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Building a sustainable model for repeat venture/startup creation is key.
Venture studios are gaining momentum, but few outsiders understand how they make money, or why many don’t. The reality: the math is messy, early-stage investing is risky, and studios must operate under higher burn than VCs. To win, studios need early equity, faster liquidity, and diversified revenue models. This is a tough business, but the upside is real if you get the structure right.
Over nine years, we’ve learned that building a sustainable studio isn’t about copying VC fund mechanics. Most VCs operate on ~2% management fees and performance carry. That doesn’t cut it for studios.
Our model blends early capital investment with sweat equity, supporting validation, MVP building, founder & team recruitment, GTM, and admin. But we don’t rely exclusively on returns. Revenue from corporate partnerships helps us offset operational costs and extend runway without over-diluting founders, something that we feel strongly about.
We also actively manage for liquidity.We don’t expect every startup to IPO. Instead, we look for early secondaries or mid-sized exits to recycle capital. That helps keep the model alive without waiting 10+ years for every return.
Studios that succeed will blend creativity with discipline: multiple monetization paths, founder-friendly terms, and early wins that feed future sustainability.
Q: Why do some studios ask for such a high amount of equity?
A: High early equity covers sweat, capital, and risk–but it can hurt future fundraising. Studios need to balance optics and economics carefully.
Q: Should studios follow on in future rounds?
A: Most can’t because of capital constraints, but even if they did it’s the studio’s choice as to whether this is part of their strategy. If they do decide to follow-on, they must consider the downstream impact this can have for later investors if the venture studio still holds a large equity stake.
Q: Can a studio survive on management fees?
A: It’s unlikely as studio operations cost more than VC fund management, and most studios don’t have large AUM (Assets Under Management), so it’s important to have revenue offsets and diversified capital sources.
Check out our Renewed Strategy, Highline Beta 3.0.
Read the full article on Focused Chaos
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