The Venture Studio
Research suggests that venture studios require between $2M and $10M in funding, which covers the launch of 10-15 companies. On average, this implies an investment of between $133K to $1M per company. Importantly, these companies typically go on to raise further rounds of venture financing, before eventually failing or succeeding.
The immense success enjoyed by venture capitalists over the past decades has fuelled the influx of capital and funds, as well as a discourse that taking VC money is the way to build a company. The rise of venture studios is adjacent to this development, and to this day we experience that most venture builders focus on churning out businesses that can take on future funding. This is owed, largely, to the economics of a venture studio that has raised funds. As soon as limited partners are introduced into the equation, returns must be outsized to compensate for risks, management fees, and carried interest, pushing venture builders to pursue VC cases. It is a self-reinforcing loop that results in a power law distribution of returns as we know it from traditional VC, albeit with a slightly higher probability of success due to the venture studio’s operating blueprints.
Bifrost does not invest in venture studios, but startup studios. There are multiple important similarities and distinctions, but notably, we believe that the startup studio is the way to build companies under capital constraints.
