Investors make better venture studio founders
Who are the founders of venture studios? What backgrounds lead to the most success? To answer this question, we analyzed the founder backgrounds of the top 53 venture studios and compared the traction of recent startups launched at their studios.
The result: Most successful studios are founded by former CEOs who want to leverage their network and skillset across many startup bets. However, a growing cohort of studio founders have a background in VC or PE investing - and these studios are outperforming.
Why are investors more successful at founding studios?
Eyes wide open. Venture studios face many challenges including navigating a long cashflow cycle, recruiting management, and difficulty raising VC for their startups given lower management ownership. The most successful studios tend to specialize in certain industries such as enterprise, cybersecurity or healthcare and raise significant LP funding. Investors may be better informed of these early stage venture challenges and build their firms accordingly.
Venture studio diaspora. Founders of Fast Lane Ventures, Juxtapose and Pioneer Square Labs were founded by investors who previously worked at other studios.
LP relationships. Former investors may have a stronger network of LPs to raise funding.
Some CEOs may decide they want to operate again. Their goal may be to build a limited portfolio of companies where they can be operationally involved. Investors may be more focused on spinning out companies and reinvesting their time and resources into new ventures.
Surprising pattern: McKinsey
Of the 53 top studios we analyzed, 5 founders previously worked at McKinsey and 5 others worked at other leading management consultancies like Bain or BCG. Most studio founders who were previously investors started their careers in management consulting. While management consulting is a common background for investors, the primary research and operational skillsets from consulting transfer particularly well to studio work.
Both CEOs and investors have demonstrated significant success launching venture studios. More than three quarters of successful studios are led by former CEOs. Investors are representing an increasing portion of studio founders, and are demonstrating relatively stronger performance at scale.
Most notably, investing or leading a large company are the only two resumes of successful studio founders in our data. None of the top studios in our dataset were founded by individuals who were neither an investor nor had led a large company.
These appear to be the two paths for aspiring studio founders.
The success of venture capital investors in founding studios may suggest VC firms should incubate more companies themselves. VC funds like Greylock, Sequoia and Sutter Hill have a history of successful incubations. Investors turning successful studio founders suggest an opportunity for more VC firms to join them.
Methodology and data limitations
This analysis is based on data from our database of venture studios and their startups. We reviewed the backgrounds of the primary founder for 53 of the most successful venture studios, measured by their startups’ funding and number of employees.
Studio founder backgrounds fall into two groups:
CEO of a successful company
Investor at VC or PE firm
One studios was founded by a CEO with a successful exit, who later became a general partner at a major VC firm - we classified this as CEO. Seven studios were founded by CTO, President or other C-level co-founders - we classified these as CEO as well.
Venture studios are low barrier to entry, high barrier to scale. We limited the analysis to the top 53 venture studios to focus only on those with significant operations producing multiple winners. We wanted to understand the performance attributable to founder backgrounds of those studios operating at scale. Backgrounds of venture studios not in the top 53, or that we haven’t yet identified in our database, may differ from this analysis.
See data methodology and limitations for more background on our database.
The idea of analyzing studios by the backgrounds of their founders is based on a framework in Venture Studios Demystified, written by Shilpa Kannan and Mitchel Peterman. We highly recommend this book for anyone interested in venture studios.