Introduction
Venture studios have emerged as a unique breed in the venture capital landscape, promising an allure distinct from traditional VC firms. Led by elite serial entrepreneurs, these studios vow unparalleled deal economics and an intimate partnership with founders. However, a stark paradox lies beneath this promising veneer: the formidable challenge of scaling without compromising the essence that defines venture studios.
The Era of Alchemy
Once upon a time, venture studios meant working directly with a seasoned entrepreneur as your co-founder. These were people who had built successful companies before. They were deeply involved, offering their wisdom, connections, and even their own money. It was personal and effective. These alchemists offered Limited Partners (LPs) an exclusive pass to a world where ventures were not just founded but crafted, embodying a synergy of vision, experience, and unparalleled expertise.
The Scaling Conundrum
Yet, herein lies the paradox. The very essence of venture studios - the intimate, artisanal crafting of ventures - stands at odds with the clamour for scale. Achieving scale while preserving the intimacy, personalised touch, and elite expertise is akin to chasing a mirage. The venture studio’s magnetic allure to LPs is grounded in this bespoke engagement, yet the demand for expansive portfolios and diversified investments beckons a drift towards institutionalisation.
The Descent into Institutionalisation
In recent years, venture studios have begun to veer towards a model that’s characterised by size and scale, mirroring traditional venture capital firms or accelerators. In making venture studios bigger, we’re losing the very thing that made them special. In this new landscape, serial entrepreneurs are often sidelined or detached, with their nuanced insights and tailored approaches sacrificed for operational efficiency. The intimate mentorship that once defined venture studios is dwindling, replaced by transient teams often lacking in both entrepreneurial experience and the inherent attachment to the venture.
Death By Institutional Co-Founder
The Midas touch of experienced entrepreneurs is being silently replaced by impersonal, corporate structures, raising questions about the studios' ability to nurture innovative, sustainable startups. In our experience, top-tier founders will avoid institutional co-founders at any cost, further diluting talent quality and inviting adverse selection.
For LPs, this change isn’t good news. Before, they were putting their money in ventures led by proven entrepreneurs. Now, it’s a gamble. The assurance that came with having seasoned entrepreneurs at the helm is waning. The shift to a more bureaucratic approach is affecting the quality of startups emerging from these studios, leading to scepticism and caution among LPs. We are now stepping into a peculiar era marked by studio blacklisting, where VCs are systematically boycotting the surging tide of hollow, studio-born ventures.
Unwavering Truths
A company, no matter how resource-rich, can't replace the intuition, passion, and commitment of an experienced entrepreneur. The hard reality remains:
- Companies can't create companies; people do.
- One seasoned entrepreneur is worth more than a team of inexperienced individuals.
- The best founders know the value of an experienced Partner.
- The magic isn’t in the structure, but in the human touch.
Conclusion
We learned these truths the hard way. For venture studios to retain their allure, they need to remember what made them successful in the first place - the personal touch of experienced entrepreneurs. It’s a tough balance, scaling up while keeping the essence alive. But it’s a challenge that needs addressing, for the sake of innovation, new ventures, and the LPs who believe in them.
The venture studio, in its pure, unadulterated form, isn’t a business model - it’s a living, breathing entity with a rare concentration of experience, resource and unwavering commitment.
This article was written by Ryan Shub, VP of Delta Studio. To learn more about Delta Studio, click here.
