FROM BOOTSTRAPPING TO A STUDIO FUND, HOW TO SUCCEED IN RAISING CAPITAL WITH A STARTUP STUDIO?

If you are raising capital for your startup studio you may want to know how to leverage this entrepreneurship model with an efficient financing structure.

Within the scope of the StudioHub webinar series, we recently held a Roundtable session hosting the industry experts. We have invited experienced and growing studios to share their expertise and practices in raising capital under the Startup Studio Model.

Here’s a very brief glimpse into the very fruitful conversation. Continue reading if you missed the webinar or would like to have a recap as a revision of shared knowledge. 

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As for now, let’s see…

What to consider when Raising Capital With A Startup Studio

Shall we agree that capital is one of the pillars to put innovation into practice? And since Startup Studios are considered as the modern furnace where innovation is boiled down to successful ventures, they need to ensure funds in the first place. So how do Startup Studios raise capital? And do they actually need a Fund to do that?

The answer cannot be a unanimous one. Farhad Alessandro Mohammadi, Founder, and CEO at Mamazen, noted that depending on the type of Startup Studio it may or may not need to have an established fund. If the Startup Studio focuses on internal idea generation, it will be obligated to raise funds. It will be necessary to support the operating costs of the Studio while it is building up the ventures before their financial independence or exit, which is, in fact, the ultimate goal in most cases with this type of Studios. Whereas, the Studios working by the so-called Agency model do not have to rely on such a Fund, given that they are fueling operations by recurring revenues instead.

And here pops in another question of whether the Fundraising shall be done directly by the Studio, or through a separate entity, such as a dedicated Fund. Farhad considers Dual Entity Model as the most efficient one and suggests it for Startup Studios who are majorly doing internal ideation.

*Mamazen is the first Italian Startup Studio where they are building startups in the B2B environment. It has adopted the Dual Entity Model for its Fund. Currently, Mamazen is raising 10 (ten) million euros Fund and is already a quarter way to their first closing.

The Startup Studio model provides many advantages for raising funds. A great tip from Michael van Lier, co-founder of Builders – if you have an excellent track record in building companies, you and your Studio partners can combine that success in your portfolios and inject it within the Studio. Founders’ advantage in raising the capital through the Startup Studio is their track record and proven knowledge: the team, structure, processes, and your thesis combined with your experience within the Studio will make it attractive for Investors. 

Then from there, Startup Studios can either do bootstrapping to raise a little bit of capital to build a few of the ventures or choose to go after a bigger round to support three (3) or four (4) years of venture building. 

However, there is this one thing to keep in mind. Even though we may be in love with the Startup Studio model, our investors are and will not care much about our playbooks or processes. We shall remember this and use less terminology in advertising ourselves by highlighting the model and producing and showcasing results instead.

Michael van Lier has been building ventures Startup Studio model for the recent 4 years. Focus of Builders Startup Studio based in the Netherlands is the Future of work and the future of living. The entity functions as an operational holding company and is currently in the process of raising a 6 (six) million euro fund.

Know your Investor and speak their language

Coming to the Startup Studio from the background of a serial entrepreneur Jeremy Burton, Co-Founder & CEO at Platform Venture Studio, highlights the scope of Venture Studio fundraising versus fundraising for individual startups as a sole founder. Even though managing the funnel may be much similar, the process of raising from LPs differs significantly from raising from traditional Venture investors. They care less for the Studio process and other values that matter for Studios and their founders, instead interested only in financial returns. Also, the timings and bureaucracy are stricter and more complicated with the Venture Funds.

Million-dollar advice from Jeremy to the Startup Studios who are raising for their Funds – “go for high net worth individuals first.” In the Platform Fund, they have a mix of LP types, where the engaged 50% are high net worth individuals, who are former tech execs or tech entrepreneurs, so they get the model. As for the rest, about 25% are family offices, and the remaining 25% are institutional investors.

As a Founder and Serial entrepreneur, Jeremy Burton succeeded in a few big exits raising over 100 (one hundred) million funds along the way. The platform also has the Dual Entity Fund Structure that has raised over 10 (ten) million dollars in their first fund.

CMO at Dengun Startup Studio Jorge Cabaço brought to our attention the necessity of having Special Purpose Vehicles (SPV’s) to attract solid investment and their role adjacent to a Studio.  

 

To showcase to the investor who we are, we can leverage the essential advantages that the Startup Studio model claims. These are the numbers benchmarking the industry which may attract investors. Here we can refer to the higher returns with lower risks, quicker timings with higher expectations, and other metrics.

Based in Portugal, Dengun Startup Studio’s investment thesis is based on disrupted digital products in the early stages. Ventures are built worldwide focusing on B2B and B2C products in travel and hospitality, healthcare, Medtech, and Edtech.

About the Speakers

Jeremy Burton, Co-Founder and CEO at Platform Venture Studio

Jeremy Burton is a 10x serial entrepreneur and has enjoyed building startups for over 30 years since his first company at age 14. Over his career, Jeremy has worn many different hats, spanning engineering, product design, corporate development, sales, and venture investments. 

Most recently, he co-founded Wonolo, the leading on-demand staffing company, where he served as CTO and board member.

Michael van Lier, Founder & Managing Director at Builders

Michael is an entrepreneur, innovator, and tech evangelist dedicated to empowering the next wave of tech entrepreneurship.

He has been founding tech companies for two decades. Michael started his first online company in 2000, at 17 years old. Later, he founded and exited multiple software and cloud-oriented companies which he grew by acquisition and organic growth.

Farhad Alessandro Mohammadi, Founder and CEO at Mamazen

12 years of experience in the digital field. Previously managed bakeca.it internal and external sales team. He coordinated the Glamoo.com sales team as Commercial Director (Exit to Pagine Gialle). 

Former Co-Founder of Pony Zero, he managed to take the company from zero to 6 million in revenues in 5 years (Exit in 2018). 

Jorge Cabaço, Founder at SHARE Algarve, CMO at Dengun

Digital Marketing Professional, Consultant, Advisor & Entrepreneur with 15 years of business, agency & startup leadership, growth marketing and board roles across agencies, business associations, chambers of commerce, and digital strategy for many clients throughout Portugal and abroad.

Recent activities include the creation of Algarve’s high profile SHARE Algarve – International Marketing and Innovation Conference, the Algarve Tourism Conference, and The Investors House.

ManushMelkumyan

ABOUT THE AUTHOR

Manush Melkumyan

Manush is currently the Executive Partner at StudioHub. Prior to this, she has been working in the top management in the Corporate and earlier in the Public sectors with 10+ years of engagement within the Startup ecosystem as an entrepreneur, mentor and consultant. “Life more than anything amazes me and I aspire to animate everything around!” M.

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