A venture studio, also known as a startup studio or startup foundry, is a company that builds other companies. In exchange for the investment of time, effort, and funding, venture studio companies receive equity in the startups they launch. If the idea of giving a venture studio equity causes you hesitation about sharing your idea, we’re here to allay your fears.

How do you structure equity in a startup?

Distributing equity in a startup is the process of deciding what percentage of the company each founder owns. Before agreeing to share equity with a venture studio, you might wonder how equity is structured to begin with.
Equal splits are the most common equity arrangement between co-founders who all launch the business at the same time, yet it’s estimated that only half of startups structure their equity on this model.

In the rest of cases, equity is not divided equally because one or a few founders contributed more to the startup than the others. This might have been intellectual property like research, the business concept itself, or the initial funding to get the business off the ground. In those cases, one founder might bring on a few co-founders and share smaller portions of equity with them. Or a senior controlling partner who made the initial investment may have more equity than others.

While there’s no one right way to structure equity in a startup, it is important to note the results of a study by Noam Wasserman, professor of clinical entrepreneurship at the University of Southern California and founding director of USC’s Founder Central Initiative. In his examination of more than 6,000 startups over fifteen years, he learned that founders who chose an even split of equity were almost three times more likely to become unhappy as the startup matured, due to the eventual perception that one or more people on the team had received more equity than they were really owed.

How much equity does a startup studio take?

Venture studios take an average equity stake of 34% in the companies they help create, though the range can be anywhere from 15-80%. Considering that future investors will also want an equity stake this might sound high to founders. However, consider that in return, the venture studio usually injects over $230,000 in funding to each startup it launches. And funding is just the beginning of the value provided by the venture studio to earn its percentage of equity.  At NEXT Studios we work with founders to craft a plan that meets them where they are, as there is no one-size-fits-all deal structure.

What does a venture studio do?

NEXT Studios objective is to provide the tailored assistance that the entrepreneur needs to increase their velocity towards growth and scale.  Here is a list of some of the support which is provided to startups by a venture studio:

  • Idea vetting and evaluation through the Lean Canvas: At NEXT Studios, we get to know each prospective founder during a Discovery Week which, using the Lean Canvas and other models,  pressure tests their idea to ensure it’s a viable startup concept.
  • Lean Coaching: During the operational phase of the startup, we follow a Build-Measure-Learn process to identify the biggest risks to the business, Then, we work with the entrepreneurs to identify ways to test and validate approaches to overcome the risks.
  • Software development: Once ideas have been vetted, we help founders develop the minimum viable product needed to get buy-in from end users and investors.
  • Sales and business development: We help founders build their network within and outside Indiana, supporting the creation of a pitch deck and sales materials that help your business stand out.
  • Marketing and communications: NEXT Studios also helps founders in our venture studio create a go-to-market strategy that is in alignment with the needs, expectations, and emotions of target audiences.
  • Accounting and finance: Our experienced team of entrepreneurs advises founders on everything from budget and spending to pricing and growing revenue.
  • Human resources: Sourcing and hiring the right talent to help the startup scale rapidly is another aspect of the service provided by a venture studio.
  • Legal: Lastly, a venture studio supports the legal formation of the business, as well as other elements of the law like employment and contracts.

Welcome to what’s NEXT for Indiana startup founders

NEXT Studios is a partnership of experienced entrepreneurs that has leveraged our experience into a set of repeatable processes that help visionaries shape their ideas into business concepts that fill them with confidence moving forward. As the first Benefits (B) Corporation venture studio in Indiana, we hold ourselves to high standards of purpose, accountability, transparency, and community impact. If you’ve got a great idea for a startup but don’t know what’s next, the answer is here. We’d love to meet you and help you along in your journey. 

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