All-In: The Only Choice For a Winning Founder / Venture Studio Partnership
Venture studio startups are a unique breed of startup. Sitting somewhere between a typical venture-backed ventures and internal incubations of large companies, studio startups utilize a unique build formula that has yielded many massive successes, including Snowflake, Moderna, Dollar Shave Club and Hims. The most striking difference between studio startups and traditional startups? The partnership between the studio and the founder, which is often a co-founding relationship with shared founding equity. For that partnership to work, the only path to success is for both the founder and the studio to be unequivocally all-in.
As odd as it may sound to those in the startup world, where the default Techcrunch puff piece is the hero story of a founder gutting it through tough times to find success, I’ve found that getting both the founder and the studio to go all-in is the expectation, but definitely not the standard. In my 15 years of running ops at Samsung Next (Samsung’s corporate innovation arm for software and services) and then Superlayer (web3 venture studio) as well as the data points I’ve gathered from leadership at Atomic, Expa, M13 and Science, getting the right depth of studio/founder commitment is unfortunately more rare than studios would like to admit.
There are many reasons that the double all-in is hard to achieve; some are structural, while others lie within the nuances of the partnership.
Why studios fail to go all-in
To ensure there is dedicated studio support to a startup, many venture studios utilize an “operating partner” model. An operating partner is a senior member of the venture studio with operating expertise that is assigned by the studio as the person primarily responsible for the success or failure of the startup. Many venture studios utilize an operating partner model, but every studio should. The specific responsibilities can vary, but the operating partner should serve as a boots-on-the-ground member of the startup itself. The oeprating partner role in a studio is very different from a typical venture capitalist (“VC”). A VC will typically invest in a company, meet with them once a month and sit on ~5–15 different startup boards, making real operating contributions to any startup impossible. Ideally, an operating partner should spend at least half their time on the company, ideally only supporting one company at a time or two if they are at very different stages.
At Superlayer, I have been the operating partner on a few of our venture studio startups, spending about ~60% of my time on the startup, with the other ~40% covering my role as COO of Superlayer. In my operating partner role, I’ve typically played the role of early-stage COO, which varies by startup but typically means handling much of the business and G&A side of the business, while being a strategic partner to the founder. The area of greatest value and time requirement is often partnering with the founder to execute a fundraise. Another benefit an operating partner should provide is to channel every possible resource from the studio into the startup at the right time. At Superlayer, that has included bringing in our Managing Partners for strategic guidance, along with our general counsel, CFO, Head of Marketing, tokenomic experts, Head of Growth, recruiter, etc. as needed and ensuring we get the full support the startup requires. Additionally, it’s the operating partner’s resposibility to ensure that the startup benefits from the lessons all the other founders in our portfolio have learned when they’ve gone through similar stages, which is another key benefit a venture studio can provide.
The reason venture studios fail to go all-in are numerous, so I’ll quickly highlight a few:
- Missing Operating Partner Structure: Some studios try to support their startups like a hands on VC (e.g. Andressen Horowitz or First Round Capital), without providing a dedicated operating partner that is in and contributing to the day-to-day operations. In my opinion, this is a massive disservice to the founder as the trade-off with any venture studio must include significant operating support in exchange for an additional piece of equity beyond the founding investment.
- Operating Partner Spread Too Thin: An operating partner that is spread across 3–4 portfolio companies at once is not serving as an operating partner, just an active advisor.
- Wrong Partner for the Right Startup: Ideally a venture studio is allocating the partner best suited to help the company, not just the partner with the best availability. It doesn’t matter if the operating partner is all-in if they’re not extremely capable. In fact, it’s probably worse.
- Misaligned Incentives: The venture studio should ensure the operating partner is both economically incentivized and held accountable to drive success for the startup, ideally creating specific upside success related to that startup that goes beyond broader carry in the GP (ownership of the fund economics of all the startups in the portfolio).
Why founders fail to go all-in
For the studio startup founder, it’s easy to assume all-in is a given, but the unique structure of the venture studio can potentially create the wrong set of incentives. Specifically, a founder role in a venture studio often comes with the tradeoff of a higher base compensation and much greater studio support in exchange for the founder sharing more of the founding equity. A few hazards can emerge as a result of this structure that limit the ability or willingness for a founder to go all-in:
- A GM in Founder’s Clothing: The allure of a higher base plus benefits, the founder monicker, deep operating support and product control can entice many “wantrepreneurs” to seek out the role, believing it to be a more cushy entrepreneurial experience. But there’s a big difference between someone fit to be a General Manager or even a Sr. Product Manager and a founder (covered in depth here). If the person brought in to be the founder doesn’t have the relentlessness, decisiveness and resiliency it takes to be a founder, they may not know what being “all-in” is all about.
- Passion for the Project: Depending on the studio and/or the concept, either the studio or the founder may come up with the initial concept. If the studio comes up with the concept, there is a real risk that the founder brought in won’t have the same zeal or passion for the problem that’s being solved. In any startup, it’s rarely the first good idea that solves the problem, but rather an obsession with the problem itself that enables a founder to weave through the idea maze to get to the final best solution. If the founder is not truly passionate about the problem, they’re not going to make it through that maze.
- Ownership: I find that the topic of insufficient ownership for the founder is the most frequently brought up reason for why a founder may not be all-in. But I’m skeptical. For context, in a venture studio model depending on the studio, a founder may take anywhere between 10–90% of the founder equity. While sufficient ownership is important, I don’t believe that the difference between 80% and 60% or 50% and 30% actually is what breaks the startup. It can definitely play a role after many rounds of funding and dilution, but I believe blaming the difference in ownership at the onset is typically a cover masking the above two reasons.
Why founders AND studios fail to go all-in
Lastly, there are scenarios where the studio and founder both come into the project set up for success, but issues emerge thatcan put a rift in the partnership and cause one or both to opt it.
First, there is always the question of whether the operating partner and studio work well with the founder. Providing complementary skill sets, communicating well, setting clear R&R, and enjoying working together on the daily grind of a startup are paramount to success. Unfortunately, you can’t always know this ahead of time until you go through the grind together.
Second, the best studio/founder partnerships have both sides holding each other accountable. It’s natural to want to avoid conflict, but holding accountability is the surest way to earn mutual respect while ensuring high performance. At Superlayer, I’ve been on both ends of asking and being asked the question: “Are you f***ing all-in on this or am I in this alone?!?!?”. It’s a hard question to ask and harder to hear. And it needs to be asked. In the end, while it’s hard to swim alone, it’s even harder to be swim while dragging someone with you, which is how it can feel when only one side is holding up their end of the bargain.
The lock-step partnership between an all-in operating partner and founder isn’t just desirable — it’s indispensable to startup success. Together, they can maximize the best of what the venture studio and founder have to offer, creating the shared mission, aligment and passion that fuels so many successful startups. Taking the necessary steps ahead of time to vet many of the issues identified above and ensuring that the founder or studio will be all-in is paramount to giving your startup the best chance the succeed.
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Originally posted: September 2023
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Other Venture Studio Content by Gary Coover
- Venture Studios Beware: Don’t Expect PMs to be Pioneers — what to look for and look out for when bringing in founders to run venture studio startups.
- Perfectly Imperfect: Core Skills and Acceptable Gaps for Venture Studio Founders — Venture studio startup founders rely on the studio to uplevel areas where they may be weakest — but which skills must be present in the founder from day one to be successful?
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Gary Coover is the COO at Superlayer, a web3 venture studio launching the next frontier of tokenized consumer products, in addition to running ops at the portfolio company Taki Games. Previously, he spent the better part of a decade architecting, launching and scaling startup incubation and investment programs for Samsung Next (the software and services innovation arm of Samsung Electronics), including developing a first-of-its-kind incubation model (Samsung Accelerator) and launching a global $150M venture fund. As the Operating MD, Gary directed the selection and launch of Samsung NEXT’s Israel and Europe offices, built and led the platform team supporting venture investments, and ran a pre-seed incubation program. Prior to Samsung, Gary started his career in consulting and co-founded a venture-backed startup in the ecommerce space that resulted in a small exit in 2017.
