Inside Venture Studios with Sam Hall

[00:00:00] Why should a founder work with an incubator or an accelerator or anybody rather than just go on their own? Greatest fulfillment comes when you invest significant cognitive capacity into really difficult things. I have a intrinsic belief that committing to a founder collaboration requires that you have done a bit more work, a bit more investment, a bit more exploration.

[00:00:21] I think if you take an idea and force it on somebody, the likelihood they will succeed with it is.

[00:00:29] Rahul: Welcome back to Understanding VC. I'm your host Rahul. Understanding VC MBA on a single subject, Venture Capital. Today, I'll be having an in depth conversation on Venture Studio and the value the Venture Studio model adds to the startup ecosystem with Sam Hall. Sam is the CEO of Rainmaking APAC, a Venture Studio acquired by Bain Company in 2023, which works with entrepreneurs and investors to build new businesses with the potential to scale rapidly.

[00:00:55] Rahul: And also one quick note. Are you looking to refresh your digital presence? [00:01:00] Digital Prism, the Singapore based digital transformation expert sponsoring this episode, has a fantastic offer. First 10 listeners to contact them get 20 free consultation hours. Just mention Rahul Senthil. And also learn more at digitalprism.

[00:01:13] Rahul: net. Now let's talk to Sam.

[00:01:16] Rahul: Hi, Sam. Thank you so much for joining me today.

[00:01:19] Sam: Hey Rahul, total pleasure. Super happy to be here with you.

[00:01:23] Rahul: Yeah. This is something that I couldn't figure out even after researching for a bit, you know, the first venture studio, which do you think is the first venture studio

[00:01:32] Sam: You, so you know my opinion on this. I don't, I don't have a clue who the First Venture Studio is. Like, in, in my head, a venture studio is a, entity that has institutional business building capability and institutional asset base that allows it to outperform in building multiple businesses. There are, in my head, tons of different modes of what that [00:02:00] thing can look like.

[00:02:01] Sam: and so there are tons of different people who have in all sorts of different forms. created a platform that gives that institutional business building capability and institutional asset base that supports that business building capability. Um, and so for me, like, to even guess at who the first Venture Studio is, I, I don't have a clue.

[00:02:21] Sam: I don't know.

[00:02:22] Rahul: Yeah, I was searching this, it's either, I thought it was Idealabs,

[00:02:27] Sam: okay, could be.

[00:02:29] Rahul: yeah, but then I read another sub stack where they claim that it's probably Greylock, but they started in the 60s,

[00:02:35] Sam:

[00:02:35] Sam: they call it a Venture Studio at the time?

[00:02:38] Rahul: no, I think the first people to call it Venture Studio was Betaworks, Betaworks,

[00:02:42] Sam: There's a lot of people getting wound up right now about what, what you call a venture studio and what you don't call a venture studio. And what qualifies as a venture studio and what doesn't qualify as a venture studio. and I'm not sure it really matters. Like, what matters is the output. What matters is, what are you able to produce as a group of entrepreneurs who are trying to create [00:03:00] impactful new businesses. How you get there is a, like, product of. The assets that you can bring to the party and the thesis that you have about how best to do it I'm not sure we as an ecosystem Need to get too wound up with what we categorize as a venture studio versus what we categorize as something else What we need is and particularly in APAC.

[00:03:24] Sam: I'm based in Singapore my my sort of Area of interest and where I participate is predominantly in APAC. What we need are more people Seeking to build more impactful businesses and whether we call that a Venture Studio or whether we call that anything else is kind of irrelevant.

[00:03:40] Sam: Um, the, the most important thing is what, what comes out the other side.

[00:03:44] Rahul: Yeah. So, but like, in terms of qualification, it's, it's basically an organization that both builds and funds, a startup. That's a very simple way to put it. Right.

[00:03:55] Sam: Yes, you could put it like that. but I think you would have to extend that probably. [00:04:00] So an organization that does a Venture Studio build a startup? Yes.does a venture studio fund a startup? Yes, in many cases. But you would also get,a bunch of, institutions that, that call themselves venture studios that don't necessarily themselves fund the startup.

[00:04:17] Sam: it goes further than that there because it's not about building one startup as a venture studio, you're seeking to build portfolio and you're seeking to build multiple startups at any point in time. And that drives them what your operating model looks like as distinct from a pair of entrepreneurs.

[00:04:32] Sam: If you and me decided, let's go and build a new company, we can be an institution together that builds a startup and funds a startup. Um, but where you sort of start to step, I think, into venture studio territory is when you're trying to do that at scale, when you're trying to build portfolio as a whole, when you're trying to,stay as co founder through, The, um, uh, multiple iterations of that company across its life cycle.

[00:04:57] Sam: Then you start to look more like what I would [00:05:00] consider to be a venture studio.

[00:05:02] Rahul: So,the, the institution stays on as like a co founder, not just for the initial phases, but also when the company is scaling.

[00:05:11] Sam: Some do and some don't. so some venture studios would act, um, we're going to get tied up if we keep using the term. So some, some people, we'll act as a early stage co founder. And as a studio, we'll partner, usually, with founders, to build to investability. And so basically to build to whether that's a seed round or maybe they will build to a pre A or maybe they will build to an A round.

[00:05:39] Sam: but in some cases, the studio is like really much an early stage validation engine or early stage launch engine. At which point the studio sort of sends the startup out into the world. and then you have founding team who will take that forward and try to grow scale that. Um, some studios might act as co founder for a longer period.

[00:05:59] Sam: Or might [00:06:00] act as almost like part time co founder for a longer period of time. That becomes really difficult then to run, uh, uh, your studio platform to generate the volume of startups that you seek to generate to benefit from Power Law Dynamics. Like a big part of the thesis around Venture Studios is that you are building portfolio in the same way that the VC is building portfolio.

[00:06:20] Sam: If you are acting and operating as a co founder for 2, 3, 4, 5 years, Then the capacity that you need in your studio to be able to do that at scale is almost impossible to achieve. so in most cases, a studio will step out at some point in the early stage and will basically act as a early co founder that either like steps away entirely or becomes a part time or advisor based type co founder.

[00:06:51] Sam: Having said that, I believe at least that any studio with the potential to be impactful [00:07:00] needs to offer its portfolio significant asset base long into the future. Even if its people are not day to day 100 percent working on the venture like they might have been. In the early months and early years, um, it's incredibly important that you're able to provide a, what I think of as like an OS or platform that all of your ventures will benefit from long into the future.

[00:07:22] Sam: If you can't provide that, why should founders build ventures with you rather than building alone in the wild? Because ultimately they're giving. Equity away to a studio that's not going to power and expedite their growth long into the future and I think it's important that we look at it from different perspectives But what's the studio agenda here studio agenda is to build multiple impactful Startups that can deliver significant equity upside.

[00:07:45] Sam: There can be all sorts of other agendas. That's one example Um the agenda of a founder is to benefit From expertise and asset base that can de risk the ability of that founder to get to value. So if [00:08:00] you and me believe that the best way for us to get to a valuable startup is to build together and have nothing to do with the studio, then we should do that.

[00:08:06] Sam: But if we believe that there's a studio there that can empower us to go further faster, that can empower us to de risk elements of our business, that can empower us to, um, expedite the time taken to do A, B, and C, or to remove those things, As a distraction entirely so that we can focus everything on the things that we're real specialist and good at, then that can be powerful for us because that can allow us to get to value in two years rather than four or in four years rather than eight.

[00:08:34] Sam: and that's, of course, incredibly important because a big part of the. challenge, of continuing to keep pace with the development of your startup is, or to drive pace of the development of your startup. A big part of the challenge is, is continued momentum. Um, and how rapidly you can overcome all of the obstacles that fall across your path.

[00:08:53] Rahul: you know, studios step away after a while, like sometimes it's just an [00:09:00] advisory sort of road after a certain point. And how is it different, um, from accelerators and also a lot of large funds have platform teams. So when it gets to a certain stage, they do offer what you would offer.

[00:09:15] Sam: But, uh, so unless, unless it's like a permanent co founder sort of service. There is no differentiation, right? So I think there's definitely differentiation. the, if you, if we think about, a VC or other investor that offers platform services. That's great. And for many founders, that is a reason why you choose Investor A over Investor B, because you believe that Investor A will offer you, greater platform support that will allow you to go further faster.

[00:09:44] Sam: Yes. VCs are investing into startups that exist already in the market. So they wait to find the companies that they think have the highest potential and then they invest into those. so deal flow for VCs typically is contingent on [00:10:00] what the market has to offer and what they are able to access. Deal flow for a studio is entirely contingent on what they are able to create.and so they are basically saying we will create our own deal flow, um, and we will be investing into that deal flow at a comparable stage to a very, very early stage VC investor.a studio might offer exactly the same platform as a VC. However, I would say that's unlikely because the platform that a studio is typically putting in place. is in first instance, a platform that is, predisposed to support very early stage startups, because that's the part of the life cycle where you commence.

[00:10:43] Sam: Whereas a VC, when it comes in with its investment, might be a month later, six months later, or 12 months later, or if it's a later stage, focused investor, then it needs to provide a platform that supports an A and a B and a C and a D type startup, which looks inherently different. To [00:11:00] the type of platform you want to offer to a five person early stage team that is launching the first version of the product and grow.

[00:11:06] Sam: I think that an accelerator is far more closer in life cycle to the starting point of a studio. but again, an accelerator is typically working with preexisting startups to help them to generate traction and to help them to grow. So a accelerator is, um, uh, identifying what it believes to be. Um, uh, the highest potential startups in market and then working with them early stage to help them generate more traction, but they're working with external pre existing startups where a studio is generating those startups from within, at least in my mind, you can also think about an incubator, where an incubator is, is tends to be working with founders or maybe aspiring founders and helps them to build credibility and momentum behind their idea and perhaps then That startup gets to a stage where it makes sense to then go into, it becomes a preexisting startup that Accelerator can work with to help grow and develop.

[00:11:59] Sam: for [00:12:00] me, Aventure Studio itself has a fixed team. So in APAC, the, the, the Venture Studio that I work with, we have about 50 people. So it has a fixed studio team that themselves. are the early stage interim founders of a startup. So any deal flow that comes to that studio comes by virtue of its own building that deal flow.

[00:12:23] Sam: and those people are focused on validating high potential venture opportunities as much as possible, getting them to investability and doing that repeatedly to build portfolio. So the key distinction there is that a studio is building deal flow from within. Whereas an accelerator or an incubator or a VC is working with deal flow that comes from the outside, the platform that one might provide could in theory be very similar.

[00:12:52] Sam: however, if you are a accelerator that makes an early stage investment and provides advisory mentorship and workshops and things like [00:13:00] that, to 10, 20, 30, 40, whatever startups every year, then what that platform needs to look like. Is inevitably, inherently different to what a platform needs to look like if you are powering an early stage team from within your organization.

[00:13:16] Sam: and for us, for example, like we, we're not sort of, offering advisory in the same way. or like subject matter, um, uh, mentorship in the same way as acting without people as. Co founders, like groups of people working together as co founders to get to investability. So the platform that you offer starts to look a little bit different.

[00:13:38] Sam: It's not to say that the platform can't be massively overlapping. It's not to say that the platform can't be,absolutely identical. at least from, from what I've seen in market, it tends not to look absolutely identical.

[00:13:48] Rahul: Yeah, so so the argument for Creating a venture studio is that you know Doing this will create some sort of edge over other ways of building a [00:14:00] business to succeed, right

[00:14:03] Sam: Well, I suspect everyone's argument is different. So I, I, I talked to like my argument or at least why I have built and continue to build Venture Studios. And I suspect everybody is a reasonably, like, personal in terms of perspective. Um, I love entrepreneurship. I, I love building companies. Um, I, the lights go on in my eyes when I'm talking to, working with founders, entrepreneurs, other people who are excited about early stage building.

[00:14:27] Sam: my specialism and, and, and so my experience set sits more in the early stage of building, rather than the growth and late stage. what I'm really interested to do. Is to switch on opportunity at scale for people to do, inspiring, fulfilling entrepreneurial work. Because at least for me, it is the work that I've found that is the most inspiring.

[00:14:48] Sam: And it's the work that I've found that delivers the most fulfillment. Um, and I've seen that not just in myself, but I've seen that in many people that I work with. So the interest that I have is in creating platform that enables,the ability [00:15:00] to deliver that. Inspiring work and that fulfillment to as many people at SCARE. The best platform that I have found for that is one entrepreneurship, but two venture studio model um, and I have found the sort of model that we have iterated and built over multiple years,as being the best attuned to be able to get to material investability And to be able to participate in that fully Rather than kind of being on the sidelines as an advisor, as a mentor, as a, sort of ecosystem contributor, which is absolutely fantastic and critical.

[00:15:36] Sam: but it's not where I take the most fulfillment. So I'm like, my starting point is driven by, like, where do you get your fulfillment? And for me, building companies, amazing. Building multiple companies, amazing. Generating the opportunity for, as many people as possible to do that, amazing. All of these things.

[00:15:53] Sam: Um, and what I believe really strongly is that if you build [00:16:00] companies in venture studio format and therefore you're building two or four or eight or 20 every year, then the reps that you're getting allow you to one, become a better company builder to become a better company builder in tandem with other people who are also becoming better company builders is a massive compounding factor that, and three, it's significantly grow and evolve your asset base as is appropriate to be able to support company building.

[00:16:28] Sam: Because if you do it 20 times a year, then if startup A needs X and startup B also needs X, you start to put X in place. and by the time that you put these things in place that allows you then to point them and deploy them to any startup that's coming to your studio. Um, so, so my belief is that you get to a place by building a venture studio that, or at least me, that I get to a place where I can do work that is really, really fulfilling.

[00:16:50] Sam: And I can massively improve the probability that the entrepreneurs that I work with will be able to succeed. And that is like the key focus for me to get [00:17:00] people the opportunity to do entrepreneurial work with which they can succeed and make breakthroughs. Um, at least in my life, I found that the greatest fulfillment comes when you invest significant cognitive capacity into really difficult things.

[00:17:13] Sam: And you do that with imaginative, intelligent, aspirational people. Even when you invest all of that effort and all of that content capacity, and even when you work with great teams, if you're doing something that's hard, you don't necessarily succeed. So when you do make a breakthrough and manage to succeed with something, that for me is like the, the biggest rush of fulfillment that I've seen people enjoy professionally.

[00:17:35] Sam: and that's why I, that's why I build Venture Studio. Now other people will give you a different perspective. which is, you know, no, no lesser or better perspective. It's just a different one. for example, um, I could have given you a very different answer. Why I say, well, the reason I do venture studio is that I think that we are more likely to deliver upsides through the work that we do by doing a venture studio.

[00:17:58] Sam: I believe that we are [00:18:00] better positioned and I do believe these things, but I believe that we are better positioned by building a hundred ventures. to generate equity upside or impact on society than if we build one venture, because power law, same, same thesis around investing across a portfolio. I believe that if we build our deal flow and concentrate our capability with a particular focus and with a particular thesis, then that is better for us than relying on,whatever might be available in market.

[00:18:31] Sam: But I am probably predisposed to sit in that space because of my background is early stage venture building. And that's like my sort of specialism and expertise. So I'm probably predisposed to be more excited about building deal flow.

[00:18:42] Rahul: Yeah. you mentioned that, uh, your team is the source of the ideas, to begin with. I have a problem with that. Don't you think, you know, you should be, the people who should be working on the idea should be like the most passionate and like obsessed with the ideas. So let's say [00:19:00] you force an idea onto someone else.

[00:19:03] Rahul: That's usually the way I think venture studios work, as in like, you validate something and then you push it to a founder and then expect it to grow the thing. That mostly will not work, right? So there's also a different approach where, you know, investors have a thesis and they didn't find a company that's doing that.

[00:19:22] Rahul: So they would find a management team to run it. So I think that such things would not work. You ideally want to somehow figure out a person who is already obsessed with this problem. And then, yeah, maybe all the support really works. Would you agree?

[00:19:39] Sam: I think if you take an idea and force it on somebody, the likelihood they will succeed with it is, is, I was going to say very low. And I think maybe the likelihood is zero.I don't, I don't think it's worth anyone's time to do that. because the likelihood of success is so limited.I wouldn't advise that for any venture studio. But, but let's like, get down to brass tacks. [00:20:00] If you have come up with an idea that you then attempt to force onto somebody, if that person is a genuinely credible elite entrepreneurial type, there's no way they will let you force that, they will go and do something else.

[00:20:11] Sam: So that's, so that's not actually what happens. Like you can't force an idea onto somebody. Um, anything that a founder might join, like, Post day one, there is no point in working with that founder on that thing, unless one, that founder is truly inspired and excited by that space and that opportunity. And two, you are truly convinced in the excitement of that founder for that space and that opportunity.

[00:20:40] Sam: If you don't have those things, you shouldn't do it. Um, maybe a different filter that I'll apply to it. Startups don't come up with an idea on day one and determine what the concept is going to be on day 30 and then, like, run with that concept for the next 3000 days. [00:21:00] Uncertainty is at its height in the early stage.

[00:21:03] Sam: and movement around a space and a, like, thesis around where value will sit. In the first 30, 60, 90, 100 in the first couple of years is high. So investors often talk about, well, we're, we're interested in finding, solutions in spaces that we perceive to be valuable where the emerging value is. We're also interested that that space is sufficiently large to accommodate pivots. I think about it like that. so any space that we are interested to build in on, on day one, needs to be a sufficiently large space to accommodate the reality that whatever we think the value will be, you know, after a month or two is not ultimately where the value is going to be. We know that. We take that as ready.

[00:21:50] Sam: In the same way that as an investor you say, okay, like if you act as an angel and you make 40, 50 investments, you know that and you expect and you actively want [00:22:00] that almost all of those investments go to zero.And you know, and you actively want and you expect that one or two of these things will be successful.

[00:22:08] Sam: Um, in the same way, we know, and we actively expect that. And we want that at the start of a process, the specific concepts that we might have in mind and be getting excited about is not ultimately going to be the thing that we're gonna drive towards. What we care about is value in the pool. Like, is there sufficient value in this pool to accommodate movement?

[00:22:27] Sam: And so what we want to do is work with founders who are Excited and inspired by that value space and,Acutely cognizant as we think we are that the belief we have today about where the value will sit. Like it will be astonishing if we have got that right at this early stage. And so we want people who are excited and inspired to build in a particular space and solve a particular problem.

[00:22:51] Sam: But exactly how we might solve that and exactly how that will end up looking. We don't want to be,wedded to any belief there. And so, [00:23:00] so back to your point, it's not necessarily the case that we're saying, Hey, founder, here's a thing, build it. We're saying, we're really excited to build a company in X space, because we've explored that space and we've built, a bunch of,investment confidence that there are valuable things to be built there.

[00:23:16] Sam: We now want to work with entrepreneurs. Who have a similar belief to us in that space. Who get excited about the things that we have learned already and the validation that we have done. Get excited about pursuing and leading a company in that space and get excited about working with us to do that.

[00:23:36] Sam: That's the great fit, right? In the same way that, you know, any individual in the wild looking for a co founder. I think is looking for comparable things. Um. I think we're the same, like the way I think about the Venture Studio, the way I think about the way that we work, we're a co founder, in partnership with Entrepreneurs Who Inspire.

[00:23:53] Sam: Then I'll take it in a slightly different direction, if I may, which is, it's not necessarily the case that a Venture Studio is saying, here's [00:24:00] an idea. Let me go and get the founder and give the idea to them. in many scenarios, a Venture Studio is saying, are you a founder with a really exciting opportunity space that there might be value in in the future?

[00:24:11] Sam: Come talk to us. And, like, let's see if we think mutually that's interesting and we should go and build something together. so I, I, I very much agree with you. That if the mode is, here's an idea, build the thing. That, that is destined for failure. I, I don't think that is, I would say that most credible bench tutors don't operate like that. Simply because they will, they, they will fail.

[00:24:33] Rahul: get it. Like, right, somebody who's obsessed about a space, is working on it and they, they come to you and say, you know, would you be able to help me build this? Perfect. But the other scenario, right, where you as an investor see an opportunity in a space, or. you have like an ideation sort of process and then you create an in house sort of idea.

[00:24:56] Rahul: Like then how do you find and assess [00:25:00] a founder, go out? So it's more like outbound. What is that process like? it's not easy to clearly understand the motivation of that person. Right. If you do outbound.

[00:25:11] Sam: uh, personally,you know, spend, spend a bunch of my time at any point in time talking to founders. and they may be founders who are building their own companies in the wild. they may be founders who are working with us in our studio. And they may be founders who are in my network or I've come into contact with and I'm talking to them and interested to understand and vice versa.I think it's really important, but also, like I said earlier, like I found that really exciting. I find that interesting. I love talking to people about what they're building and why they're building. Because of that, like I'm constantly. In market, not in market, for who are interesting founders to build with.

[00:25:50] Sam: and who do I think is particularly, has particularly interesting perspectives on different spaces and, and who is likely to be a really great co founder. and where do they want to [00:26:00] build? Do we also want to build there? So might there be a possibility at some point in the future that we might want to build something together.

[00:26:05] Sam: Um, and so that sort of, like community network of. Founders,that in theory we could build something with in the future, continues to grow. And so if at some point in time we say, okay, we're now got really excited about this, FS, we, proposition. We think we're going to build a FinTech in whatever space.

[00:26:25] Sam: Ha, that would be something that that guy was talking about. Maybe we should go and speak to him about it. Or. Remember that lady that we met last week, that's like not exactly what she's doing, but she was getting really excited about a value pool that that would ultimately go in the direction of. Let's go talk to her about that again.

[00:26:44] Sam: so we're kind of always on for, and, and, and, and where the sort of, um, Where the puck is moving to from a like consensus among founders, we're probably moving in that direction as well. So you end up having a bunch of overlap. at the same [00:27:00] time, we have a, talent function within our studio. whose specific role is to be actively intentionally always on.

[00:27:13] Sam: To find entrepreneurial talent that might either be a great fit to work with us as a perennial interim co founder in our studio, or might be a specific fit for a venture that we're starting to get excited about. So let's say we've been working on a thing for a few weeks and a few months and we're starting to get like investability signals.

[00:27:36] Sam: So at the moment, we're,getting to a place where we're probably very excited to bring somebody into an ag tech venture, right? So as we, as we move through that process and we get excited about that, then our, recruitment function will flip into a very specific work stream. to go and find the right founder for us to work with. And the starting point for that will be what I just talked about. Well, hold on. Who have we [00:28:00] met with over the last few years? And who do we think might be interesting for this particular thing? And what's the particular skill set that we're looking for? Um, but we might not have somebody. So then it becomes a very specific, like targeted, focused recruitment to go and find the right person.

[00:28:15] Sam: and it's really important that we have that distinct function because that's a, significantly time intensive job. To go do that. there's no point in moving forward with a founder, unless the things that I said earlier are true, which is they are really excited about building the thing. We are really excited about building the thing with them.

[00:28:34] Sam: And collectively, we were both mutually excited and inspired by the,by like how, how we engage on that. Like what our co founding structure looks like on that. and you have to do the work to get there. So you have to be in market with like connective tissue to talent at all times. and then you have to do the work to find the right person for any particular scenario.

[00:28:55] Sam: So, given that it's hard, you might then say, well, hold on a [00:29:00] minute. Why don't you just get founders at the start? Why don't you just start with founders who have really high potential? So you've just told me, Sam, that you, you know, you individually and you institutionally have, in touch with and connected with lots of founders.

[00:29:11] Sam: So why don't you, when you want to start a new thing? Go and find somebody who's just shut down their startup, or who's just exited their startup, or who's ready for something new, or whatever it might be. and start working with them. And we can do that, and we do do that. However, I have a belief that, that can be challenging in some scenarios.

[00:29:31] Sam: And the reason for that is, we haven't yet built our, investment thesis for a particular venture on day one. We're building it over the first few months as we explore the space. And so we don't actually know what the like elite founder for that venture, what capabilities that person will possess because we're not specifically sure what that venture might be.

[00:29:57] Sam: So we might say, okay, that's an, that's an ag [00:30:00] tech venture. so we want somebody who has domain expertise in ag tech, but, but, but what, which part of it, and what does that domain expertise look like? Do we want somebody who is elite enterprise sales CEO? Because that's really what's going to drive our focus and our development in the early years.

[00:30:18] Sam: Maybe. We don't know that yet. Or do we need somebody who's like a, a, a genuine expert practitioner in AI? We don't know yet because we're not sure what the venture is going to be. So until we figure out where we think the value is in the venture, we don't yet know what the characteristics are for the right founder, founding team.

[00:30:37] Sam: So if we commit to a person on day one, what we're then doing is setting an additional investability criteria. So let's say that person was an elite enterprise salesperson. So we're now saying that we're looking for a venture in X space, that we think can capture this type of value. and must be helmed by somebody who leads with enterprise sales.[00:31:00] and so we're constraining the world in which we can operate, from day one. And so that means that we're closing off potential pools of value before we even open the door on them. so, so I have a intrinsic belief that, committing to a founder collaboration requires that you have done a bit more work, a bit more investment, a bit more exploration. As and when you get to the point, in an ideal world, you'll Tetris piece it with people in your networking community who you've always been waiting to work with and it's not quite been the right time, but oh my gosh, now is the right time. but that's not the way the world works. Often that's not the case.

[00:31:33] Sam: And so if you can't ideally Tetris piece it, you must, intentionally,focus on going and finding those people that you want to work with, um, if you can.

[00:31:43] Rahul: Yeah. So there's domain expertise, right? is that a good way to assess,or fit a founder in, in, into a particular idea? Becausethe capabilities that you need would be like far higher than the particular domain. Like you mentioned enterprise [00:32:00] sales.right. So isn't it better to find a founder who can learn things quickly rather than,

[00:32:06] Rahul: 100%. I have no interest to work with, founders who can't learn things rapidly. so isn't that a, isn't that a more important thing to look for rather than a domain expertise?

[00:32:16] Sam: would you, there might be relative importance of various different things. So somebody who is a domain expert in X space, but it's not intellectually agile is not like entrepreneur or curious. is not action oriented and practical. I'm not working with them. I don't care how expert you are in the domain, because I don't think you're going to be a really strong founder.

[00:32:36] Sam: but somebody who is all of those three things that I just mentioned and a domain expert, okay, then I can get even more excited than the person who has those things but doesn't have domain capability. I'm, I'm not a particularly,like big proponent of, oh, I want somebody to build a thing who has already worked in that industry.

[00:32:53] Sam: I see a lot of value in working with people who have never touched that industry. Um, I have [00:33:00] seen a lot of value over, over, many different ventures in ideating to investability by ideating through people who come to that industry with a total, like, fresh perspective on it. I think there's enormous value in being able to take expertise in industry X, particularly entrepreneurial expertise in industry X.

[00:33:19] Sam: So somebody who's been able to innovate a business model in Industry X and then pattern matching that to Industry Y. And there's enormous value in that. So, if I, if I misspoke or if I,misdirected with what I was saying, let me clarify. From my perspective, I am not necessarily looking for somebody who has worked in an industry when I'm looking for a founder for a particular industry.

[00:33:42] Sam: I'm looking for people who are. all of the things that I mentioned before. I'm looking for people who are good entrepreneurs.

[00:33:49] Rahul: Yeah. So we talked about inbound, uh, in house ideas, but another source of ideas, is from big corporations, right? [00:34:00] Like the corporate innovation teams. So, how does that process look like? And that's what you guys work, is my understanding?

[00:34:08] Sam: it might be that an idea comes from a corporate. So a corporate might come along to a Venture Studio, somebody like us or somebody else, and say, we want to build a company that looks like X.

[00:34:21] Sam: We don't think, necessarily. that we have the capability to do that. So we'd like to partner with you on that. or we don't think that we have the ability to run the right governance structure for that. Maybe we think we have the capability, but we don't think we'll be able to structure that venture to give it the best chance of rapid growth as a startup.

[00:34:44] Sam: And so maybe you can warehouse some of that for us. but it's not always a specific idea. A corporate might say, we want to build ventures. So there's a spectrum of, we believe we should be building new things, to, we specifically want to build this thing, or these two things, or these three [00:35:00] things. and a corporate could sit anywhere along that spectrum.

[00:35:02] Sam: I think it can be interesting to work with corporates to do that.the reason it can be interesting is, corporates operate at scale with significant Assets, that they've developed a scale incumbents and that allow them to, in many cases, be somewhat protected in position in market.

[00:35:21] Sam: what those assets also allow them to do is to, if they are able to unlock those assets to experiment more rapidly than you and me can do in the wild without access to any of those assets. As any entrepreneur knows, then the journey to get to investability and to grow and prove your startup and gets product market fit requires many, many, many experiments.

[00:35:43] Sam: You have a philosophy, you have a thesis, and you say, okay, what are the critical things that I must prove? Well, the most important one I must prove is this, okay, what's the experiment that will allow me to prove that? If I can prove that. Validate or invalidate that, that position. What's the next one?

[00:35:59] Sam: What's the next one? What's [00:36:00] the next one? And you're running tens and hundreds of larger and smaller, smaller experiments over many months and many years. if you and me, start a company tomorrow and it takes us two weeks to run our first experiment, then that's clearly, less advantageous than if it takes us two days. If we already have asset base at hand, we can run that experiment faster. We can probably run that experiment at greater volume. We can therefore get access to data faster. And we can probably get access to data, at greater volume. And that data allows us to design the next experiment and move in the next direction.

[00:36:36] Sam: And that compounds over time. So if a startup is, is,struggling for asset base to run its experiments, but a corporate has ready asset base that allows it to expedite time to data, then that also with the compounding factor massively expedites the time to investability. So what that means is the cost of getting to investment confidence, in terms of time [00:37:00] is significantly less. And then the cost, once you have something that is validators. and that you believe in scaling. The cost of getting to scale, in terms of time, should be significantly less, because you're able to deploy the distribution that corporates have at scale. Now this thesis totally falls apart if you can't actually unlock those assets.

[00:37:23] Sam: So if you have a corporate that wants to build a venture, and they want to build a venture in a space that is nothing to do with them, in a space in which they've never operated, in a space in which they have no network connectivity or expertise, then it becomes harder to see what the value of the collaboration is for an entrepreneur.

[00:37:42] Sam: so I think something that, is important, like perspective, when building corporate venture studios, is to think about, what is the proposition that you are bringing to the party? So if we wind back to an earlier conversation we were having, When you were saying, well, does the Venture Studio offer a platform that's any different from an [00:38:00] VC?

[00:38:01] Sam: And the implicit thing there is, why should a founder work with a Venture Studio rather than a VC or rather with an incubator? And there's also another question which is, why should a founder work with an incubator or an accelerator or anybody rather than just go on their own? And no founder should ever work with any collaborator unless there is genuine asset advantage to doing so.

[00:38:23] Sam: And the same is true for a corporate Venture Studio. So why should a founder work with a corporate? There needs to be a proposition at play that is,materially impactful for that founder such that it makes sense for them to engage in the collaboration. The same is exactly true for, for a startup studio.

[00:38:38] Sam: Like if you're building studio, if you're building ventures within a studio construct, and if at least as, as, as I would be interested to do, you are taking equity in those ventures alongside the founders, then the founder needs to have a compelling reason. to work with the studio, rather than to do it on their own.

[00:38:55] Sam: Vice versa, the studio needs to have a compelling reason to work with that founder, [00:39:00] rather than just to take all the equity itself. same as any founder. And the same dynamic as if they're playing corporate venture studios. So, the founder needs to have a compelling reason to want to go and work with that corporate, to want to go and work with that corporate venture studio.

[00:39:13] Rahul: Yeah. So, when it comes to founder working with the venture studio, we already discussed a lot of, the advantage in terms of support, reduced risk, you know, more expertise, reduced risk in terms of like, quicker time in terms of validating and scaling and all those things, but from a studio perspective Can we also talk about the the advantages in terms of ownership?

[00:39:38] Rahul: My understanding is that the ownership usually is significantly higher than let's say what an accelerator takes anywhere between 30 to 70 percent

[00:39:46] Sam: For who?

[00:39:47] Rahul: for studios

[00:39:48] Sam: Oh, okay.

[00:39:50] Rahul: so it's outsized ownership, right?

[00:39:52] Sam: Can be.Are you talking specifically about corporate venture studios or venture studios in general?

[00:39:57] Rahul: Venge studios in general

[00:39:58] Sam: Okay. I mean, it can [00:40:00] be. if any type of venture studio, wants to work with a founder, and the studio says, okay, we will have 70 percent of the equity, and you as founder have 30 percent of the equity, Then there needs to be a really, really compelling reason why the studio is taking 70 percent of the equity.

[00:40:21] Sam: And in that scenario, you can understand why a founder will find that challenging. Certainly a founder that,believes that they can build this thing, with other collaborators or on their own. the, the general rule in terms of how I think about. Equity composition of cap tables with through venture studio constructs is, I mean, the same way that investors think about it, which is, It is critically important to us that the founders building these ventures have a really significant, compelling reason to want to build and scale this venture over many years and get it to value.

[00:40:59] Sam: [00:41:00] Um, critically important. If the founder doesn't have any equity. Then I don't believe that there is that same, same compelling reason and no equity is the extreme version Like as you move the dial along the spectrum, you need to get it to a place where it makes sense for that founder And and and you have to think about that not in the immediate term if you say oh, it's fine because the founders got 50 percent on day one People, what do they have after the first round?

[00:41:28] Sam: What do they have after the second round? And just in the same way that investors might come to a cap table for a startup in the wild, um, uh, at a particular round, and look at the cap table and say, we need to completely reshape the cap table at this point in time. Otherwise, I believe in the thing, believe in the founder, but I don't believe in the incentives for the founder, based on the cap table as it looks today.

[00:41:50] Sam: and I don't believe that this founder is going to be incentivized to stay with this. Through the challenges that it will take and to drive this to value the upside available for the founder, which [00:42:00] is going to be continued to be diluted over time is insufficient.same is true for a, for a venture studio.

[00:42:06] Sam: So I think that venture studios, whether corporate or otherwise need to look at cap tables in a similar way to investors look at cap tables. there's perhaps a slight caveat on, Corporate Venture Studios, because it depends how they're seeking to build, what they're seeking to build for, what's the timeline on consumption.

[00:42:24] Sam: if a corporate is building a venture which it seeks to bring back into the core. So the starting point intent is we want to build a thing and we want to build it outside of. corporate infrastructure because we believe that will give it significantly greater chance to succeed and to grow and to win as a startup.

[00:42:44] Sam: We want to incentivize our founding team to act like founders and to drive for value creation that they can share in through equity.but we also expect because it is adjacent to our existing business in some way supportive of our [00:43:00] existing business, or we expect that this is going to be a, key revenue driver for us.

[00:43:05] Sam: Uh, that's part of our group in the future. So then we expect as corporate that we will consume that back into the business. And when I say consume, what I basically mean is we will, we expect that to be a exit for shareholders and a consumption by us at X point time in the future. And that's the thing that we're driving towards.

[00:43:23] Sam: Now, if that is true, it might be the case that the ambition there is to achieve that on a three, four, five year timeline. And it might be that the ambition is to achieve that with one. greater pace, three, four, five year timeline, and two greater reliability of an exit than a startup in the wild, in which case a founder might say, I'm willing to take 60 percent of the equity that I would expect to get if this was a startup in the wild, because I'm expecting a greater chance that I will exit and that I will get to exit on a faster [00:44:00] timeline.

[00:44:00] Sam: So net net on a weighted basis, like I see the equity as the same or better. and some founders look at that and go, yeah, that's what I'm about. And some founders say that's not what I'm about. That's not what I'm building for. and, uh, different strokes for different folks. so that's the sort of thinking for some corporate ventures.

[00:44:17] Sam: But my fundamental position on, on, how studios should share equity with founders. Founder equity is, critical because and significant founder actually is critical because otherwise you don't have a compelling reason for that founder to stay and build. and I've seen a ton of,studio ventures that get to say a series a stage, where the founder is just sitting on immaterial equity stakes, or in some scenarios where there are founders.

[00:44:47] Sam: that are, that are not equity founders that don't have equity. And you just can't raise investment for those things. Understandably, because as an investor, would you invest into that? I wouldn't,

[00:44:57] Sam: uh, because I'm investing into, into [00:45:00] the key part of my investment is who is the founder and how they incentivize and inspired to build this over multiple years.

[00:45:06] Rahul: yeah, yeah. So, what do you think are some other challenges for Venture Studio? Obviously, you mentioned you have a 50 percent team. That is like an insane cost, right?

[00:45:21] Sam: Okay. well, you've, you telegraphed a challenge there. I think that, it's a good one, I think it's a good one. yes, so we have a, not insignificant headcount for our studio in APAC. headcount's costly. so the opex of running a studio at that scale is significantly greater than if we ran a studio with five people, whatever it might be.

[00:45:42] Sam: is that a challenge? it's a challenge that you need to be able to Provide for enduring OPEX coverage over multiple years. you don't get to value with what you're building as a studio in 12 months. So you need to be able to accommodate a team of whatever size you want to accommodate, over multiple, [00:46:00] multiple, multiple years.

[00:46:01] Sam: I think it's really important not to be, Frequently changing and shifting your team. Um, I think it's really important that you have talented people. Talented entrepreneurs, who also have tenure and experience working together. I think elite teams become elite teams. And strengthen their ability to collectively work together and generate, you know, the compounding benefits of experience together by working together over time.

[00:46:28] Sam: so I think that's really important. and so there, yes, there is a,significant OPEX challenge for studio. So what does that mean in terms of like, what's the, what's the, the, so what of the challenge to studio? We got paid for it.

[00:46:39] Rahul: There's also one other thing, right? Like, when you're starting out with this concept, it It might be harder to convince, let's say, your LPs.

[00:46:46] Sam: For sure, for sure. I mean, at the moment, in this part of the world, like to my knowledge, there are not an enormous number of, investable LP backed venture [00:47:00] studios. I think that globally, that number is, in my view, globally relatively small. that number, I believe, will continue to grow. Uh, in the coming years, and I think there will be significant proliferation of studios in coming years.

[00:47:14] Sam: However, the vast majority of studios that are popping up tend to cover the cost of their OPEX, um, by generating revenues somewhere else. So they deploy the team that they have, the asset base that they have, to generate revenues through. Non building benches, sources of income. because we're not at a point in time yet where there is sufficient credibility in the studio ecosystem for studios to be able to command significant LP interest and investment.

[00:47:45] Sam: And if they were to your point, then the cost of maintaining a team at the size of 50 versus the cost of maintaining a team at the size of five is obviously significantly greater. so yes, that is a challenge in terms of investment, [00:48:00] and you need to be able to show that you are worth the investment. so you need to, the way it looks for studios is you must build your, um, reputation, you must build your portfolio over time.

[00:48:10] Sam: And because we're talking about startups, you don't really build a portfolio that you can really point to with any level of pride in 6 months, or 9 months, or 12 months. Um, it takes a bit longer, because you should be expecting as well that X number of the things that you work on in any 12 month period you kill. And you don't fund and you don't launch. So there is a, there is a challenge there. I think it is critically important for the ecosystem that we see significantly more investable studios. I'll explain why. If you are backed by, LPs, then You can cover the OPEX and focus all of your time and attention and asset base on building ventures, which is the key focus for the studio.if you are backed by the founders of the studio being able to invest their own capital into the studio, provide the OPEX and [00:49:00] provide the runway, then you have the same net outcome. If neither of those things, you must generate revenues elsewhere. What that typically looks like for startup studios. is they do agency work or they do consulting work or they take some form of commission to build benches for people and be paid for it.

[00:49:20] Sam: that's a good way to generate revenues. And if you can generate X in revenues, you can send X across and now you can invest that into building your own companies. However, if you have five people and you have to work on agency work and commissions generating revenues, Then you have to turn X percent of your attention to do that.

[00:49:41] Sam: And that means that you're no longer focusing all of your attention on building ventures. But even more importantly than that, the OS that you run, like your operating platform that you run for your studio, must accommodate that fees based agency work, rather than being solely focused on [00:50:00] accommodating your equity focused venture building. What that means is that your operating platform is not like perfectly attuned for the thing that you truly want to be. It is in some way, distracted by the thing that you must be in order to accommodate the thing that you want to be. and that's really challenging. Really challenging. And it's difficult, I think, to, reconfigure an operating platform. One year, two years, three years down the track. And I think it's difficult to reconfigure an operating platform when you have grown a team to scale. And then the other challenge is, as you grow your team to scale, in theory, grow your ability to do more ventures, and therefore to seed fund more ventures, and to deal with the natural attrition, and to get to power law dynamics.

[00:50:53] Sam: To accommodate that team, you need to do a lot more of this fees based work. Unless somewhere [00:51:00] along the journey you can flip into investability, get yourself to a place where, okay, we don't need to do this so much. We don't need to do this at all. Because we've generated the portfolio, the capability, the credibility to get investors to stand behind us, to deploy the opex, um, uh, to focusing exclusively on, on bench building.

[00:51:18] Sam: I think in this part of the world, we have very few studios, that are in this world where they can focus entirely and exclusively. On doing this thing, which even if you can focus exclusively on it, is still really hard to do. but I think we'll see more. That's what I think is really important that we see more, really, really critically important at the moment.

[00:51:37] Sam: If there are a handful, then we need that to 10 x. The reason we need it to 10 x is that's the only, we get only way that we get experimentation in the ecosystem. So it's really important that we're, as an ecosystem experimenting across different modes of running venture studios. And the reason for that is simply the equivalent of A B testing.

[00:51:56] Sam: So if we as an ecosystem have in [00:52:00] market 20 different types of Venture Studio models, then we can more rapidly as an ecosystem figure out which are the highest performing. And therefore we can more rapidly as an ecosystem double down on the highest performing. And deliver more value and get the flywheel to spin.

[00:52:14] Sam: So that's really important. So something that is a big focus for me,And has been for a year or so, But is really a massive focus moving into this year. is how to generate and deploy multiple different modes of venture studio in the ecosystem. Part of that is doing it myself and part of doing it in partnership with the people that I work with, but part of that is supporting others to do it.

[00:52:37] Sam: So whether that is through investment or whether that is through advisory or whether that, whatever that is through, I want to see more of these ecosystem, more of these venture studios in the ecosystem. I think it's critically important that we see more investable. venture students in the ecosystem. and I think that that is a,a really important ambition for 2024.

[00:52:55] Sam: I don't think it's necessarily a oh yeah, that's my prediction, that is what will happen. But I think [00:53:00] if we get to the end of 2024 and we haven't been able to generate significantly more experimentation in the ecosystem, then that will become very challenging for us as an ecosystem at AIPAC. I

[00:53:11] Rahul: So, going back to challenges for venture studio, right? Like I'm probably telegraphing another, challenge here.you mentioned even if the lack of focus, so even, even if you get to a point where you're investable and you don't need to focus on other agency or everything, you still are working on multiple sort of.

[00:53:33] Rahul: Ventures, right? So that would inevitably at some point lead to like split focus Isn't that a challenge?

[00:53:42] Sam: don't think so. Because the teams are not working on multiple ventures. So the fact that we have 50 people in our team allows us to accommodate multiple, multiple early stage founding teams. and so if I take, two people who are working as an early stage co founding team, they're only [00:54:00] working on the one thing.

[00:54:01] Sam: 100 percent focused, like a pair of founders in the wild. Um, And maybe the slight difference is that a pair of founders in the world might be a hundred percent focused at the very early stage, but might also be doing their jobs or whatever it might be and having like jumped into it head first. what the studio creates is a scenario where you have a founding team who are, you know, cost covered by the studio and are able to focus a hundred percent of their time on a venture.

[00:54:27] Sam: And then you have another one, a hundred percent of their time on a venture, another one, a hundred percent Who,like spread their time investment across multiple and work with the family. So people like me, so, so, so the work that I do now, I'm never a hundred percent focused on one particular, venture.

[00:54:43] Sam: I I'm looking more at portfolio level in terms of the stuff that we're building. but if need be, and if I'm particularly excited about a thing, I might go into that a hundred percent time for a period of time. And the same is true for others who work at portfolio level. So we have this dynamic where we, we, it is, It is imperative that anything we are looking at [00:55:00] has a founding team that's 100 percent focused to your point. and it is also, we have found beneficial to have other people who are working at portfolio level and able then to bring either specialism to different ventures or able to bring, like sparring and advisory with those founders to different ventures.

[00:55:19] Sam: What I mean by specialism is, if I have two founders who are exploring a particular space. And they want to rapidly run some experiments in market. Therefore, they want to throw together some prototypes, or they want to put in place some,some digital testing. Then they go to the team that is the specialist in doing that. And that team is then able to rapidly throw out these experiments for them, so they can more rapidly generate data, take the data, synthesize it, move on to the next thing. And that's an asset that a studio is able to offer. So if a, uh, any of our founders, are in a point in time where they're building partnerships or they need to do anything around like regulatory or legal, then they can go to the bench, which is that [00:56:00] specific function and have that dealt with.

[00:56:02] Sam: So they, as the founders need to be on top of that, but they don't need to be necessarily,as deeply invested from a time perspective as if they were doing that in the wild. Um, and I think that is the platform. That is really important to be able to build for a studio.

[00:56:18] Rahul: Yeah, yeah, I was just thinking about that I think the designing and designing and operating a platform That does all this becomes the the best sort of effort to Like value

[00:56:32] Sam: I think that's right. my belief is, um, if you build an elite Venture Studio platform, that becomes an OS that you can deploy to different studios. So that's what I, that's the focus for the past few years has been that. and, and, and so where we have now been able to get to is that we are able to deploy the platform that we have, the Venture Studio OS.

[00:56:54] Sam: For different modes of studio, and that's what I was referring to when I talked about experimentation. [00:57:00] So that allows us to run a, um, uh, So we talked about all the things we talked about earlier on, right? That allows us to deploy the same platform and capability to a studio where we never bring founders in until Seed investability. But also to put a different studio in market where we always work with founders from day one. And to put a different studio in market where we are specifically focused on financial services and nothing else. Or to put another studio in market where we are working exclusively with one corporate partner to build 10, 15, 20 ventures with them.and many, many different modes. there's four examples, but many different modes. And that OS that we've been able to build sits as the platform that underpins the operation of all of these studios. So that's the really powerful thing because then we get the learnings on all of these different modes of operation.

[00:57:51] Sam: And that tells us where is the value going to sit in venture studios moving forward. Which is the thing that's most exciting to me because if I go back to the thing I said right at the start. [00:58:00] I do this work because I believe it gives me the best way to provide inspiring, fulfilling work for the largest number of people.

[00:58:07] Sam: So what's exciting for me is to get to incredibly sophisticated venture studio structures that can be deployable at scale. We're not yet at, as an ecosystem, incredibly sophisticated. We have market leaders. My belief is that the work that we do in the past few years has,fortunately got us to the point in terms of being a market leader in this type of work, but we're like three out of ten.

[00:58:30] Sam: So when I look at the market, I think those at the forefront of the market are currently operating at three out of ten. That's really exciting for me. Because there's an enormous room to the ceiling. So this, this asset class has got so much more value to create and unlock. But the only way we get from three to four to five to six to seven is through experimentation across different models.

[00:58:51] Sam: And if we can get to six, seven, eight out of 10, then we can start to, as an ecosystem and potentially as an investor community, be [00:59:00] a lot more excited about doubling down and scaling the volume of these studios. and that's when we really unlock. The, the, um, exponential value. So that's, that's where I want to see the ecosystem go in the next couple of years.

[00:59:13] Rahul: Yeah. one last question. who do you think, should start a venture studio?

[00:59:17] Sam: Oh, if you think you should start a venture studio, please reach out to me, as a first port of call,because I would love to support you with that, in whatever form is most useful. the people that I think should start venture studios are eitherEntrepreneurs who have built successful companies and would now like to go and build in parallel and build a portfolio.or people who have built studios and have become expert practitioners in building the operating platforms. and the portfolio dynamics that are best deployed,or that need to be [01:00:00] deployed to deliver impact through studios. So I think they are the two, like, best. So if you're lining up all the people and say, hey, who do you want to work with, Sam?

[01:00:07] Sam: Then I'm looking for predominantly credible, seasoned, prolific entrepreneurs. and people who have a deep understanding of venture studio structures, um, and experience in operating those. Now. Any individual doesn't need to be both of those things. And the best studios will be built by, complimentary founding teams.

[01:00:28] Sam: a big breakthrough in my journey building studios was a jump to a more nuanced complimentary leadership team. multiple years ago now, and that really helped us to get over the hump in terms of switching on growth trajectory in terms of what we're trying to do. I think it's really important to work with complimentary people.

[01:00:46] Sam: So you might be an elite seasoned. entrepreneur, who has never looked at studios at all. I'm pretty sure because you're an elite season entrepreneur, you can get your head around it. But also if you work with somebody who spent the last 10 years building their own studios, then maybe you're going to [01:01:00] have more success and vice versa.

[01:01:02] Sam: so I think they're the, the, the traits that I would like most want to see in a founding team. And then you could also have other all sorts of valuable traits around that. But they're the ones that I would really like to see that are critical. So if you have like, you know, great connectivity with investor base, like if your background is in investment, then maybe you can be a really, really powerful contributor to that venture studio team, really, really powerful co founder, but I would also like to see founder experience.

[01:01:29] Sam: I would also like to see studio experience. That for me would be the Rolls Royce. Um, Anybody who does not fit those profile, then if you are smart and ambitious and aspirational and learn fast, then I'm sure you can also build a studio.

[01:01:43] Rahul: this is great. Uh, thank you so much for taking the time to do this.

[01:01:51] Sam: you any questions.