The studio model is very popular right now as more people figure out that building vertical SaaS companies can be made formulaic. There’s a lot to be said about the economics of Studios, but I want to focus on is output. Or rather, the lack of output from these sorts of firms.

VC Platforms, deconstructed

A studio is an advanced permutation of VC platform, in which the investor provides market validation for a new business, and secondarily finds the right manager for that business. The manager, usually given the CEO title, is given access to the studio’s resources (typically recruiting, product, engineering) to use the studio as an ostensible co-founder.

Two things enable this: 1) asymmetric access to markets and customers, and 2) a repeatable process allowing for rapid go to market.

The strength of asymmetric access is not a novel concept – rather it’s what enables a lot of the best investment firms regardless of asset class. Within a venture studio, assymmetric access comes through partnerships (whether via governments, portfolio companies, or institutions with a need to fill) as opposed to an entrepreneur. The advantage here is that a company can be launched, validated against market gaps that investors see, with professional management. Such a model usually results in a raised floor for the company. The disadvantage is that a disproportionate amount of capital growth comes from unique insights and advantages from founders, which a studio company doesn’t necessarily get access to. This means lower exit valuations, but with the tradeoff of higher exit pprobability.

I would love to wax rhetoric about this topic (and I could go on for hours) but this post is about point #2.

Repeatable processes are the product studios sell

Repeatable processes are key. The product the studio ultimately sells is its ability to validate market problems, and conjure market solutions. The best way to achieve that is through rapid iteration. Moreover, this is the area that is most annoying for multiple-time founders, and I argue is a major differentiation for potential Studio company CEOs. The better the tech. they inherit, and the more insight and research they are given, the less they have to redo for themselves.

Thus, every studio SHOULD be obsessing over its internal tooling and information dissemenation.

And yet the only Studio models that come with access to high quality tooling and research are the ones that come with a corporate angle – like NVidia incubating and funding companies that are pushing forward foundational ML.

A general purpose vertical-SaaS studio model should be outputting a lot of great open source (ideas or code) that anyone builds upon. Most are still playing the exclusionary admission games that work well for accelerator models.

I’m not building a studio but…

I’m currently working on a few projects. One of them is Open Source, a few are in stealth/nascent stages, and a couple others are joint ventures with other groups. I want to use all these projects as an opportunity to standardize and justify a toolkit for early stage ventures, in the manner that I think studios should.

I will write about tooling choices, and I’m going to start publishing ADRs for all of this to add some rigor to the process. Within this will hopefully contain a lot of my thoughts on startup tech. stacks, and will CERTAINLY contain my complaints about how people build software.

Stay tuned.