The Venture Studio Model The Future of Innovation, Investment, and Impact – MATTHEW BURRIS

In the world of high-stakes entrepreneurial investment, traditional models like venture capital and accelerators have long been the standard. With the tumultuous nature of technology and market demands, even corporate giants and seasoned investors are on the hunt for more efficient, less risky avenues for innovation and investment.

Simultaneously, the call for targeted social and economic impact is louder than ever before. Meet the Venture Studio Model—a mechanism that not only promises higher returns but also champions long-term innovation and social impact.

This isn’t just a minor tweak; it’s a compelling alternative that’s setting a new standard in the industry.

Situation

In today’s fast-evolving entrepreneurial world, corporations and investors seek innovation pathways that deliver both financial and social returns. While traditional methods have their merits, they struggle to match the rapid pace of modern innovation, often locking capital into rigid, high-risk ventures and failing to keep innovative startups outside the gates. The rising focus on ESG (Environmental, Social, and Governance) investing emphasizes this shift. The convergence of these factors sets the stage for an alternative that promises not just financial returns, but also a more efficient and targeted approach to innovation and social impact.

The Venture Studio Advantage

What sets venture studios apart is their co-creative approach to startup development. Unlike other models, venture studios are designed from the ground up to be deeply involved in creating, developing, and scaling startups from day one. They act as an active co-founder, with both the financial and operational involvement necessary for long-term success. Studios maintain strong controls of each company they create while they are still within the studio to guide companies around common failure modes, leverage a proven process of opportunity identification, validation, and company creation, and have the core resources to execute independently. Well crafted studios strike a balance between delivering for four distinct customers – studio investors, studio staff and general partners, entrepreneurs, and follow on capital, which is not restricted to just venture capital.

The result is not only delivers strong returns but is also innovative and impactful, offering a more balanced risk-to-reward ratio. The Global Startup Studio Network on a study of 258 studios showed a 53% Internal Rate of Return (IRR), nearly twice that of top venture capital, 5.8 Total Value – Paid In (TVPI) compared to 1.57 for VC, companies that reached the Series A level in half the time of traditional startups, and a Series A rate of 60%, over 30% better than the Series A rate of Y Combinator, the best accelerator in the world.

Why corporations turn to the studio model for better return on innovation

Efficiency & Speed
Venture studios are built for speed and agility, efficiently combining investment, talent, and expertise to push innovative solutions to market. Unlike traditional in-house approaches that can get tangled in bureaucratic red tape and complex spaghetti tangled approval processes, venture studios provide a streamlined, efficient pathway to innovation. Their independence eases the burden on overloaded internal departments, leading to faster decision-making, reduced time-to-market, and efficient capital use, all aligned with corporate goals and market needs.

Alignment
Venture studios present a compelling solution for corporations contending with competitive startups. They allow corporations to create their own startups, tailored to their strategic and business goals. Ideal for pursuing adjacent market opportunities that would require new buyer relationships to be built in existing customers, where existing technical constraints or outdated business processes prevent rapid execution, and the annual budget and planning process creates too many roadblocks for the dynamic nature of commercializing early opportunities. Alternatively, partnering with existing studios offers similar advantages, requiring less investment but providing strategic alignment and enhanced flexibility.

Risk Mitigation
The venture studio model is not just about speed; it’s also about security. Studios take a diversified approach, finding and validating multiple opportunities to build multiple companies every year. The studio process itself forces a series of risk mitigation evaluations for each opportunity as it matures judged against ever increasing expectations. The structured approach to due diligence and risk assessment they take offers a more secure avenue for delivering return on innovation, a key concern for corporate investment. Additionally, the studio model provides a better ownership stake in each company built than corporate venture investments secure for a smaller total investment.

Corporate Venture Studio Options
Build, partner, or invest. These are the core options for corporations to consider engaging with the studio model. Building and operating a studio is often the most attractive option for corporations who seek to maximize their control, return, and strategic alignment, designing and operating a studio is a unique challenge. Applying standard corporate approaches to compensation, equity ownership, and operations are the most common silent killers of studios, undermining key customer requirements for successful studio operation.

Partnering with studios to build companies or investing in studios offer the best initial path for corporations to tap into the power of the studio model. Partnering first allows companies to see the model work first hand and shape the creation of strategic portfolio companies with a minimal financial commitment.

Investing in strategically aligned studios secures a diversified portfolio, the ability to influence the opportunities pursued to ensure greater strategic alignment, and insight into how the studio operates and evolves overtime.

Why Investors Seek Venture Studios

Capital Efficiency
Investors value the efficiency of venture studios. Studios optimize both financial and human resources, offering a higher success rate with fewer resources. By continuously refining the company creation process, they shorten the journey to product-market fit and gain substantial ownership, often over 30% ownership between common and preferred stakes. This approach aims to build businesses effectively, with minimized costs and risks.

Portfolio Diversification and Risk Mitigation
Investors are increasingly drawn to venture studios due to their comprehensive and hands-on approach. Venture studios deeply engage in every phase of venture creation, offering rigorous vetting and risk reduction creating deep due diligence documentation as they build each company. They diversify their portfolio by co-creating multiple businesses, a unique advantage over traditional models. Instead of relying on a single idea, studios test multiple concepts, quickly pivoting away from less viable ones and leveraging shared resources to minimize launch costs.

Access to Talent
Studios attract top-tier talent, far better than early-stage startups could hope to hire alone. By pooling expert talent, studios enhance the speed and quality of their portfolio companies. Led by seasoned entrepreneurs with proven track records, these leaders use their expertise and networks to rapidly grow their new startups.

Investment Options in Venture Studios
Venture studios offer three core investment avenues, with perpetual returns for the life of the studio available for the earliest investors. Direct investments into studios take the form of traditional VC funds, holding company investments to create a diversified portfolio, and General Partner stake (GP Stake) investments securing perpetual returns across funds without additional capital investments required. GP Stake investments are available only to the earliest studio backers who take on greater risk in supporting a new studio.

Studio exposure can also be gained through dedicated studio funds of funds. There are few of these focused funds today, with many new funds in development. Traditional investment funds with a focus on investing in companies built by studios offer the broadest exposure to the asset class. This approach combines small diversified investments across multiple studio portfolios with the improved exit rate and time to exit to enable strong fund recycling and the potential to outperform traditional VC and approach direct studio returns.

New venture studios may offer lifelong studio returns for a one time investment through a GP stake or direct ownership in the studio. While higher risk, the long term strategic and financial benefits are especially attractive when the studio’s thesis and focus is aligned with the corporation.

Why Impact Investors Support the Studio Model

Scalable Impact
At it’s core, the studio model is designed to provide the right support to derisk building companies. The studio model is flexible enough to tackle global climate deep tech or local economic development while still delivering venture scale returns.

Impact alone is not enough. Sustainable economic impact is table stakes. The flexibility in the fundamental design and operations of a studio enable sustainable impact investing. Delivering the proper support to take on global or local challenges by building the right economics and expectations into the core operations of the studio.

Whether the target impact is hyperlocal economic development by building profitable small businesses or addressing or targeting the UN’s Global Sustainable Impact Goals, the studio model is a framework that can work at any scale.

Model Adaptable for Impact
Adapting the structure and deal terms for studios is a common approach to reducing risk. Deep climate tech studios building companies that may take 20 years to mature may opt for a fund life more aligned with the cadence of the impact endeavors they build. Deal terms for founders and staff adjust while maintaining return potential and alignment with follow on investors.

Adapting to ensure strong alignment between the studio, studio investors, the founders the studio works with, and follow on capital allows the studio model to be dialed in to deliver specific impact goals.

Operations Designed for Impact
Studio operations are built around the companies they aim to build. For deep tech and hard tech, expansive talent pools and facilities are common. An approach that has worked well for Flagship Pioneering, the studio behind Moderna Therapeutics and a half dozen other biotech IPOs. Studios that focus on driving local economic impact to underserved communities rarely need more than a handful of staff once key partnerships are established, allowing leaner operations that focus on dividend returns from cash flow generating portfolio companies.

Impact Investment Options for Studios
For impact investors the studio model holds the promise of delivering both impact and returns. Studios are a rapidly growing model with 50% of the 800+ studios launched within the last 6 years. Finding aligned studio deal flow is a challenge and limits the potential investment landscape. This leaves three options for impact investors:

Improve studio deal flow by publicly expressing interest in the studio model
Partner with groups that work with and support new studios, such as the Global Startup Studio Network and Venture Studio Associates

Take an active role in building their desired studio providing playbooks, financial support, and access to general partners that are ideal to start and run impact focused studios.

The Future Is Here
For global executives, institutional investors, and venture capitalists, the message is clear: the Venture Studio Model is not just another alternative; it’s rapidly setting itself up as the new industry standard. It’s a calculated, methodological, and most importantly, successful approach to entrepreneurial investment.

This model offers a way to invest in the future— a future of higher returns, more impactful innovations, and enterprises that are built to last. For anyone looking to make a long-term investment in innovation, impact, and financial returns, considering the venture studio model is not just an option; it’s a requirement.