Biweekly VC Insights by Uniborn #29

Inside: Latest numbers on venture studios and growing startups
Barbara Krassner
🇬🇪 Uniborn Team
3 min read

Hi all! Our past few weeks have been packed with events and meetings focused on venture builders. In case you missed the memo, here are some valuable insights for those just starting to explore investments in studios, and here are tips and tricks for both studio founders and investors.

Now, some news that grabbed our attention in the last two weeks. Apart from the OpenAI drama, there's already a plethora of both sensible and absurd materials on this topic 😅. By the way, the prize for originality goes to TechCrunch's "How to discuss the OpenAI drama at Thanksgiving dinner."

As for our favorite meme, of course, it's from Twitter (we're not yet ready to call it X).

Image: Emmett Shear's Twitter account
Image: Emmett Shear's Twitter account

🔥 Staying on the venture studio wavelength, let's check out some fresh and uplifting stats

In the ever-evolving landscape of venture studios, a more accurate term is gaining traction in the market — "company creation funds." This term distinguishes itself from the misused "venture studio," mainly in the context of traditional accelerators. So, company creation funds (they are venture studios or builders) consistently generate ideas for technology startups, nurture them, and attract external co-founders — all while keeping the foundational ownership stake intact.

Specifically, the term "company creation funds" is championed by the Vault Fund (which invests exclusively in venture studios). Its team surveyed 200 emerging companies that are building new capabilities as founders and co-founders within their portfolios, and here is the scoop:

  • Company creation funds boast a consistently higher average performance, rocking a 60% net IRR compared to a 33% net IRR for the weighty traditional VCs. The secret sauce is the streamlined build process both in terms of time and capital.
  • Target ownership for founders falls well within market terms, averaging between 21% and 43%, contingent on structure and funding. 
  • Size matters more than structure for performance. Any vehicle can outshine the rest if it curates the right portfolio and structures it just right. But as vehicles balloon in size, the effect of early outperformance weakens.

Fun fact: studios are 2x more likely to choose traditional fund structures than holding companies. Why? They often raise from LPs that are active in traditional early-stage venture capital, and have a significant bias toward investing in classic funds.

Meanwhile, we at Uniborn are sympathetic to a dual entity model — combining the advantages of a holding company and a fund. We scratched the surface in our recent mini-conference, and you can bet we'll be digging deeper in future articles and talks.

More about the venture studios' inspirations. (Image: the Vault Fund report)
More about the venture studios' inspirations. (Image: the Vault Fund report)

Check the Vault Fund report for a deeper understanding.

🔥 How many startups do you think make way from Priced Seed to Series A?

Peter Walker of Carta seems to have figured it out. 

Just over 27% of companies that secured a seed round in 2019 successfully advanced to Series A within two years. By contrast, less than 18% of companies that made it past the seed stage in 2021 managed to advance to the next round.

What about industry-specific nuances?

  • Among fintech companies that raised seed in 2020, an impressive 44% pumped up their level within two years. The 2021 cohort, on the other hand, saw a dip, with less than 23% reaching the same milestone.
  • Biotech startups had a success rate of nearly 40% in 2020, compared to just 16% for 2021 companies.
  • In the SaaS sector, the success rate was 37% for the 2020 cohort and 17% for the 2021 one.
  • Hardware, consumer, and medical technologies experienced more modest declines.

As for predictions, forecasting results, even for the current year, is a challenging undertaking, let alone for the future. It's possible that the number of lucky ones will experience an increase as founders change their cost structures to avoid the need for fundraising.

Peter cautions that the numbers are a bit of an underestimate. They only take into account the first two years. (Image: Peter Walker's LinkedIn account)
Peter cautions that the numbers are a bit of an underestimate. They only take into account the first two years. (Image: Peter Walker's LinkedIn account)

Check Peter Walker's review for a deeper understanding.

Cover image: Unsplash

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