Exclusive Interview with Mitchel Peterman: Venture Studios Demystified

Mitchel Peterman is an MBA graduate from the Stanford Graduate School of Business and MPA graduate from the Harvard Kennedy School. Mitchel has served in leadership roles with multiple startups in both the criminal justice and digital health spaces, managing strategic operations, marketing and communications, and business development. Mitchel’s areas of expertise include innovation design, copywriting, marketing, and brand development.

What types of venture studios dominate the US market? 

There truly is no "right" way to structure a studio as it heavily depends on factors like LP mix, build thesis, return expectations, etc. However, there are numerous reasons why dual entity models are quite popular with studio founders. A dual entity model can be thought of as an operating company where studio staff and operations reside, and then a separate holding company where investor funds are held and allocated. Separating these entities helps avoiding issues with dilution and having to establish valuations when raising additional funding. It can also help to provide a clearer picture of ownership and exposure for LPs. 

Where do you see the biggest differences between a classic VC fund and a venture studio?

VC's primary role is to evaluate existing opportunities and allocate capital to entrepreneurs. They do not operate as founders and provide a lesser degree of hands on support. Venture studio's primary role is to create new companies and operate as co-founders. Both early stage VCs and studios are providing capitalization to early ventures, but in the case of studios they are typically financing their own creations.

What are the characteristics of LPs for venture studios as opposed to VC funds? Do you see any differences here?

VC has a longer track record of performance and the asset class is better understood. This means more risk averse institutional LPs like pensions, endowments, and large corporations may be willing to invest in top performing VC funds. These groups are less frequently willing to invest in studios. Studios tend to be financed by more patient and flexible LPs like high net worth individuals, family offices, or even largely self-funded by studio partners themselves. 

Based on your research, where do you see the greatest opportunities for Venture Studios?

There is growing demand from larger organizations like universities, governments, corporates, and even VC firms to partner with studios. Many of these groups are looking to studios and incubation experts to manage innovation and startup creation rather than trying to build in-house innovation capabilities themselves. As studios continue to improve their efficiency and refine their processes, these partnerships are likely to become more and more common. Studios heavily incorporating AI into their customer discovery and early sales efforts are also more likely to reduce their validation and build costs, increasing the number of ventures they are able to create and launch with smaller team sizes. 

What are the advantages of venture studios for founders compared to other programs such as accelerators?

Studios may help with pairing founders to already validated concepts and with designing and building early MVPs. Studio management of admin related functions like legal and finance can help allow founders to focus more explicitly on product and early sales. And studios with strong talent networks may also be extremely helpful in building out founding teams, a significant potential time drain for new founders. These hands on services are necessary to justify the studio's larger co-founding stake.