creation. * Expertise: Most studios claim privileged access to expertise. But expertise in common skills isn't necessarily enough, because it's not that special. What do you know or excel at that everyone else doesn't? Ultimately, every venture studio has to ask: What privileged access do we have and how can we use that to our advantage?

Corporate venture studios are designed to build new businesses (internally or externally) empowering big companies to grow beyond their core. They can help diversify revenue, strengthen the core, protect against disruption, build brand, navigate around restrictions and accelerate learning. Designing a corporate venture studio is complex. Two big variables: Validation Methodology & Team Structure and Finding the Right Talent. Tomorrow I'll cover two more. ➡ 1. Validation Methodology & Team Structure: Corporate studios follow a similar process to non-corporate ones; going through some form of ideation, research, validation & testing. Corporate studios tend to be slower, in part because the hurdles to get through the "stage gates" are often bigger. Market size + business model are a big focus; these new ventures have to scale to have any impact on a billion dollar business. You could argue that too much focus is put on market size + biz model though. The validation methodology is impacted by whether you spinout companies or not. If not then you're responsible for validating them longer. * The optimal team size for a venture studio is small. A big team leads to working more like the big corp. Fiefdom building in a venture studio is bad. Some studios have an "early validation team" that transitions opps to a "build venture team" after. * Consider when to recruit EIRs (Entrepreneurs in Residence)/Founders into the mix. Do you do it at the outset? Or do you get the MVP built/launched and then bring in an operator? Somewhere in the middle? ➡ 2. Finding the Right Talent for a Venture Studio: Studio employees do not need to be entrepreneurs or crazy risk-takers, but they do need to be entrepreneurially-minded. * The pace will be faster with less red tape than w/i the corporate. The team has to thrive in this environment. * The team has to love experimentation & learning, recognizing that 0 to 1 is radically different from keeping the big company moving. If they don't genuinely love 0 to 1, don't hire them. * Failure becomes a significant part of the process in a venture studio; the team has to be prepared and comfortable with that. Team members can’t feel like their performance reviews, bonuses or status within the company will decrease if they invalidate things. High performers from within your organization may not be the right fit. Winning in a big company is very different from winning in a studio. I recommend having internal & external people. Internal people know how the machine works. External ppl bring a "burn the ships" mentality. EIRs/Founders almost always come from the outside, with past founder experience. Incentive models play a huge role in the type/quality of talent you can recruit. Most corporate studios w/o a spinout model don't offer real upside. They do offer higher salaries + benefits. Tomorrow: Governance & Budgets + Measuring Success

Venture Studios are startup superheroes. But why do they return 60% IRR? They create, operate, & invest all in one. Having a venture studio is NOT about: - Just being an investor • Providing regular advice • Seeking market trends • Hoping for the best • Building and filtering dealflow • Relying solely on founders • Lacking hands-on involvement Having a venture studio is really about: - Being a co-founder, operator, and investor • Bringing a skilled team • Following a proven process • Building hands on • Guiding startups to success • Pivoting when necessary • Ensuring financial controls Ready to dive deeper? Studios buy equity at a deep discount. They are not just first investors, but founders too. They are on the cap table with common stock and secure preferred equity. Their stake is generally twice what seed or series A investors typically get. With the VC average IRR at 21.3%, twice the equity already delivers an IRR of 42.6%. Leaving a gap of 18.4% based off of Vault Fund’s most recent data report showing a 60% IRR for studios. This is where process and experience come in. Studios start lots of companies and get very good at it. Spinning up all of the back office is trivial. The real magic is streamlining opportunity validation and guiding founders to strategies that make sense for the market and follow-on investors. Most experienced founders have started less than 5 companies. Studios like High Alpha have started more than 7 times that. Studios are true partners with financial controls from day one. Unlike accelerators and early seed investors who bet on founders and early teams to get it right with advice, mentorship, and resources, studios can force a change of direction. They can kill projects, pivot to new ones, and even fire founders who are not a fit for the role, preserving capital to start a new company. Studios are in the weeds with the founders but can look beyond the forest and study the terrain, while the founder focuses on the details among the trees. With all these advantages inherent in the studio model, is an additional 18.4% IRR really that hard to believe? Embrace the venture studio model. And build successful companies.

Venture Studios Eat VCs..! Are you curious about Venture Studios and how they work? # Venture Studios are industry-specific "factories" that conceives ideas and solutions # The ideas and solutions are executed by Portfolio Companies of the Venture Studio # The Portfolio Companies are funded by a captive studio fund. This model has several benefits:- # Quicker Product-Market Fit (products and solutions pre-vetted by industry strategics) # Shorter cycle to getting paying customers (strategics buy, use, and make available the solutions to their end-use customers) # Time burn of executives in scouting for talent is avoided # Plus, the odds of a successful exit are higher With over 800 studios worldwide (and growing), half of which are in the U.S., it's worth exploring..! Click here (https://lnkd.in/gSNTNuiE) to learn more about on U.S. based Venture Studios and issues to navigate. #VentureStudios #Startups #Innovation

New venture studio definition? Trinity of entrepreneur, operator, & investor. Miss part & you're not. More & Critique 👇 The question ‘What is a venture studio?’ has been on my mind recently. Broadly viewed the venture studio model is merely an organization that builds companies. It does this by: 1) playing an entrepreneurial and founder role creating companies, 2) bringing a team, process, and playbook getting hands on in building the company, 3) and making an investment conducting the proper due diligence and putting risk protections measures in place. These are the three aspects of a studio. And all three aspects can be quickly tested. Miss one or more and you are not a studio but something else. ⚖️Testing Time Studios are commonly compared with accelerators, incubators, and VC. Accelerator - Plays an investor role with minimal due diligence. Advises and educates only, failing the entrepreneurial and operator roles of a studio. Incubator - Rarely plays an investor role. Rarely helps at the idea stage as a minimal cofounder. Does not get hands on in building but provides a network to mentor, guide, and hire yourself. VC investor - Plays a strong investor role. Does not play an entrepreneurial role. Rarely jumps in and helps build. What about other players in the ecosystem? “Vulture Studios” - As agencies that take outsized equity are service providers playing an operator role but rarely an entrepreneurial or investor role. - As studios that prey on founders taking outsized equity are failing to play the investor role in derisking the path to exit, instead adding risk to each company. ‘Operator Studios’ - Studios that play a partial role in helping you build one or more aspects of your company but still take full ownership as a founder would influencing the broader company and building the team for full ownership going forward and they conduct proper due diligence prior to investing capital and/or sweat to earn equity fit the studio definition while also ensuring there are protections in place. An agency would not conduct beyond cursory due diligence nor take ownership of aspects of the company. They build what you ask, not show up as an equal. Thoughts on the three core aspects of a studio? How does the entrepreneur, operator, and investor framework feel to you? Let me know below!

🚀Venture Studios- Your Institutional Cofounder🚀 Transitioning from a founder to a VC has given me a deeper appreciation for the unique role that venture studios play in the startup ecosystem. More than just funding entities, venture studios act as institutional co-founders, providing the perfect blend of resources, expertise, and support to shape high-potential startups. 1️⃣ Structured Ideation & Validation: Venture studios don’t merely fund ideas; they actively create and validate them. By partnering with visionary entrepreneurs, they help identify market gaps and build solutions that are aligned with industry needs from the start. 2️⃣ Institutional Co-Founder Support: As institutional co-founders, venture studios go beyond passive investment. They bring a wealth of experience, a team of seasoned experts, and a network of mentors to guide the startup journey, sharing in both the risks and rewards. 3️⃣ Hands-on Execution: Startups have access to a full suite of operational support, including product development, marketing strategies, legal assistance, and business development. This hands-on approach accelerates growth and enables founders to focus on their core vision. 4️⃣ De-risking the Process: One of the biggest challenges for startups is navigating early-stage uncertainty. Venture studios systematically test and iterate on ideas, dramatically reducing risk and increasing the probability of success before scaling. 5️⃣ Access to Talent & Resources: From tech teams to growth hackers, venture studios provide startups with access to top-tier talent and resources. This shared pool of knowledge and expertise ensures that startups have a strong foundation to scale rapidly. 6️⃣ Built-in Funding Pipeline: Beyond initial seed capital, venture studios connect startups with a network of investors, providing a clear path for subsequent funding rounds. This ensures that promising startups have the financial backing they need at every growth stage. 7️⃣ Speed to Market: With their resources, expertise, and proven frameworks, venture studios significantly shorten the time it takes to bring a product to market, allowing startups to outpace their competition. 8️⃣ Strategic Partnerships: Venture studios often have strong industry connections that can open doors for strategic partnerships, helping startups gain traction faster and expand their market reach. I believe that venture studios are more than just a launchpad—they’re true institutional co-founders, rolling up their sleeves to co-create and guide startups toward sustainable success. They offer founders the best of both worlds: entrepreneurial freedom with the backing of a strategic partner. 💡 If you’re an entrepreneur looking to turn your vision into reality, aligning with a venture studio could be the game-changing partnership you need. #VentureStudios #Startups #InstitutionalCofounder #Entrepreneurship #VC #Innovation #BusinessBuilding #Growth T9L Qube

What is the impact of early exits for studios? I confess, I got this wrong. Then I modeled it. Gamechanger. I confess, I have a VC bias. I have a lot of experience in the venture capital space as a startup founder, student of the venture capital business model, and in my work with studios that often focus just on venture capital. Early exits just sounded weird. Exit after the first or 2nd outside round? Too early! This is a hits driven business! WHY do that?!?!? Turns out, I was wrong. Here is the scenario. A studio has raise $20M to build a cohort of 10 companies in 3 years. They are true cofounders, removing the need for 1-2 founders, bringing a team, and providing hands on support for 18 months. They take 50% and provide $1M in capitalization to each company. They take a 50% common stake, are diluted by the 20% options pool they establish day one and the $1M preferred investment they make at pre-seed valuation of $8M for a 12.5% preferred stake. With the first outside investment targeting a Seed round of $3M at a 13.5M valuation for a 22.2% dilution (inline with Carta’s Q4 2023 data). They perform on par with the studio data, with 60% of their companies raising a Series A. What is the impact of a policy to sell a portion of their common stock at this point? Assuming a $9M Series A raise at a $45M valuation, the studio would have 21.16% of the common stock after the Series A, matched with the sole founder in the company. Total Value of the studio’s common stake is $9.522M for each portfolio company. With 6 portfolio companies that make it to Series A that is a value of $57.132M. Not including the preferred stake. Selling 25% yields $14.283M, an MOIC of 0.714. Selling 50% yields $28.556M, an MOIC of 1.427. Selling 75% yields $42.849M, an MOIC of 2.142. Selling 100% yields $57.132M, an MOIC of 2.856. Sell it all and still retain a 12.5% preferred stake (diluted to 9.44% after the Series A). This is HUGE. Why? We have returned 2.85x to LPs in 5 years (3 years build plus 2 years to get to Series A on average for studios) half time of the average VC fund AND still have typically sized seed/pre-seed investment stakes in 6 companies. Add in a preferred investment and it just gets better. Series B? Add 0.352 MOIC. Series C? Add 0.539 MOIC. Series D? Add 1.178 MOIC. Series E for $1B? Add 2.88 MOIC. Here’s a question for the crowd. Should studios play the early exit game or the follow on game? Either pro-rata or expanding ownership. BTW - This is from my beta financial model of a multi-fund, multi-strategy, multi-legal structure studio financial model. It’s a beast, but the capability and fidelity to explore these critical strategic decisions is powerful as I architect studios with clients.

Raising funding as a startup studio is TOUGH. Who are the investors in startup studios today? And can you get them on your captable? 🏢 Institutional Investors $10M+ Interest is limited but growing from institutional investors today. These investors rarely invest less than $10M and often require a fund size of $50M+. Studios need a strong relationship with them and a track record that makes it easy for them to justify investing. Rarely will invest in the first fund, generally 3rd fund or later. 🏠 Family Offices $500k+ Growing interest from one of the most patient sources of capital around. Studio awareness is good, but deep knowledge is often hit or miss. Willing to invest as early as fund 1, with relationship being a driving factor. Think quarters to years, not weeks to months. 💰 HNWI $250k+ Wealthy experienced individuals tend to be fast and shred investors that can quickly evaluate the team and studio model. 🧑💼 Operator Angels $25k+ Experienced startup and executives that want to be more hands on bring capital, their network, and hands on support. Generally quicker to grow interest and an understanding in the model. 🧑🤝🧑 Friends & Family $5K+ Invest because they know you and trust you. Often smaller checks, but with limited need to fully understand the studio model since they are investing in people they know. 👥Community $1+ Tapping in to a community with aligned interests to address a common cause is a powerful option, especially for impact focused studios. Impact and aligned interests lessen the need for deep understanding of the studio model, making raising easier. 🏢 Corporations $250k+ When industry or technologies align, corporations can make solid early investors or build partners with studios. With the right partner tract record and network, corporates and corporate venture capital consider investing as early as fund 1 in studios. Plan on quarters to a year+ to go from first conversation to investment even with a relationship. The complexity of the model creates a lot of opportunities for red flags and for investors to stop looking. This can be seen in an interested emerging statistic. 50% to 75% of the first fund a venture studio raises comes from the partner’s network that existed BEFORE they started working on a startup studio. They say your network is your net worth. For fund 1 of a venture studio, expect half of your first fund to come from your existing network. Can you raise enough to start or would you need to find another path? Let me know in the comments below. #startupstudio #vc