Startup Studios are also known as Venture Builders and as both of these names suggest, they are companies that create other companies. The goal of a Venture Builder is to use the same internal team and set of internal resources to crank out as many high-quality startup ventures as possible. To learn more about Startup Studios and how they work, read this article.
At Studio Upstart- Build, the first and only membership community for entrepreneurs and leaders across the Startup Studio industry, we talk a lot about how to fundraise for Startup Studios. As many of our members are emerging Studio creators, there are questions on everything from legal to accounting. In this episode on our YouTube channel, I outlined the steps an emerging Studio must undergo in order to get ready to raise funding.
At a high level, one must:
- Develop a kick-ass team
- Identify your niche and mission,
- Set up your Studio as a legal entity
- Design your branding- which includes launching a website- and
- Decide on your funding mechanism (bootstrap or investment)
Once you’re set on those tasks, yous Studio is in good shape to move on to the next step: fundraising.
After conducting research and surveying existing Studios, I’ve come to the conclusion that there are two main structures Studios use to finance their operations and startup creation efforts. This is not to say that the financing can’t be set up in other ways, but in general, these two structures are the most frequently used for new and emerging Studios with little to no funding of their own to offer up. Additionally, most often VC firms are the backers of Startup Studios, but Angel groups, governments, and even private corporations can also contribute funding to a Studio.
Structure #1: The Fund Model
Essentially, Studio founders each hold an equal amount of equity in the Studio and they collectively launch a fund to raise money to build ventures. They’ll settle on an amount that will give…