The “best of the best” studios in the world
On May 6-7, Vault Fund hosted its annual Global Takeoff Summit in NYC – the premier, invite-only gathering for the top 100 studios globally to share valuable insights, foster meaningful connections, and meet with leading investors.
I had the pleasure of being able to represent Alloy Partners amongst the world’s leading venture studios. I spoke on a panel comparing/contrasting leading “studio entity structures” moderated by Michael Platt, Partner at Cooley, alongside panelists including, Jon McNeill, CEO of DVx Ventures; Leo Scott, Managing Director of DataTribe; and Francisco Gomez, Partner at Vault Fund.
As the venture studio model continues to proliferate, with over 1000 self-declared venture studios in the world, Vault Fund has taken the lead in helping to drive consistency in this emerging asset class of what they are calling “company creation funds.”
A venture studio is a system for designing, launching, capitalizing, and scaling a portfolio of fast-growing startups. More specifically, “a company that builds companies”, typically by using capital to both employ a venture building team to progress ideas into investible startups and invest in those startups at formation.
Regardless of the term, what sets leading studios apart is their proven ability for repeatable company creation paired with a market-validated startup portfolio. The best studios have:
- Launched more than one portfolio company
- Created portfolio companies that have raised outside capital
- Raised a subsequent Studio/Fund to continue their company-building efforts
Over two days in NYC, leading studio executives discussed how they are responding to some of the most important trends in venture building.
Insights from leading venture studios
1. Investors are increasing their focus on studio outcomes.
The thesis of a venture studio requires diverting a portion of investible capital to underwrite venture building headcount who co-create startups and provide them with advantage that they could not otherwise efficiently access on the market. As a result, studios must carefully manage operating vs. investment capital to achieve investor outcomes. Vault Fund has developed a metric to normalize studios: DIBPE – “dollars invested per basis point equity”. By considering the total dollars invested – via investment capital at formation and over time, as well as the operating capital required to employ the team who co-creates the startup – venture studios can then be normalized against a traditional early-stage fund, for example, which chooses to deploy more dollars directly into existing startups, but at a later stage and thus usually at a higher cost of capital.
2. While self-developed ideas and entrepreneur-led ideas continue to be the leading sources of concept generation, corporate venture building is on the rise.
Linked to the rise of “vertical SaaS”, corporations continue to be fertile ground for new multi-billion dollar software opportunities that have been overlooked by traditional coastal VCs. Innovating with corporations, however, requires more than just executive insights or pet projects: deep partnership and co-creation are required to truly yield “advantaged startups”. Over the last five years, Alloy Partners has developed a track record as a leading corporate venture builder by launching 34 startups and studios with leading corporations.
3. Leading studios are rapidly embracing AI tools across the co-creation and startup scaling process.
At Alloy Partners, we believe AI is the next disruptive technology that can unlock human ingenuity, enabling those who embrace it to amass the knowledge and capital necessary to solve the next most significant challenges faced by humankind. We challenge ourselves and our portfolio companies to continuously experiment with the tech to improve core products and services while exploring potentially transformative business opportunities. Just as startups are embracing AI to more efficiently build and test products, so too are leading studios:
- AI tools like Lovable and Bolt enable studio teams to rapidly develop and test products, building MVPs and rapid development capabilities that transition into their portfolio companies once launched
- From landing page generation and A/B testing to cold outreach email generation, tools like Optimizely and Unify can enable rapid experimentation to validate solutions and accelerate go-to-market
- Unique to studios is the use of AI in the business design process itself: from market and competitive research to customer persona creation and validation, AI can accelerate time-to-insights
4. The 4th wave of studios is breaking: “Studios of Studios” are the future.
Venture studios have origins that go back to the early days of VC when venture capitalists, such as Sutter Hill Ventures and IdeaLab, actually co-operated the startups they invested in. Since then the model has proliferated through several successive “waves”, with each innovating on the models of the last.
As leading venture builders from Wave 3 established their credibility through their investment track records, market presence, and vast networks, some – like Alloy Partners, which spun out of leading venture studio High Alpha in 2020 – scaled their venture studio to create multiple studios under one roof. We believe Wave 4 of studios will be defined by this “studio of studios” approach.
Alloy Partners builds venture studios alongside corporate partners who seek to innovate within a sector. Each studio has a pool of allocated capital deployed by a dedicated venture building team focused on launching a portfolio of startups in a sector.
Each studio operates independently, allowing us to rapidly experiment based on the specific sectors and corporations we work with, ultimately identifying the best ways to support entrepreneurs and co-create startups that achieve scale.
And each studio benefits from the scale of Alloy Partners, which contains a centralized portfolio management team that provides world-class go-to-market, network access, and fundraising support for portfolio companies, as well back-office support for the studio itself. By leveraging shared services, each studio can dramatically reduce headcount and increase portfolio companies launched, improving investors’ chances at top-tier outcomes.
As the studio model continues to proliferate, emerging studio managers are beginning to ask the question: “Why hire and train 12 people, raise over $20M in capital, and build a new studio, when it’s possible to build on an established Studio Platform?”
Alloy Partners is a leading venture builder that has co-created 30 new startups with corporations such as Capital One, Elanco, CMS Energy, Koch Industries, and others. We have launched and operated 6 studios to-date in significant sectors with leading partners like agrifood with Purdue DIAL Ventures, retail value chain with Walmart Family Foundation, digital health with UNC Eshelman Innovation, and global Catholic research areas with University of Notre Dame. And we believe now is, counterintuitively, the right time to launch a venture studio. Build with us!
