Success rate is a helpful metric, but it depends on which player/party is interacting with the Studio. Studios lend themselves well to Consumer fields which traditionally have lower exit multiples than B2B/Infra/Software.
- Are you an LP? You can have great paper returns, but poor DPI over time. How do you feel being an LP not seeing that GP's are double dipping on equity grants at company formation for them to only secondary as fast as possible after a quick markup (easier done in the last few years in zero interest rate environment) arguably breaching fiduciary responsibility?
- Are you a "Founder" getting hosed on equity? You do receive a ton of support and resources, but you're paying with the most expensive cost of capital (equity). Do you have full control of the company? What are the voting rights of your stock grants? Where does the buck truly stop?
- Are you an early stage employee getting a sliver of the already somewhat upside down cap-table?
Going to Idealab's Pitchbook page: 202 investments, 135 'exits' (I think this is where you get your 65% number), but 65 of those 135 'exits' were bankruptcy.
I saw 2 types of studios
- that incubate their own ideas and bring founders to operate them. Here founders don't have the large stake, but it's not their idea and resources
- that bring outside founders with ideas. Here founders retain big part of equity.
I'd be super curious to get the entire list of studios that the author looked at for analysis. Max Levchin's studio HVF labs birthed Affirm, which isn't included.
The problem with startup studios is attention is completely splintered. I think Lemon.io (your company) is probably the only way to get quick validation and then drill down.
It requires a lot of capital. Most of them fail.
One of the startup studio founders told me it's hard to fundraise for the studio even if you are successful
Success rate is a helpful metric, but it depends on which player/party is interacting with the Studio. Studios lend themselves well to Consumer fields which traditionally have lower exit multiples than B2B/Infra/Software.
- Are you an LP? You can have great paper returns, but poor DPI over time. How do you feel being an LP not seeing that GP's are double dipping on equity grants at company formation for them to only secondary as fast as possible after a quick markup (easier done in the last few years in zero interest rate environment) arguably breaching fiduciary responsibility?
- Are you a "Founder" getting hosed on equity? You do receive a ton of support and resources, but you're paying with the most expensive cost of capital (equity). Do you have full control of the company? What are the voting rights of your stock grants? Where does the buck truly stop?
- Are you an early stage employee getting a sliver of the already somewhat upside down cap-table?
Which public resources? I didn't see any references cited.
It's pretty common in the startup space to exaggerate, but even a reference to a studio's own stats would at least be a good start.
Isn't founder in such a place just another employee?
Also, I think it's better to validate with in-house talent, even though I see a lot of MVP built through us.