Two thirds of venture studios are dead
Venture Studio Index is a free, public database of venture studios and their startups.
According to our data, there are ~372 venture studios but only ~126 have launched a startup in the last 2.5 years. The rest have shuttered, are focusing on their current portfolio or their founders have retired in success.
Will every venture studio eventually shut down? Are new studios simply replacing the older ones who die? Not according to the data.
In the table above, we group studios by year they were founded, and look at how many from each group are still launching startups. After an initial culling, the remaining ~34% of studios continue to launch startups - this is consistent across every founding year cohort.
The strength of earlier cohorts is a good sign for the longevity of the studio business model. And the health of recent cohorts suggest there may be room in the market for even more studios.
Which studios are thriving and why?
Observations:
Some firms have been operating for more than 50+ years, others are just getting started
All have sizable teams dedicated to ideating, prototyping, selling and recruiting for their startups
Most have a dedicated focus, e.g.:
A.I. - Slimmer.ai
B2B software - Fractal, Greylock, High Alpha, Madrona, and Super{set}
Cybersecurity - Cyberstarts
Healthcare - Flagship Pioneering, Redesign
Insurtech/Fintech - DESCOvery (D.E. Shaw)
Geography - Rocket Internet, Team Global
What causes so many studios to shut down?
Studios are low barrier to entry, high barrier to scale. Beyond the challenges of simply launching startups, factors that may pressure the studio model in particular include:
Difficult to recruit high quality founders. Studios target founders with significant experience and domain expertise, who are hungry for the stress of a building a big company, and are willing to trade a lower equity stake for a proven idea with operational and financial support. The venn diagram is narrow and competition for great founders is high. Many studios invest significant resources in events, networking and relationship building.
Cashflow / the capital return problem. Studios invest significant resources in their R&D, and may not see a return for 5-10 years (or ever). Studios launching frequently need a large base of capital to continue investing resources until they start to see exits. Even studios who manage LP funds can usually only invest them in active startups, and have to pay for their team and R&D budget out of their management fees or founder capital.
Lower exit valuations. We may see additional studios struggle due to recently lowered tech valuations.
Too much success. Studios who have built an extremely successful portfolio may choose to focus on their winners or simply retire from venture building.
Potential EIRs and studio employees studio should consider the funding, burn rate and strategic competencies when deciding among studios.
Still room for more venture studios
A new venture studio is launched every month. The ~34% who can focus on a core competency, recruit high quality founders and remain capital efficient have a good chance of building an enduring business.
Today might be a particularly advantageous time to launch a studio. Studios founded in ‘08/‘09, the years of the great financial crisis, have a higher survival rate than their neighboring cohorts. This might be due to lower competition from other startups and greater availability of tech talent. The tech challenges of 2022 may provide a similarly attractive setup for new studios.
Methodology
The tables above are based on our free, public database of venture studios and their startups. See our data methodology and limitations for more info on the data.
The “dead studios” column in the table above is based on the number of studios we have identified who are inactive divided by the number of total studios we have identified. We count studios as active if they have publicly launched a startup since January 1, 2020.
Various factors may lead to over- or under-counting active studios. Studios who are currently developing startups yet have not launched any in the past 2.5 years will be undercounted in this analysis. However, this should balance out against studios who have recently launched startups but are no longer incubating new ones. Finally, it is more difficult to identify past studios who have shuttered than currently active ones, so the denominator of total studios is likely understated.
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