Venture Studio Economics

The Real Cost of Company Building

The venture studio model has a cost problem—or more accurately, a cost communication problem. Building companies systematically requires significant operational infrastructure: experienced teams, technical resources, and robust processes. These costs are unavoidable. The only real question is how to structure and present them to investors.

Think of a venture studio not as a VC fund with extra services, but as an operations-heavy private equity fund that creates companies instead of buying them. Like PE firms, studios employ disciplined processes, develop sophisticated playbooks, and maintain substantial operational teams. The key difference? Instead of using financial leverage to acquire existing companies, studios apply operational leverage to build new ones.

"No ops = no studio," as one industry veteran bluntly puts it. The math is straightforward: creating companies at scale requires substantial investment in operational capacity. Yet the industry ties itself in knots creating increasingly complex fee structures to make these costs more palatable to investors.

This complexity stems from a fundamental misunderstanding of the studio model. A venture studio plays three distinct roles, each requiring significant resources. First, like any fund, they're investors deploying capital. But they're also entrepreneurs, getting their hands dirty in shaping product strategy, business models, and fundamental company direction. Finally, they're operators, both executing day-to-day operations and building the infrastructure that allows portfolio companies to scale.

Studios typically employ one of three approaches to cover these operational costs. The traditional fund structure charges management fees, either above the standard 2%, accelerated, or with a minimum fund size of over $25M. Holding company models build operational costs into the overall capital structure. Hybrid models combine aspects of both, often with additional service fees charged to portfolio companies.

"The investor is paying for all of the operations cost either way," notes a leading studio designer. "The only question is whether we're being transparent about it or hiding it in complicated structures." This gets to the heart of the debate. The operational costs of running a venture studio—primarily driven by teams of experts actively building companies—are essentially fixed. Whether these costs are wrapped into management fees, billed as services, or directly budgeted doesn't change their fundamental nature. It’s not a bug, it is a core feature of the studio model.

When these operational teams perform effectively, they de-risk the entire portfolio, reduce time to exit, and increase company value. It's an investment in the portfolio companies themselves, but one managed directly by the studio rather than at the discretion of individual startups. This tight control enables better risk management but breaks the traditional "2 and 20" fund model—2% management fees simply can't cover the cost of comprehensive company-building operations.

Some studios have adopted a "dual-entity model," separating the studio's operational entity from its investment vehicle. This approach offers more transparency but adds complexity through two investment vehicles that operate jointly. Others maintain simpler holding company structures and use a budget approach to communicate and manage operational costs. The capital efficiency claims of studios add another layer to this discussion—studios argue their systematic approach to company building delivers better returns per dollar invested, even accounting for higher operational costs.

Studios are recognizing that their value proposition requires a different economic model. Rather than apologizing for higher operational costs, they're clearly articulating how their three-fold role as investor, founder, and operator drives superior returns. Some investors are already adapting, evaluating studios more like holding companies than traditional investment vehicles—focusing on their capability to repeatedly build successful companies through systematic processes.

As one studio veteran colorfully puts it: "LP, do you want it straight or do you want it smooth on the rocks but a bit cloudy?" The real choice for investors isn't whether to pay for operations—it's whether they prefer those costs to be clearly visible or smoothed over through financial engineering and layered legal entities.

The future belongs to studios that can align their economic model with their operational reality while maintaining clarity with investors. Instead of crafting ever more elaborate fee structures to disguise operational costs, studios might be better served explaining why these costs are necessary and how they translate into better outcomes. After all, if you're going to build an assembly line for startups, you need to be upfront about the cost of the factory.

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About the Author

Matthew Burris serves as the Senior Director of Research at the Venture Studio Forum, where his mission is to transition venture studios from an emerging asset class to an established asset class. In this role, he leads the creation of the rigorous data frameworks and due diligence standards required for institutional adoption.

This research is built upon the proprietary insights Matthew developed as Partner & Head of Insights at the 9Point8 Collective. By codifying the methodologies from his advisory work with corporate, university, economic development, and private studios, he provides the Forum with the foundational architecture needed to define the industry.

Connect with Matthew on LinkedIn.