State of the Digital Nation 2020: Venture Road

Exploring the continued evolution of the digital creative sector. Charting the individual’s journey to new territories to lay out a blueprint for an evolutionary leap of the studio model… The Creative Capital Studio.

Jules Ehrhardt
74 min readMay 14, 2018


Artist unknown ‘Ulysses 31 by Jean Chalopin & Nina Wolmark’

In 2016, we assessed the State of the Digital Nation, exploring industry, agency, and future perspectives in the midst of turbulent change. Two years later in 2018, many of the identified key trends continue to play out and exacerbate. These headwinds have put further pressure on the traditional consultancy model and driven even greater urgency to explore new avenues for the creative class*. In this follow up to State of the Digital Nation (State) we go down the venture rabbit hole. Also, there’s music

State of the Digital Nation 2020: Venture Road

  • Chapter V: Media Crusades & The Death of Agency: Roundup on Consultancies vs Ad Holding Groups, the necessary death of the agency model, changing the stakes, all serve as impetus to explore new paths in venture for the creative class.
  • Chapter VI: Venture Pathfinding: Pathfinding in venture for the creative class, real talk on agency-venture work, and taking inspiration from trailblazing creatives.
  • Chapter VII: The Startup Studio & Venture Ecosystem: We journey across the divide and take a deeper dive into the supporting ecosystem for startups, an exploration of the evolving startup studio model, and the opportunity within for the creative class.
  • Chapter VIII: The Creative Capital Studio Blueprint: Moving beyond the ‘pivot’ model of the Digital Product Studio, taking our learnings into a blueprint for starting afresh… The Creative Capital Studio.

* For the sake of definition, I consider the creative class to not only encompass those who create design, but also those who create code, culture and community.

You don’t need to have read State to make sense of what follows, but if you’re interested you can read chapters I to IV of the saga here. Happy to continue the discussion on social using the hashtag #SOTDN2020, or at @ezyjules.

Preface: This Time It’s Personal

Ferris Bueller’s Day Off (1986) Paramount

It is rare for dispensed ‘wisdom’ to be untainted by the giver’s human need to validate their life choices and beliefs. So before we go down the rabbit hole, I’m going to break the fourth wall, get personal, and offer some context to why am I even writing this stuff. So please indulge me for a mere few paragraphs as I confess context in what is a deeply personal journey of exploration.

It transpired that State became something of a dear John letter to my profession, and indeed the first half of my life. In early 2017 I disembarked the good ship

, my studio of the last decade, stepping out of the game and into the wilderness. That wilderness was an extremely privileged twelve months, liberated from the closed loop, perpetual, cycle of digital agency life, free to observe and reflect from the sidelines.

Important aside: Fear not, this isn’t one of those lame “how I left [company X], bought a typewriter, and learnt to make handmade paper” Medium pieces. No one with their nose to the grindstone of reality wants to hear it. The only relevance is offering context and perspective. If it’s not your jam, you are free to skip and scroll down to the first scene of death and destruction below.

Nathan James Page ‘Walk the plank…

Harvesting Knowledge

Conscious that I was stepping into the second half of my career (and life), it boiled down to figuring out the answer to a simple question…

what is the optimal application of your energy, experience, network, and knowledge to the next five years of your life?

In perspective gathering mode, with no agenda, I spent time in animated conversation with talented humans from the tech, startup and agency world, with agency and startup studio operators, startup entrepreneurs, VCs and more. Thanks to ustwo’s standing and State unexpectedly doing the rounds, I was very fortunate to be able to do that with people at the top of their game from all over the world. Two things particularly struck me; Firstly, that people were so kind with their time and minds. Secondly, that nearly everyone I was meeting was also thinking deeply on new paths, fuelled by a healthy dissatisfaction with the status quo. To help me get input on my own challenge, I would always flip my own number one question to them…

“If you could start anew, liberated from all professional responsibility and legacy, taking your experience, network, and knowledge with you to the next… what would you choose to do?”

I collected a lot of perspectives, pointers and all important yeahbut’s along the way regarding the mechanics of the industry. This provided me with a rich knowledge base to sift through, most of which has gone into this piece.

Toshihiro Kawamoto ‘Cowboy Bebop’

Personal Reflections

Layered into that are my own reflections gleaned with real distance from my former life as a studio owner. I landed on a number of personal reflections, the details of which I will spare you (if you really care you can find them here in ‘Halfway reflections at the end of a career in agency’), resolving that:

  1. Even with the outrageous privilege of the freedom to do pretty much anything, I knew to remain true to myself would mean staying with my tribe, those who I resonate with above all… the creative class. I wasn’t leaving them or the industry.
  2. My obsession with changing the terms of business for my tribe remained. In fact, it burned brighter the more I came to understand the wider ecosystem. I would find a better way.
  3. I was done with being paid for time. Done with the linear relationship between time and income that makes you a glorified Uber driver. I would be paid for mind, not for time.
  4. I was done with the agency game. With sincere love and respect for my many friends in that game, personally I am dealing myself out. Going forwards I would work on a venture only basis.

With agency life/model done, yet resolved to remain in the ecosystem, all roads lead to venture and startups. So aside from a systematic exploration of various aspects of the digital and venture industry, this is also the journey of a nomad from the creative class looking for the right place to call home. It’s a piece about you, and me. OK then… with context, motivations, and sources on the level, let’s do this…

Chapter V: Media Crusades & The Death Of Agency

Intro: To start this journey we’ll first take a look back at the world of agencies before exploring the future overlaps of venture, design, and the creative capital studio... The war between consultancies and the ad holding groups are now well underway, whilst the ad industry itself takes hit after hit to its very foundations. As the individual agency model comes under increasing pressure, there is good reason to reflect on its viability and on new paths for the creative class. For me, the consideration is whether this a battle worth fighting? If not, then changing the stakes points towards venture…

Markus Heitz ‘The Dwarves’ by Jesse van Dijk

The macro industry trends highlighted in State have accelerated. Management consultancies are continuing to build capacity and capabilities at a dizzying pace, spawning a relentless flurry of bullshit-word-salad press releases (from which the Pac Man word cloud below is made)…

Accenture, continuing its Borg-like procession through design space, acquired as many agencies in 2017 as it did from 2011 to 2016. The Monkeys, Maud, Clearhead, Wire Stone, Matter, Rothco, all assimilated. Elsewhere Idean, and Adaptive Lab sold to CapGemini, ACNE sold to Deloitte, Sequence sold to Salesforce, Moment sold to Verizon, Instrument sold to MDC, Citizen sold to EY, FRWD sold to Bain, Smashing ideas sold to luxoft. Even the Godfather of UX, Alan Cooper, sold his asylum to DesignIt/WiPro. ‘Design’ has been consumed, nose to tail. Did you know that if you blend the diverse and vibrant palette of the rainbow, you end up with a uniform, chromatic neutral?

Whilst all design capacity is being snapped up by the consultancy groups, for reasons we covered in State, the advertising holding companies have been keeping their Black cards sheathed. With hardly a peep on the acquisition front, they have been deep in merge mania, consolidating and folding their extensive agency networks to prepare for the epic battle over their burning empire. Let’s get a quick data fix for context. Since the 2008 crash (thanks banks!), US GDP has shown solid and stable growth (thanks Obama!). So has the value of the S&P 500, which is at record levels. The economy is booming. Whether this is sustainable or not is beyond my remit (it isn’t!), but the sun is shining so one should be making hay.

Now lets take a look at the relative size of the major consultancies and the ad holding companies (click here for a detailed look at the data table). You can see the revenues of the consultancies are much greater than the ad holding companies. They operate from a position of power, resources, and wealth.

From the data that is publicly available, aside from IBM and Dentsu, during this economic boom, the consultancies have been increasing their profits. At the same time, the advertising holding companies have experienced decreasing or declining profits…

So what’s going on? We explored the ad industry’s existential crisis in Rome Is Burning, and little has changed. It’s been a rough couple of years since we last checked in mid-2016. Let’s get in the ring.

Ten Rounds On the Advertising Industry’s Malaise…

  • From a valuation (market perception) perspective 2015 and 16 were peak years for the holding companies, with all sharply declining in value since. WPP, Dentsu and Publicis peaked in 2015, Omnicom in 2016, and IPG spiked mid-2017 before dropping 20%. Given the dramatic downtrends have all taken place amidst a period of unprecedented economic expansion, it presents a worrying picture.
  • For WPP 2017 was the advertising sector’s worst year in a decade, reporting a 0.9 percent drop in 2017 underlying net sales, including a hefty 3.2% drop in North America. 2018 began ominously, with the group losing nearly a third of its market value in 2017/2018. WPP then lost Martin Sorrell, their founder CEO of 33 years after a murky but convenient misconduct investigation. He was already facing a huge pay cut following his 2015, $103M mega bonus. I wonder if he saw the dark clouds on the horizon in his calculus, opting to go out near the top. Either way, who would you rather be? Arthur Sadoun steering the Publicis super tanker through a biblical cyclone, or Martin Sorrell chilling on the yacht in a Mediterranean harbour plotting your next, unencumbered, move
  • It’s not good on the client front either. The holding group’s largest clients, the FMCG or CPG companies, are drastically reducing their external spend and agency rosters. P&G, WPP’s largest client, is nearly halfway through reducing their annual $10.7bn budget by $2bn by 2021 — “We used to work with 6,000 agencies around the world and have cut it down to 2,500. We think we can cut another 50 per cent”. Unilever revealed a cost-cutting plan to remove half of the creative agencies and 40% of the consultancies from its roster, claiming to have cut marketing spend by 30% by taking the work in-house. This process hasn’t been all win though. In State I heralded Pepsi as leading the in-house charge. But that resulted in this particular monstrosity…
  • Nefarious industry practices triggered a U.S. Department of Justice investigation into bid rigging by Ad Agencies, practices corroborated by ANA’s Production Transparency Report. All four of the largest holding groups have been subpoenaed and there will be jail time (which has to feel like justice to the many sub-contracting production houses that were disadvantaged).
  • The ad and consultancy industry’s penchant for ignoring illegal levels of overtime tragically came home to roost with the death from overwork of a Denstu employee. The canary in a coal mine triggered a deeper level of reflection on working hours in the industry. It doesn’t take a global accountancy firm to work out that correcting that exposes an unsustainable business model. Dentsu saw global profits drop in 2017 as a result of reducing working hours. If your business has been surviving by relying on an 80-hour work week and you shift to a ‘benign’ 60-hour work week, you need 25% more employees to get the same done. Ergo your costs go up, and your profits go down, revealing that you might have an unviable business that has relied on illegal working hours and Stockholm syndrome.
  • On the supply side, the new generation of entitled millennials appear to value their own wellbeing over the company’s fortunes, triggering outrage with the “in my day” brigade. At PWC a rebel millennial enclave has even been willing to make a stand to effect real change (good on them!).
  • For the first time on record, the number of people working in the ad industry declined during an economic expansion. The industry brain drain is well underway.
Number of Net Jobs Created Annually in Media and Advertising, in Thousands. Data: Bureau of Labor Statistics
  • Despite the best efforts of the holding groups to acquire or build their own ad-tech, in 2017 90% of the growth of the digital-advertising business went to just Google and Facebook, screw you very much. This has left the ad holding companies standing outside the party and has starved them of valuable commission revenues.
  • Talking of standing outside the party… in Feb 2018, Google launched an update to their Chrome browser, used to view 56 percent of web pages, with a built in ad blocker, that also blocked competing ad trackers. Whilst the cookies crumble, people are wiping advertising from their screen like a smudge. As of 2017, 11% of all global internet users and two-thirds millennials use ad blockers — a 30% increase from 2016. You can see where it’s all headed.
Neil Leifer ‘Muhammad Ali vs George Foreman, 1974 WBC/ WBA World Heavyweight Title’’

It’s a unanimous decision by the judges — the ad holding groups spent 2017 on the ropes taking a beating. Set in the context of a period of stability and expansion in the global and US economy, it all points towards bloodbath and chaos when the central-bank-pump-primed economy sours in the coming year(s).

Enter Marcel

Sensing danger on the horizon and the need to respond to the consultancy invaders, Publicis Groupe in 2017 announced Marcel. Marcel is their AI-powered professional assistant platform — “a revolutionary tool for collaboration and creation”. The bold intent and aggressive timeline was delivered as a shining testament to the Groupe’s technical and product prowess, their ability to work like a startup and deliver groundbreaking technology. “Fortunately, we are able to do that ourselves because we have a huge technology based enterprise that exists on a wide, global scale.”- Chip Register, co-CEO of Publicis, and Marcel’s architect said at launch. Furthermore, they have vowed abstinence from their awardography addiction, pulling out of Cannes, CES, SXSW, et al to deliver the platform within a year. Watch the inspirational showreel…

“Et voilà? Are you ready?”

…Marcel asks in the aspirational demo reel. Aside from this feeling like a hostage video, where captives are forced to read statements at gunpoint, it exposes a deeper malaise. Nothing more perfectly illustrates the hubris of the ad industry than Marcel. The project precisely demonstrates the lack of the technical and product prowess that could provide passage to safe harbour in the new world.

Apple can barely get Siri to arrange an egg timer on command, and IBM’s Watson is over a decade in development. Marcel is clearly not going to help deliver “game changing business ideas for a Fintech IPO” any time soon. (Although, perhaps they could hard-code “Millennials” as the default response to cover 90% of the agency network’s queries in the meantime). Even a junior product manager would advise it would be utter madness to stand on a platform and promise something like that within a year. They would advise you to promise skateboards rather than hoverboards. If they stick to the award abstinence policy, no one is going to be enjoying Publicis agency bar tabs this side of 2020.

Best In Show, Last In Class

Studio Lernert & Sander X de Volkskrant ‘Black Sheep

The whole process is illustrative of the very worst of agency sales practices. A salesperson with little understanding of technical implementation, or of the teams delivering the work, sells the client a fantastic vision, on a knowingly impossible timeline, scope and budget. In doing so, they not only sell the project but also sell their own people, upon whose shoulders the problem will sit, down the river in the process. No doubt project Marcel has landed on some poor soul’s desk at Publicis, who was never consulted about timelines and feasibility. Now they are going to nigh on kill themselves trying to deliver the impossible. As someone who has ‘sold’ creativity for most of my career, I find this infuriatingly disrespectful of clients and of your own people. It is truly a scourge upon the industry and the key factor in the unhealthy industry lifestyle.

This time it would appear they played themselves. And royally so. There is no greater truth and test of your abilities and process than when you are building your own product. Six months following the launch they then went to Microsoft to develop the platform. The sad thing is it just didn’t need to be this way. Take it away Jony…

The Door Is Closing On The Chance For Change

In early 2018 Publicis announced a hard pivot into “digital business transformation”, targeting consulting work over creative work and focusing on acquisitions to support their capabilities. The Publicis 2020 plan is a 2,617-word study in weapons-grade Newspeak. At a time when clients’ trust in their ability to handle marketing is declining, it is tenuous to ask for access to the controls of clients’ core business. This is an extremely hopeful play.

Ad agencies are undoubtedly the world’s greatest salespeople, bar none. This has been their undoing when it comes to complex product work. Able to paint and sell a vision to secure the work, but continuously unable to deliver beyond the veneer. We have yet to see a meaningful pivot by any of the ad holding groups. Nearly every acquisition of the kinds of shops that could help them pivot out of their marketing stance has been made by their new competitors, the consultancies. Instead, they engage in consolidations and mergers, pursuing efficiencies whilst the big 5 wolves circle.

Big client’s tech or ‘digital transformation’, budgets could save their industry. With trust fading in the marketing industry’s capabilities to deliver beyond campaign work for their clients and into technical products and services, the unfolding Marcel situation will likely serve to further erode trust. Unless they can get their tech chops together to move meaningfully into ‘business transformation’, delivering the product output of strategy, the door will close on them.

Offering both strategy AND execution services represents the future operational model. If Ad holding groups can neither clean house, nor compete with the war chests of the consultancies to acquire the necessary skills to implement product experiences, it poses existential questions about the integrity of their business. The ad industry’s problems are deep-seated, systemic and environmental, so expect things to get much, much worse. Prediction: by 2020 we will be at least one holding group down, either via a merger of two or through sale to a consultancy.

‘The Good, the Bad and the Ugly’ (1968) United Artists

The ongoing crusades between the ad holding companies and consultancies are going to take years to play out, and developments in that saga are for future generations. From the perspective of my own search for a new path, it is a battle in which I have no desire to be involved. So in the absence of any sharp pattern deviations, it is infinitely more interesting to continue to explore the possibilities for the agency model and the wider digital industry’s atomic unit, the creative class (you).

The Necessary Death Of ‘Agency’

Ami Vitale for National Geographic Creative

Let’s take things down to the agency and agency operator level and look at the client service model itself across the wide spectrum of ad, marketing, and production shops, through to brand, design, innovation, and digital product consulting firms. All across the digital nation, the ‘death of agency’ drum grows louder as the agency model suffers an increasingly hostile climate. It is undeniable that with every financial year, running an agency is becoming universally more challenging. This is due to multiple factors.

Clients are increasingly taking work in-house (and they are getting progressively less worse at it too), constricting the flow of projects to agencies. Consequently, there is a race to the bottom on pricing as competing agencies scramble to fill their drying pipelines. The logical end-game of clients driving rates through the floor, and agencies agreeing to do discounted work, will be to push the price point so low that the requisite quality of output and service is unsustainable. Many agencies have already pulled all the tricks in the book to reduce their operating costs, including offshoring work (Publicis have 8,700 people in “delivery centers” in India, Colombia, Costa-Rica and Mauritius, with plans to increase to 13,000 by 2020. Sweet Jesus!).

With little left to ‘optimise’, and agencies racing to the bottom to compete for a declining pool of business, the model will simply break. It is a desperate, self-fulfilling loop for which all parties bear responsibility: Multi-billion dollar clients calling free pitches, their procurement departments ‘scoring points’ by squeezing their agencies, and agencies continuously conceding ground. It makes zero sense to expect any partner to work at breakeven or a loss and still produce quality output. Nor is it the basis for a healthy relationship. It practically guarantees an acrimonious end.

Trust between clients and agencies is broken. Before we get too pious, let’s not forget that the agency world bears the weight of culpability in the breakdown of trust by so many bad actors having rorted their clients for decades. Building and rebuilding trust takes time and the ever-declining tenure of CMOs, 42 months and dropping, further undermines such efforts. Either way, a long-standing symbiotic relationship, where corporations and major brands nurture and invest in the next generation of creative talent and their host studios, has been broken. The collapsing ecosystem is increasingly inhospitable to new growth.

Retaining talent is becoming a challenge. The plague of agencies mis-selling their work is creating unsustainable conditions for employees. Beyond twenty somethings willing to sacrifice themselves upon the altar of company and career, when it comes to working mothers and parents, it is completely unsustainable, especially in the US market. That’s why, shameless plug alert, we started Pledge Parental Leave to get the industry to self-elect meaningful standards for their working parents.

These conditions mean leading agencies are increasingly serving as finishing schools for tech companies who can offer not only better conditions, but also 25 to 50 percent higher remuneration and superlative benefits. The existing agency model simply cannot sustain packages to compete. On the people front, as a human capital operation, the agency ‘enjoys’ negative economies of scale. So as you grow the business and take on more operational, capital and payroll costs, as well as more risk and stress, your gross margins decline (pure genius isn’t it!).

If you want to ride out the storm, and you’re not looking to shoot up the agency pyramid, these industry conditions are perhaps more appropriate for smaller, more nimble, operations that can engage on a specialised, project-based, level. Check out Faris and Rosie Yakob’s Genius Steals, who have stripped that model to its very essence. Talking of pushing the business model reset button, industry veteran

set up his own, funded, new-model-studio and recently issued a call to arms for the industry. He identifies four key areas in which that broken trust can be rebuilt: Process: Restrict viciously, Structure: Peel the layers, Culture: Design for the long term, Leadership: Focus less on fame, more on trust. He speaks the truth, however we also need to address the primary tumor, namely the economic model.

The ‘Paid For Time’ Model Is The Primary Tumor

Many decades ago, in the mists of time, we built ourselves a prison island from which which we never escaped: The ‘paid for time’ client service model that rules the agency economy. Retainer or not, most billing is based on a certain number and type of resources over a certain period of time. With revenue linearly yoked to time, it makes the agency model a fixed odds, limited stakes game. And those odds are getting longer each and every year. This is at the very core of the agency malaise, and it cascades through all aspects of the business, corrupting incentives, efficiency, and trust.

Here’s the rub. Expertise, craft, knowledge, and wisdom, have been arbitrarily abstracted and atomized into units of time — homogenised and commoditised, like ground sausage meat to be sold at market. For rote tasks such as manual labour this is perhaps appropriate. I’m not delusionally arguing that all creative work is profoundly transformative. Some of it is indeed equivalent to the stamping of license plates in a penitentiary and should be charged accordingly. However, the influence of the right advisor, with the right mind, at the right time, can help make or break a business. At stake are many millions of dollars and all the livelihoods a business supports. When the capacity for impact is truly exponential, then we need to negotiate the upside.

With procurement departments at major corporations being resistant to exploring alternative revenue models such as equity payment, co-ownership, licensing, revenue-share, there is little prospect of escape. Locked in, you are able to celebrate at best a 10 to 20 percent gross margin. But the reality is that this is dropping across the board every year. Notably, all of the above means the model would be of little interest to an experienced investor. It is for this reason that we need to uncouple from the yoke of paid time, move along the risk-return spectrum, and explore the venture continuum.

Join The Army, See The World… Then What?

The designer

, having run the full gamut from agency through to startup tech company, before founding First Principle, refers to agency life as ‘Bootcamp’. A fitting metaphor… join the army, see the world. Building an agency and the agency life is a privilege and provides an unrivalled, deep view into a broad set of industries. It is something to be experienced and there is of course still a viable business in there. There are many successful shops doing stellar work in the market today and those numbers are sure to grow when the second wave of the independent studios predicted in State emerge from post-acquisition earn outs.

Improving The Now

There is a great deal that can be done to improve the situation for all parties within the existing ‘paid for time’ paradigm. However only if you can offer a premium service and charge a premium for it. These ABCs shouldn’t be much of a revelation to the relatively small number of well-run, progressive studios (you know, the ones you can count on the fingers of one hand in each market):

  • Creativity is a finite resource. Charge accordingly. I firmly believe that actual human creative output is limited to five hours a day and the rest of the day is dressing around it. On that basis, having teams working 12-hour days is simply the raking of creativity across a field like manure. So charge weekly or monthly for individuals and teams rather than hourly. The same crucially goes for planning resource and timeline estimates.
  • Embrace uncertainty and go MoSCoW. You don’t have all the answers, and every project is a leap in the dark. So agree on high level requirements based on ‘Must have, Should have, Could have, and Won’t have’ rather than granular fixed-scope, fixed-cost arrangements which always end in tears and acrimony.
  • Agile process breeds trust. Run your engagement with clients under a transparent, lean, agile, process to provide visibility and foster trust rather than dragging your project off to a cave and returning with a misfiring big reveal.

This all comes with the proviso that you’re doing great work in the first place to be able to pull these essential levers. As always, if you’re doing shit work, yeah, you’re extra screwed. Not to mention that you also need to find clients and partners who are willing to perform the same dance, or who are genuinely willing to learn.

Baby Steps Or Giant Leap

There is also of course opportunity to iterate on the agency model. During my time at

we were constantly driven to evolve beyond the consultancy model, eventually coming to blend digital product consultancy, with own-product and venture work. We did so for the experience, the opportunity and of course the revenue model. We made a fair go of it over the years and made a mark in a corner of the industry.

State proposed the ‘Digital Product Studio’ as a blueprint for the evolution of the studio model. This got strong pickup from the global design and agency community and was cited by the venerable

in his Design in Tech Report 2017.

The Digital Product Studio blends three components: Consultancy, Venture & Own Product. Each feeds and informs the other in a powerful virtuous circle of network, experience, funding, brand, craft, and talent.

Yet the Digital Product Studio, itself is not immune to the forces battering the industry, was a model based on pivoting an existing legacy business. What model might we land on if you were starting from scratch without the constraints of serving a legacy consultancy business?

Is Being Best Enough?

In State, I offered the simple logic that there are more great projects than there are great teams, so studios that deliver to the highest standards will thrive. I laid out the challenge for a creative business to thrive in an increasingly challenging environment:

The real challenge is to evolve, do it all better: capabilities, product development, collaboration, process, and culture, to deliver the irresistible package.

That still stands, but the performance bar is being constantly raised, and you need a whole lot of luck to go your way to survive natural selection and punch your way to a notable size. Aside from a whole lot of skill, passion, and effort, ustwo certainly benefited from a huge amount of luck during the studio’s rise.

But you can’t plan on luck, and by definition only the few can be ‘the best’. Will a slow iteration of the established model be enough to escape the blast wave? The truth is that very few of sound mind, who have grown an agency before, would begin that process again under anything close to the existing model…

You know how to establish, build, and operate a company, recruit a team, fit out office spaces, hustle for business, and cope with the stress of it all. Why would you do that all over again in this climate for gross margins at best limited to 10 to 20 percent a year that decline as you grow because of diseconomies of scale. What the fuck are you thinking son?

As you scan your three month pipeline with a degree of clarity that descends into a fog of hope and guesswork with each month out, you need to realise that the agency model is all a gamble. So guess what, you’re already ‘doing venture’. You’ve just chosen the model with the same level of risk and stress, but with the shittiest upside of them all. (I’m not jaded, I’m simply sober).

There is of course, no ‘sure thing’ in business. It’s all a gamble, so raise the damn stakes. Stop playing the fixed odd slot machines in the lobby when you can don your tux or slip on your cocktail dress and play for real stakes in the high roller’s room. The tux, the dress, is the experience, insight, network, trust, goodwill, access, and permission you have earned over your career to date. And if you’ve not got it yet, then go out and earn it — building an agency is just one way to do it.

Casino Royale (2006) Columbia Pictures

Changing The Terms Of Business

It all begs the question, should the existing agency model just die and break so that we can properly put our minds to establishing a new model rather than slavishly serving a legacy. Is its’ demise necessary for us to truly take an evolutionary leap? “Dear John, it’s not me, it’s you…”

All along my journey in design/digital/tech, my greatest obsession has been how to navigate the industry to best leverage the opportunity for the creative class. The reason the tectonic shifts in the industry interest us is because we’re trying to figure out “What does this mean for me?”.

Tumultuous industry conditions aside, there is an even greater existential challenge on the horizon that we must face. As we head into the age of automation, machine learning, and AI, human creativity becomes the ONLY difference between us and the machine. Creativity will ultimately be perhaps our only USP. The good news is that for those who practice creativity, the greatest opportunity lies ahead. As such, one thing is crystal clear from all of the above: 👏 we 👏 need 👏 to 👏 change 👏 the 👏 terms 👏 of 👏 business!

An aside… I really wanted to drive the importance and urgency of this call to arms home. So I figured out a way to literally take it home. Super happy to be launching a collaboration with friends over at Good Fucking Design Advice, with whom we share a belief in the true potential for the creative class. Their iconic, inspirational posters adorn the walls of leading design studios all over the world, including Jony Ive’s at Apple. We’ve produced a special edition poster and tee on the theme of changing the terms of business for the creative class…

Outro: Whilst the industry rages with change and the agency platform burns, the viability of the agency model itself in question. For the creative class to achieve safe harbour and prosperity, it is now imperative to explore radically different models of engagement and change the terms of business. For this nomad, having played the agency game within the constraints of the model for half a career, I am no longer satisfied and seek a new model. Uncoupling from the yoke of paid time means exploring the venture continuum, where risk meets the potential for exponential upside. Looking at the state of the digital nation today, what model might you land on if you were to start from scratch? There is plenty of inspiration to draw on as we ask the question.

Chapter VI: Venture Pathfinding

Intro: Searching for inspiration for new business models for the creative class, we move down the venture gradient and spend some time in the halfworld of agency + venture work. We also find trailblazers from the creative class have forged new paths in the world of venture.

Ever since the day that Instagram sold for a billion dollars, agencies have had the hots for the shiny, exciting, world of startup and venture. Let’s take a look at some of the more prominent plays for agencies engaging startup and venture…

Ad Holding Group & Agency Venture Plays

The ad holding group agencies are hanging with the startups and tech world like a parent in high tops at a millennial house party. They know tech is cool, and they go to all the gigs Facebook and Google put on to demonstrate the optimal method of applying their lips to their tech tailpipes. All the while the last 10% of market growth slowly disappears… to Google and Facebook.

They are also very happy to spend their big brand client’s money to try to help them work out how to play startup, ball pit corporate accelerators and all. But, they have bigger fish to fry with the consultancies looking for a piece of their action. Brands and marketing agencies have downsized their presence at SXSW. “It lost its community of innovation” they say… This is perhaps more of a bellwether of brand’s reduced desire to ‘play startup’ as well as of the more pressing concerns of agencies than the health of SXSW and the tech ecosystem itself.

Since we covered The Agency Venture fund in State in 2016, several prominent digital product shops have been taking big strides into the space. R/GA are leading the halfworld pack with their ever-expanding set of R/GA Ventures accelerators.

Boom Boom Boom

R/GA have done an exceptional job of leveraging their brand to pivot into venture footing. They have done so again and again to remain relevant since 1977, when they first launched as a video production shop. The genius move here has been to harness their big brand relationships to sponsor their accelerator programmes. This pushes the cost off their own P&L. Their promise is “financial capital, creative capital and client relationship capital to companies who participate”. The reality is that the involvement of the agency’s creative talent in the accelerators is limited and restricted. A true integration it is not. For the creative class, the setup provides a limited scope for engagement in venture work and of course none of the upside. The R/GA accelerators are more akin to brand extensions, and very clever ones at that as it is not easy to pull off.

On that note, let’s look under the hood and have some real talk about the challenges of resolving a consultancy and venture operation.

My Precious…

The Hobbit: An Unexpected Journey (2012) Warner Bros. Pictures

Those of us who have worked in the agency game know that from the cleaners right on up to the owners, absolutely EVERYONE in the company wants to work on the shiny, startup stuff. For the talent, the venture work represents an opportunity to cover new, refreshing territory and enjoy different challenges. For the leadership and ownership, after a career of grind in the traditional consultancy model, venture represents an opportunity to do something new and potentially pivot the business. And who can blame them? This is a chance to escape what begins to feel like a repetitive Sisyphean tragedy of a working life. The shift in focus brings risk to the business and requires deft transition and clarification of leadership responsibilities to ensure smooth operations.

“Fuck You Money” Required

The Gambler (2014) Paramount Pictures

Venture is expensive. Operating in the venture space with any gravitas has thus far been the domain of larger shops such as IDEO, Frog, R/GA, and ustwo. The reason being that you need scale, a lot of spare cash, and serious intent to spend it in order to play the game. Even if you were running your consultancy business at a healthy 25% margin, it is not easily afforded. With agencies facing costs scaling inversely to shrinking client budgets, the margins that allow permission to play are declining. Venture play becomes a luxury when the bulk of the operations, the legacy business, is under pressure. In that scenario, the economics of risk-based, deferred revenue, venture work is fundamentally irreconcilable with paid for time consultancy work.

The other key issue is that without external funding or a sidecar fund, prorata rights or not, a regular agency can’t afford to follow on in their investments or even their own creations. You truly need that ‘fuck you money’ to be able to ignore the variable profit margins of your consultancy P&L. My prediction is that you’ll begin to see large agencies leveraging their brand to raise micro-funds (sub $100m) to avoid the pressure on the group’s cashflow.

The Agency & Startup Process Is Incompatible

When the mobile app boom boomed, in search of riches and fame by proxy, the agency world rushed to work with startups. The neat narrative was that the agency could contribute its brand, marketing and product building expertise to the startup and together build the next Instagram, Uber, Snapchat, Tinder. [CUT TO: Celebratory post-billion dollar IPO Soylent cocktail party.]

However, as skilled as the agency may be, what works for Verizon doesn’t work for a pre-product startup. Agencies and startups have different blood types. The sad reality is that the trail of agency startup collaboration is littered with not only excitement, hope, and good intention, but also with corpses, disappointment, blown budgets, antipathy, and burnt bridges.

Working Methods

Building a startup business is not the same thing as building a brand or making an app. The processes and methods by which agencies have serviced their corporate clients under expensive time and material arrangements, are not readily compatible with the startup paradigm. Startups need to operate with small, pragmatic, agile teams to get to market fast, iterate, pivot, and generally navigate the rapids. Sometimes you just need to do what the CEO says if she has a hunch. That is a far cry from bloated teams, months-long research and discovery phases, evaluate everything before you leap, considered brand executions and the like.

Poor Dealflow & Evaluation

When it comes to evaluating opportunities, agencies lack the necessary truffle pig skills to filter founders and ideas from their dealflow. In fact they generally lack solid dealflow in the first place. These are two things that VCs have done for a living for a veeeery long time. Agencies have been historically poor in filtering viable candidates to partner with. The unbound optimism and ‘make it work’ attitude with which agencies must respond to a conventional client brief, becomes their undoing on the venture evaluation side. Many ideas were not worthy of the risk, and many startups did not need an agency partner. This often led to engagements with first time entrepreneurs who had never before built a company, let alone a product they were getting assistance with. Invariably it all ends in tears.

It is primarily for these reason that so many agency startup collaborations end in acrimony and mutual blame, with valuable runway blown and “useless” output. Agencies have a tendency to blame the client and not look in the mirror themselves enough. For those relationships to work it will require agencies to fundamentally retool their processes for the startup flow, which is a considerable challenge, if the whole company operates the other way. Agencies will also need to develop better dealflow and evaluate opportunity and teams better.

Incompatible Talent

Beyond process incompatibility between agencies and startups, there is a talent compatibility issue. Even at the leading product focused studios, I would say that only 10% of the talent is capable of delivering instant value to a startup. Another 10% will learn to swim if pushed in the deep end, but that’s going to burn time and runway that the startup can ill afford to lose. And that is at the best shops. From there on downwards you are working with single-digit percentages. The rest of the agency talent pool is simply not suited for the startup terrain and task, the necessary muscles either atrophied or never developed from years of enterprise work.

set out a list of 28 skills that designers need to understand in business and startups in his 2018 Design in Tech Report.

Taken from John Maeda’s 2018 Design in Tech Report

The fact is that creatives working in an agency environment are rarely exposed to even half of this list. Most of the corporate client stakeholders they work with would not even know where to begin to find this information themselves, so large and fragmented are their organisations. You are not simply going to pick up or develop these skills in a regular consultancy environment. Therefore as an agency, you are not in a position to offer them on to a startup as a service.

Before you get your knickers in a twist (don’t worry, I’m not talking about you. You’re not in the 90%), this is not some sweeping damnation of swathes of the agency industry. It is simply a reflection of the years of conditioning that comes from doing enterprise and corporate work. It’s like asking David Beckham to play Rugby or some hunking rugby bloke to play football (of the English variety). Simply different body types offering different kinds of value.

Whilst agencies have flocked like moths to the startup flame, the vast majority of them are innately incompatible with startups from an economic, process, or talent perspective. In that light, the agency will only ever be a half-step towards the world of venture.

The Trailblazers


When many of us unwittingly began our careers in digital/tech/design, it was a pure passion play. We’d excitedly get our hands on whatever primitive tools and limited learning resources we could play with — a far cry from the embarrassment of riches available today — and create. In a twist of fate, whilst others around us took ‘real’ jobs, it just so happened that an industry grew around us that, for better or for worse, would come to transform the modern era. The world has embraced technology and creativity. Today in this game it is possible to see the world, be courted by presidents (for better or for worse) and become a gazillionaire. Told you mum!

Finally ‘Design’ and ‘Product’ is fully acknowledged as a critical factor in business and startup success. Design thinking blah blah blah, digital transformation blah blah blah. Congratulations! We got our seat at the table. Did everyone get their prize in the mail? What are you going to do with it?

For the talent at the top of their game, the industry now presents a dizzying array of opportunities. You could work in-house for a brand or enterprise and help them chase their digital future, work at an agency or consultancy to help said brands chase their digital future by proxy, or work at the sharp end, fully immersed at a tech company. Each option has its benefits and drawbacks and there is no ‘wrong’ choice. However, with our focus on venture, let’s examine examples of trailblazers from the creative community in that space.

  • Advise a startup. Successful creatives often consult with emerging startups for a half point or point share of the 1% to 5% equity pool startups usually set aside for advisors. The role involves setting aside a limited amount of time to help with critical/foundational decisions that the startup needs to make, as well as the normal networking and recruitment support. Precisely what is delivered under an advisory agreement is often vague and the arrangement not infrequently leads to disappointment for the startup. This in itself provides an opportunity, helping to shape up the advisory model.
  • Join a startup. Let’s simply categorise this as joining an unproven, early stage business. Whilst this used to be the hottest option of the last five years, the luster is fading on this option vis-à-vis less risky brand, agency, startup positions. Going down this path is a topic well-covered elsewhere, so let’s leave it at that.
  • Start your own startup. A number of designer founded startups such as Square/Twitter — , AirBnB — & , Pinterest — , WeWork — Miguel McKelvey, Kickstarter — Charles Adler, Etsy — Rob Kalin, have hit the BIG time. Forget the seat, creatives own the table too now. However, it is not all about herds of unicorns roaming the silicon plains towards triumphant IPOs. There are great examples of creative founded startups in (Canva), (Honeybook), Designers and - (Remix). (Lumi). (Oyster). (Slideshare), which sold to LinkedIn for $119M. Check out for some inspiration as well as
  • Another route to pursue this interest is to join a fund as a Limited Partner, which gives both exposure to the work of startups and access to investment dealflow. However, this is, of course, a pay-to-play usually requiring a minimum $25k (for a micro-fund) investment into the fund by the LP. This is a level of ‘spare cash’ that few will achieve in their creative careers, or would be an investment they’d have a hard time arguing with a partner about making.
  • Join a VC firm. With money no longer being a differentiator, VC firms have looked to enhance their ‘value add’ by adding creative services to their stack. Successful creatives have found home in prominent venture capital firms, assisting their portfolio companies with design advisory. GV have led the field with , , and enjoying long tenures of over six years. Today they are home to , , , and (general partner with a strong design and investor background). Elsewhere (Khosla Ventures), (NEA), (True Ventures), (Accel) have blazed the trail for the creative class. There are so few people in the role of “design partner”, it is far from codified, which in itself presents and opportunity.
  • It’s not all one-way traffic though. What was highlighted as a hot trend a few years ago, appears to be more of a trickle. It remains truly rarified air for the creative class. , a prominent prototype for the designer to VC shift, left Kleiner Perkins for Automattic/Wordpress and left Google Ventures to jump into a not-for-profit at Resolve to Save Lives. Daniel shone some light on the role for me, explaining design partners get to work on “big problems that are important and complex.”, adding “Every designer who has been a partner at a high-level VC fund is really senior. You’re in a position to do just about anything you want in your career. The main attraction to working in VC is not working ‘creatively’… it’s working strategically. You get to work with CEOs, founders, heads of product, on the core parts of their business not just their design and not even just their products.” Evidently the role opens up an irresistible and wide range of career opportunities beyond tenure.
  • Raise a Fund. and , both former designers, established Designer fund in 2011 to make early stage investments in tech startups that are design leaders. , YouTube’s first designer, established Rivet Ventures.

These examples show that there are no excuses. Paths have been forged, and your only limit is your imagination. There are no barriers or excuses for the creative class to step into the world of venture.

Outro: Due to fundamental incompatibilities, the agency model will only ever be a half step into the world of venture. For many who are simply happy to practice their craft that will be just fine, but it’s not enough for me on my quest. However, trailblazers from the creative class have forged new paths, demonstrating that their skills are valued and transferable, highlighting viable opportunity in the venture space.

Chapter VII: The Venture Ecosystem & The Startup Studio

Intro: In continued search of a habitable planet for the creative class, and a new model to invest ourselves in, we cross the divide and step firmly into the venture ecosystem. We examine the evolution of the startup studio model. What is there to learn that we can make ours?

A sea turtle hatchling about to head out to sea. Banco de Imagem/Flickr (CC BY-SA 2.0)

The supporting venture ecosystem for startups is multi-layered, ranging from angel and seed investors (SVAngels, 500 Startups) to accelerators (Y Combinator, Techstars, Dreamit) and then the VCs themselves (Andreessen Horowitz, Kleiner Perkins, Index Ventures — just to cover coasts, shapes and sizes —Union Square Ventures, FirstMark, Thrive, Greycroft). International friends, please forgive the US focus, it’s simply my particular playpit.

In recent years the startup studio, also known as venture studio, has emerged as a part of that ecosystem. People wiser than I have written about what a startup studio is. Here are some ‘Go To’ articles: this 101 by

, this by , and this on the differences between venture players by . There’s even a bloody book!

by Thibaud Elziere on Medium

A startup studio deploys its expertise, resources and infrastructure under a platform approach to generate and validate startup ideas, then build and launch them into the market. The studio assigns a founding CEO to grow the companies into independent entities with the studio owning the lion’s share of the equity. The expertise and nest they provide allow them to increase a startup’s odds of survival and success over those of a startup, naked out in the wilderness. They are markedly different to accelerators and incubators, well at least they used to be.

In The Beginning, There Was Bill, And Bill Had A Groove

Illustration: Getty, Guardian Design Team

The venture studio is not a new model; the originator being Bill Gross’s idealab from way back in 1996, which served as an incubator. The first studio to take this concept into the post dot-com crash era as a true startup studio, the Lucy of the lineage, was Betaworks. Their founder,

Borthwick, was inspired by the now defunct venture trailbalzers ICG and CMGi. Later Science and Expa came to help to establish the model within the ecosystem. Today there are well over 100 startup studios across the world, half having been founded since 2013. It is evidently a growing model and a global phenomenon, with well over half in Europe. Here’s a twitter list of notable examples.

I would sidebar Rocket Internet from the Genealogy above based on their ‘startups with proven business models’ approach. Just like that Eames ‘Inspired’ Lounge Chair, those with creative sensibilities will find the Xerox startup model of this Samwer Brothers founded studio somewhat controversial. I do however doff my hat to them for systemising the approach, creating a platform and listing on the Frankfurt stock exchange, becoming billionaires along the way. How that turned out for their investors is another matter, with them delisting six years later. Objectively they are a very impressive organisation. Rocket Internet highlights the benefits of a platform, or productized, approach that creates value not only in the startups they launch, but also in the startup studio itself.

inside, you just know…

A Varied, Ever-evolving Model

In the opening remarks of the superb 2016 PIE Forum, the only formal gathering of US startup studio operators that has ever taken place, the host Jeff Stewart highlighted that there is not only one flavour of startup studio “founders inform the flavour based on their experiences”. i.e. the DNA of the founding team defines what kind of stack the studio offers. If you dig into the nucleus of nearly every major studio, the DNA is primarily technical, business school, finance, VC.

insert image of ice-cream to flog ‘many flavours’ metaphor

Furthermore, startup studio operator and Foursquare co-founder, Naveen Selvadurai, said that they consider the studio itself to be a startup. So just like any good startup, reacting to data and the market, you have a great deal of variation in the offering/stack and a lot of iteration of the business model. This is evidenced in several important shifts that nearly all major startup studios have made from their earlier iterations.

The Startup For Enterprise Play

There are a subset of startup studios that intersect with enterprise/corporate clients. Prehype, Founders Factory, and Human Ventures all have programmes focused on opportunity and value creation for corporate partners. The startup studio does the running on the opportunity space, deal sourcing, company, and team building. Within the ‘startup for enterprise’ model there are subtle differences in execution and focus so let’s look at a few of the key operators in the space.

Founders Factory in the UK develops up to 12 startups a year across a wide range of verticals from their London, Johannesburg and Paris offices. These verticals are aligned with the strategic interests and needs of corporate partners who symbiotically support the startups with insights, data, IP, and distribution. Founders Factory build a founding team and take a minority stake in each startup in exchange for the aforementioned support, £150,000 seed round and 12 months of operational support. Interestingly the corporate partners who invest up to the region of “several million pounds” take a stake in Founders Factory rather than the specific startup focused on their vertical. Whilst operating this model at scale, they also operate an early stage accelerator. Their portfolio companies have so far raised £160m.

Prehype, also proponents of the ‘startup for enterprise’ model, have a slightly different approach. They build or reshape startups for and with enterprise partners, with the ultimate objective of integration or acquisition by said enterprise partner. Prehype installs an ‘intrapreneur’ selected from the corporate as CEO and builds a startup fine tuned to the needs of the enterprise partner — the buyer in waiting. That partner has the option to share ownership of the startup or purchase the startup outright down the line, facilitating an early exit for the studio. They are open in highlighting that not every initiative should by default end up turning into a company. For Prehype ‘corporate co-creation’ is only one strand of their operations. They have had success in building and/or exiting their own startups (BarkBox, Managed by Q, AND CO, and Roman), support EIRs in developing their next startup, and invest directly.

Entering the fray in 2019, New York’s Human Ventures established an enterprise arm focused work with Fortune 100 companies helping them ‘accelerate and de-risk entry into new products and markets’. They leverage their operator network and platform to quickly launch companies with/for enterprise sponsors. Those NewCos are either ‘spun in’ (absorbed by the sponsor), or kept as free standing companies with the sponsor retaining a minority stake and potential future acquisition.

This is also a play space for the management consultancies such as BCG Digital Ventures who offer a similar service — acquiring or developing a startup and getting paid 10x per solution by enterprise clients. Though having what is still in essence a management consultancy, agile as a corpse, build a startup feels like insanity. Anyway, this service generates a significant revenue stream for the management consultancy.

The startup for enterprise model reads like a win-win for all concerned. It is a compelling proposition to large and unagile enterprise partners keen to surface opportunity, avoid disruption, or satisfy a mandated innovation agenda. The corporate partner as ride along sponsor, gets access to dealflow, investment opportunities, technologies, all at a fraction of the cost of attempting it themselves. They get to check their shareholder mandated innovation box. For the startup studio serving as an innovation comfort blanket to big corporates, it offers the opportunity to generate smooth and stable revenues to offset the venture studio model’s feast or famine mode, where you are holding your breath for your next liquidity event. The fees involved, very much chump change for a large corporate, are significant funds for a startup studio model, providing a stable foundation to operate from. Location also presents a significant advantage to studios situated in major cities with diverse industries.

However, startups are from Mars and enterprise is from Venus. Meshing with large scale corporate partners brings as many challenges as it does advantages. Many generations bear the scars of meaningless corporate ‘innovation theater’. Startups are already high risk endeavors without the need to simultaneously satisfy a corporate sponsor so let’s consider some of the risks.

  1. Cadence. Working with enterprise is slow AF! What feels like light speed for the enterprise partner is actually eons for the startup studio endlessly crafting corporate stakeholder decks 3 months in.
  2. Stakeholders. Getting the attention and focus of key corporate stakeholders, for whom this is often a passive interest rather than a necessarily all absorbing obsession, is hard and slows things down.
  3. Product. In terms of product development, building for an enterprise sponsor might take you off the path to product market fit, lead to expensive code branches, and distracting custom feature sets.
  4. Data. The promise of rich sets of enterprise data to build insights from invariably flounder when the realities of corporate data privacy policies kick in, especially in the financial and insurance sector.
  5. Talent. The model attracts quasi startup CEOs, business school types, who want to be a startup CEO in a ‘safer’ environment. At a stage in their career, perhaps with a family, mortgage, and living standard that fosters a correspondingly lower appetite for risk. That’s not necessarily a bad thing, but it’s a factor to be aware of.
  6. Lifespan. Once a startup is acquired and integrated by its enterprise sponsor, the medium to long-term prospects of survival are diminished. Unless held at arm’s length by its corporate buyer, it will most certainly die a rapid death because the only reason it worked in the first place is that it did not grow in a stifling enterprise environment.

This subset of the venture studio model is a solid line of business if you enter into eyes open and cater for the compromise and opportunity cost. Cleary to make this work you need to build a two speed operation that can culturally and operationally tolerate the juxtaposition, and maintain a membrane to keep the two from intertwining. This is a space that I can only see as growing in value potential and opportunity. How it all plays out is still to be seen but a number of studios have cast their die.

The Startup For Enterprise Model is perhaps ideal for traditional agencies who can get their act together. However, if they bring the same approach as they do to their enterprise clients, then they are going to fall on their face. Building startups is a very different game. There is a very clear line between the experience in holistic venture building that startup studios have and are staffed for and the abstracted product-focused offering of the agency and consultancy world… Buyer beware!

The “Pre-company” Venture Studio Model

It is a long standing convention for venture capital firms and venture studios to offer a temporary home to startup entrepreneurs who are preparing for their next lap of the startup circuit. The ‘entrepreneur in residence’ system through which the VC/Studio offers a desk, support, and resources, all in the hope that they might get to be the first cheque in said entrepreneur’s next big idea. Two venture studios in particular, Entrepreneurs First (EF), and Antler (not to be confused with branding shop Red Antler), have made that somewhat informal system the basis for their entire model.

EF and Antler operate a matchmaking entrepreneur in residence programme on steroids and at scale, in the belief that a true opportunity lies in investing at the ‘pre-company’ stage in potential founders, and matchmaking founding teams. They see many more potential founders around the world beyond the atypical Stanford and Ivy leave track. They offer a system and support to surface them, and help match them with co-founders, and help them work on their ideas over a half year process. EF takes roughly 10% of the companies they have helped found in return for their efforts. Interestingly, both studios were founded by former McKinsey management consultants, not the typical startup builder pedigree, but as you will see those skills have been applied to make a model work.

EF’s co-founders Matt Clifford & Alice Bentinck (rare and very welcome founder’s diversity in the venture studio space) say EF “pays you to find a co-founder & invests in your company. We’ve helped 1000+ people create 200+ companies, worth a combined $1.5bn.”. Antler calls itself “an international Talent Investor, which supports individuals to build technology companies” with a similar focus of identifying and investing in people ‘pre-company’. Check out this a podcast interview with Matt for a lovely breakdown of the model.

They also share two unique characteristics that their fellow venture studio brethren do not. The first is global reach, as startup studios largely operate in one or two geographies. Both EF and Antler have spread their wings globally. EF was founded in London, and then over eight years expanded to six locations including Berlin, Paris, Singapore, Hong Kong, and Bangalore. Antler was founded in Singapore and in under two years expanded to Amsterdam, London, Oslo, Stockholm, Sydney, New York, and Nairobi.

The second is the funding of venture studios themselves, which has been a challenge historically with investors asking what exactly they would be investing in (studio or the portfolio?) as well as what a liquidity event or exit looks like. But EF has attracted serious backing from LinkedIn co-founder Reid Hoffman, raising $115M in their recent 2019 round. Antler has been backed by Facebook co-founder Eduardo Saverin and raised a $50M round in 2019. Both have proven that the venture studio model, or their take on it, is in itself investable, which is something that previous generations of venture studios have found challenging. That in itself is a remarkable development for the overall venture studio model.

The Startup Studio’s Diminishing Value Proposition

The value proposition has had to shift from the inception of the ‘modern’ startup studio model in 2007. Way back then it used to be prohibitively expensive to launch a startup. Before the cloud hosting era that gave us those awesome, omnipresent, Microsoft Cloud ads, on-premise server costs alone were too high a barrier for the average entrepreneur. As such, a startup studio was a far more compelling proposition for a potential entrepreneur to get their idea off the ground than it is today. That meant, by deploying its infrastructure alone, a studio could attract startups and startup entrepreneurs on favourable terms. However, with it becoming cheaper and cheaper to launch a startup, possibly too cheap, the startup studio model has had to adapt to continue to compete.

Bug Tracking The Startup Studio Model

Whilst Angels and VCs can make multiple investments and spread their risk, requiring a two in ten hit rate, the startup studio can only launch so many companies a year, and each bears considerable risk. It is heavily cash and resource intensive and if you have several unprofitable startups suckling the teat in parallel, the air can get pretty thin for the studio. You might be sitting on tens of millions in equity value. But it might as well be monopoly money unless you can get to a revenue generating round of financing that lets you cash in a slice of your pie. I am sure that major investments into Betawork’s Giphy and the sale of Science Inc’s Dollar Shave Club to Unilever for a cool billion were like coming up for air from a record free dive.


The In-Vitro Founder CEO Paradox

When it comes to launching their own startups and installing the founding team, there lies a paradox at the heart of the startup studio model. A founder of their own startup would enjoy 100% ownership, vested of course for best practice. They need to hand out a slice of their pie with each round of financing and issuance of stock options to the management team. If she is successful in establishing a profitable and valuable business (in the world of tech those are not often bedfellows), except in the case of an early exit, they may go through four(ish) rounds of financing. This will often leave the founder with 10–20% of the business, 20% for the management team and 60% for their investors of all ilks. Cases of course vary, but forgive numbers to illustrate the point. That’s the natural founder scenario, the hidden reality behind the outlier situations for Zuckerberg, Gates and Kalanick who retained significant ownership and majority voting rights as their companies scaled.

Geek Art Prints by Olga Shvartsur ‘Picard Facepalm’

The tension in the startup studio model is that the amount of equity an installed ‘in vitro’ founder receives is significantly lower. Rightfully so as the startup studio is taking all the risk and needs to retain equity to recoup its investment. This equity distribution has led to accusations of startup studios being greedy — perhaps a misplaced interpretation as it is simply a necessary characteristic of the model.

Running the model, if the startup goes the full gauntlet, the installed founder CEO may end up with low single digits for practically killing themselves over the 4 to 6 years of their life. This has the potential to trigger an existential crisis in the installed freshman founder when they realise “I’ve got this”, but also that their upside is incomparable to that of a ‘natural’ founder. The pressure is immense, and the founder’s dilemma is real. It risks creating a disincentive to run the full course and could destabilise the startup if key people leave — we have to maintain those all-important narratives. This, in turn, has the potential to affect VC funding, where the preference is to invest in teams ahead of products.

It also means that a startup studio will not easily attract an experienced founder without giving up a significant stake in the business. That does not work for the startup studio model. This reduces the candidate pool of installed founder CEOs to those with potential to develop into the role. However, just like the ‘startup for enterprise’ founder CEO we discussed above, it might be the ideal, risk-appetite appropriate, comfortable fit for many a talented human.

Ideally, this is all a matter for an honest upfront conversation between all parties. Perhaps this outcome is already considered by the venture studio ownership and, if they manage transitions well, they end up with a valuable company and an even stronger equity position.

The Inside-Out/Outside-In* Model

The startup studio model was grounded in acting as a foundry for developing its own startups, working inside-out. However, to improve their odds, many startup studios have extended their services to work ‘outside-in’ with external startups that already have their wheels in motion. This involves either bringing them into their own incubation or accelerator programmes. Naturally, in this capacity, they take a much smaller equity consideration in return for the services of the studio than they would for their own creation. Expa launched its Lab programme in 2017, Betaworks launched their 11-week Camps, and Science their Incubators, shifting the model towards the accelerator model rather than exclusively developing their own companies. *confession: phrase stolen from an

deck I might have peeked at.

Packing Cash For The Journey!

Another bug in the startup studio system found the studio in the ironic position of being priced out of their most successful creations. When one of their startups would get solid traction and a correspondingly high valuation, they would not have sufficient cash on hand to follow on in each round of financing and get slowly diluted. Yeah, you might have spent 1 million building startup X, but now you own 30%, it’s series C and with a $100M valuation, 5% is going to cost you a cool $5M (just let me check what’s left in my Venmo). This has led to the recent trend of startup studio’s raising their own funds to follow on and stay in the game. It also means that many startup studios are now serving as VC funds, or have migrated completely to the model. In fact, it does not look like any major startup studio does not now have an associated fund. Doesn’t seem like you can have one without the other.

So, What The Hell Is A Startup Studio?

Right?! As you can see, the lines have blurred as to what a startup studio is, with many originators of the model shape shifting into startup studio, cum-accelerator, cum-VC. For example co-founder of Uber, Garrett Camp’s Expa looks more like an incubator VC today and Obvious Ventures, who gave birth to Medium and Twitter, seem positioned more like VCs based on their latest fund. Science has pushed hard into the ICO and blockchain space with their Science Tokenhub ICO.

You’d be forgiven for wondering what defines a startup studio after all this. The point is that the definition does not really matter. It’s a vessel for an assembly of smart people, well-versed in making things and starting companies, working out every and any which way they can best apply their energy, experience, network and knowledge ;).

Seeking Creative DNA?

If you look at the origin and composition of all the main players in the startup studio space, the founding DNA is not creativity. The founding team are usually any combination of a business school, consultancy, finance/VC, crowd. There are however, creative capital exceptions emerging from the likes of Combine, started by

and and Sweet Studio in Stockholm. It will be interesting what we see from them as they find their way.

Outro: The startup studio is not new, but it is constantly evolving. Learning from the evolution of the model, defining a model based on deploying creative capital presents a clear opportunity. For my own search, the journey, rather than the destination, became the source of inspiration. Rich in discovery, conversation, and new traveling companions I was inspired to forge a new path. Come alive! What would a startup studio founded upon creative DNA and its corresponding stack look like?

Chapter VIII: Blueprint: The Creative Capital Studio

Intro: We’ve journeyed across the industry landscape, from the media maelstrom, to the challenges of the agency model, found learnings from agency-startup collaborations and the startup studio world. What vessel can we build to best harness the skills and capabilities of the creative class in the venture space, on OUR terms? Let’s sketch out a blueprint for the Creative Capital Studio…

Tatsuo Yoshida — Mach GoGoGo / Speed Racer

The Digital Product Studio blends three components: Consultancy, Venture & Own Product. Each feeds and informs the other in a powerful virtuous circle of network, experience, funding, brand, craft, and talent.

The Digital Product Studio was a model based on pivoting an existing legacy business. What if you were starting from scratch without the constraints of serving a legacy consultancy business? Looking at the state of today’s digital nation, and all we have learnt above, what model might we land on? Seeking an evolutionary leap, we’re looking for a model that both properly harnesses the skills and capabilities of the creative class and transforms the terms of business to a funded, risk-based, venture model with the potential for exponential returns.

The Creative Capital Studio leverages the skills, experience, and network of industry-leading creative professionals in the field of tech. Operating on an equity-for-services, venture basis, it delivers a compelling suite of value-add expertise in product, culture and growth to startups and VC firms. The studio also leverages its resources acting as a foundry to its own startup ideas. The operations of the studio are supported by a side-car micro-fund that allows for additional investment in the dealflow the studio attracts in the course of its business.

The Creative Capital Studio Blueprint

We’re going to lay out a model for a Creative Capital Studio; the stack, setup, talent, partners and model — as a new vehicle for the creative class. We are doing so predicated on a few key assumptions.

  • We’ve sworn off being ‘paid for time’ as it linearly yokes time to income, locking the business into a game of maximum, fixed odds, returns. That means establishing a funded, risk-reward model that offers founders, employees and investors the opportunity for significant upside, albeit at a risk.
  • The Creative Capital Studio is predicated on presenting an offering that is compelling enough for startups or corporations to engage in ‘alternative revenue arrangements’. This means parting with equity, profits, licensing, and no doubt also cryptocurrency and tokens. Our aim is to explore and normalise the alternative.
  • Money is everywhere. Mega funds such as SoftBank’s mammoth $100 billion Vision Fund have distorted the landscape, pushing VC firms to raise greater amounts than ever before. Corporate and institutional money is flooding the startup ecosystem. All of this is unallocated capital in search of a home, and its ubiquity makes the dollar’s real value utterly homogenous. Now to get heard, it is about the value add, and creativity is the key.

Let’s do this…

Step 1. The Stack

Any compelling service offering (stack) must be predicated on an understanding of the needs of your market. If our market is startup focused then let’s dive, pseudo-HBR style, into a list of the critical factors in startup success. Yeah yeah, I know lists like these can be found everywhere, for example in this CB Insights report and First Round’s excellent State Of Startups. So just consider this A list rather than THE list.

The Seven Critical Factors In Startup Success

Akira Kurosawa ‘Seven Samurai’

Idea is everything. What problem are we deeply motivated to solve? What’s the size and growth potential of the market, company growth strategy, and how defensible is it. And that’s all before you marry idea to product.

Runway is life. Be the source self-funding, debt financing or investment by friends & family, angel, VC or institutional, without the money nothing happens. That’s hopefully a runway taking you to sustainability and product market fit.

People and networks. Whether they are advisors, supporters, co-founders, customers, mentors employees, or investors, social capital is as important as venture capital. Your job is to know the people you need to know and help them want to help you.

The hidden plumbing. Operational and back office functions such as HR, payroll & benefits, office build & management, and all important sage legal counsel are unglamorous but utterly necessary for the front of house to be able to operate.

cool story, bro”. An idea without execution is nothing, and as (we said) Scott Belsky said in State “It’s not about ideas, it’s about making ideas happen”. That means shipping product to users, requiring design, engineering, product management and process to make the vision a reality.

Humans are complicated. A startup needs to be able to aggressively recruit employees as well as develop and retain them. This means taking care of culture, organisational design, and personal development to support motivation and collaboration.

Users baby. Without em you ain’t got nothin’. Beyond the product experience, you need to be able to deploy sticky, viral, and paid growth strategies (fantastic

video on the topic here) to take your user base from ten, to ten thousand, ten million, and beyond.

Luck is a thing. However hard you work or plan, so much of the journey is way out of your control. From timing, funding, and market conditions, to the right intro at the right time, you need the universe to line up a whole bunch for you. It’s impossible to plan for, but possible to cultivate.

The Creative Capital Studio Stack

So far so good right? Now time to define our stack from that hot mess. We’re going to pass on Money, Network and Operations.

I’d argue that in the area of Money it would be nigh on impossible to fashion a compelling enough proposition to command equity in return. I know that sounds odd (as equity is in theory exactly what you get for investing money), but you need people to accept your money. The fact is that no one, especially a successful startup entrepreneur, could care less about yet another $50M dollar fund. There are literally hundreds of billions of dollars sloshing around the system, looking to be allocated and the stakes are getting higher. There is much more money than there are good startups. So it all comes down to the value add, or you simply don’t get access to dealflow. This homeless capital problem in itself presents a compelling argument for shaping new venture opportunities. Moving down our list, Network and Operations can be widely facilitated, and it would be hard as a new kid on the block to shape a compelling enough offering in this space to be paid for anything other than for time.

Properly leveraging the specific talents of the creative class — our DNA, points to Product, People & Culture, and Growth as the natural stack for a Creative Capital Studio. So let’s dive deeper into what a service offering would look like for each:

Andy Warhol ‘Campbell’s Soup Cans’ 1962

cool story bro”. An idea without execution is nothing, and as (we said) in State, Scott Belsky said “It’s not about ideas, it’s about making ideas happen”. That means shipping product to users, requiring design, engineering, product management and process, to make the vision a reality.

Building high-performing product teams, and shipping product, is hard AF. Bringing together a wide range of disciplines to work creatively at velocity is both a hard won science and art. It is here that we surface the first opportunity for a compelling service offering for the Creative Capital Studio:

  • Design: help its startup partners define their core brand and product experience
  • Engineering: inform key technology and platform decisions that balance speed to market, scalability and future proofing
  • Process: help startups establish best practices and methods in product delivery
  • Product delivery: deploy design, engineering, and product management resources to assist its startup partners in the delivery of their product experience
Takashi Murakami ‘Flowers & Skulls’

Humans are complicated. A startup needs to be able to aggressively recruit employees as well as develop and retain them. This means taking care of culture, organisational design, and personal development to support motivation and collaboration.

One of the greatest points of failure in a startup is human. Helping people work together towards a commonly understood and clearly communicated mission. A clear North Star, that informs all decisions, is critical. Companies need to consciously design their organisations and foster their culture. Culture is almost impossible to retro-fit, and it must be set and role-modelled by the CEO and founders. Personal development is key to that journey, doing the work to shift individuals from a fixed mindset to a growth mindset. That goes for the CEO and founding team especially, but also for wider teams, supporting both individual and organisational health. In that way, you can scale the human alongside the company. Recruiting is a very necessary and a time-intensive activity — founders spend a disproportionate amount of time building their team. Delays in hiring key staff can burn valuable runway and put the entire mission at risk. Once you have your people, retention becomes key. A nuanced, delicate, but critical area and a very clear opportunity for the Creative Capital Studio to:

  • Culture & Org: facilitating work with founders and core teams to surface the startup’s values, vision, and mission. Effectively communicating the vision is key. Often a third party facilitating the process is the only way to extract it from the heart and heads of the founder/s. That, in turn, informs organisational design work, the creation of roles, processes and structures aligned with the startup’s goals. Establishing core and technical skills roadmaps, skills matrices and career pathing to assist with motivation and retention.
  • Personal Development & Coaching: help establish a personal development framework for the founders, core team, and wider project teams. Improving communication and feedback, organisational health, resilience. Self-care and mental health is an essential focus area for any healthy company.
  • Recruitment, Staffing: with a focus on “hire the right people”, to help recruit operational staff and build teams for the startup across the full range of disciplines. This extends into temporarily staffing or augmenting internal teams to build product, and then transitioning new hires into those roles to ensure self-sufficiency. This is key as the product cannot be ‘owned’ outside the startup as this would risk investor confidence.

Users baby. Without em you ain’t got nothin’. Beyond the product experience, you need to be able to deploy sticky, viral, and paid growth strategies (fantastic

video on the topic here) to take your user base from ten, to ten thousand, ten million and beyond.

Growing your user base runs way beyond ‘build it, and they will come’. Growth strategies, data-driven marketing (or growth hacking if you speak tech bro), are thus essential to building your user base. I am going to directly quote

on this front…

“So there are three types of growth. Sticky, viral, and paid growth. Sticky growth is trying to get your existing users to come back and pay you more or use you more. Viral growth is when people talk about you. So you use a product, you really like it and you tell ten other friends, and they like it. That’s viral growth. And the third is paid growth. If you happen to have money in the bank you’re going to be able to use part of that money to buy growth.

Here, expert-practitioners in the Creative Capital studio can advise on, or help execute:

  • Sticky growth strategy: improving key metrics such as engagement and retention within the startup’s existing user base through experience design, and technical performance optimisation.
  • Viral growth strategy: improving viral growth through product design and the financial modelling and design of referral programs… refer a friend for $X credit.
  • Paid growth strategy: advising on performance marketing strategy and ad spend with Facebook, Google and other prominent platforms.

The Platform: Standalone and Complementary Services

The stack described above is, of course, a 2020 vision of a fully established studio. Where you begin should be a reflection of the expertise of the studio’s founding DNA. From there you expand the range of value-add services. The services in the stack are complementary. The studio is able to extend any of the individual services, as well as thread them together into a comprehensive set for truly pivotal impact. Crucially, this happens under a ‘platform approach’ — productising the expertise and process of the studio to be unique, brandable, efficient and defensible. This establishes and builds value beyond the equity portfolio, and in the studio itself, making it an investable vehicle in its own right.

Step 2. The Setup

The corporate structure of the operating group for the Creative Capital Studio needs to be:

  • Tax-optimised: Properly leveraging government exemptions and breaks, factoring in short and long-term capital gain scenarios. It must also operate with full consideration for the tax affairs of the individuals who work in the company. Personal note: Not advocating for a nefarious offshore “At X we follow the laws, and if the system changes we will comply.” setup. For me ‘optimisation’ sits within the borders of the nation the studio operates in, rightly paying its dues to the society in which it grows.
  • Distributable: Allowing for incentive programmes such as profit share and equity vesting for all employees, to help drive the company forwards with the upside properly shared. There are many ways to do this but exploring the VC firm GP / LP setup and incentive structure is of interest (more on that below).
  • Investable: The Creative Capital Studio is a funded model and requires investment – in the US that would mean a Delaware C-Corp. In order to attract investment in subsequent years, the structure will support investment into a set period of the studio’s operation, be it a year, 18 months or more. Additionally, the group structure needs to accommodate a side-car micro-fund (sub $100M), with all the associated due diligence.
  • Sellable: A healthy company is a sellable company. There is no shame or cynicism in building a company whilst still being open to selling (or floating) the platform down the line. The structure must reflect that possibility.

Consequently, the group will comprise of three related entities:

  • a. A cost-neutral corporate entity for studio operations. This entity will host the talent / expert-practitioners, the creative DNA of the studio. It will also establish and retain ownership of the platform and process IP, creating real value in and of its own right.
  • b. A tax-optimised corporate entity for the holding company. This will collect and hold assets collected in the course of business, such as equity, tokens, and other rights.
  • c. A sidecar micro-fund (sub-$100M) attached to the studio operations. This will leverage access to the hard-to-get dealflow the studio generates in the course of its business. The fund, leveraging the value-add of the wider studio, will get an opportunity to invest where similar standalone micro-funds would never get the opportunity. The fund can also invest in the startups that Creative Capital Studio’s spins up. This requires a minimum two person team of experienced investment professionals to operate.

The Creative Capital Studio is not a large company play. The studio at full pelt would require a modest team of 20 to cover it’s stack, leveraging the LP network as well as drawing in partners for any higher torque projects. This would require operational funding of anywhere between $1M to $4M million a year as the business scales up.

Step 3. The Talent

Team Ghibli — Studio Ghibli by D Kaufman

So we have quite the stack to deliver on. This requires more than just a run of the mill crew to deliver, especially if it will be at a standard that can command equity in return for services from leading startups. The output has to be premium, literally money-can’t-buy, pivotal in its impact.

So whichever market the Creative Capital Studio operates in, we’re talking about assembling nothing less than the Avengers. The kind of talent we are talking about will likely be working at, or have worked at, some of the world’s leading tech companies and startups. They may well be founders who have exited. They are also in the cream of the mere 10% of agency talent that is capable of delivering value to startups. This ensures not only the necessary skill level, but also the experience and insights that are of so much value to startups earlier in their journey. Crucially, they are all expert-practitioners, able to not only ‘advise’, but also still able to execute on their given craft. After all, otherwise they’d just be another group of management consultants who’ve never actually done anything, wouldn’t they.

That’s a pretty high bar! How on earth are you going to assemble a group of people who are likely at the top of their game and already enjoying considerable privilege? To thread the eye of that needle, the Creative Capital Studio needs to offer the promise of something different, something better…

  • Privilege: Already advising startups for a point here or there
    - Access to the very best startups, dealflow they would not see individually
    - The opportunity to work together with the industry’s leading talent
    - Hedging risk-reward across a widely distributed equity portfolio
    - Legal and tax affairs streamlined for them by the studio
  • Privilege: Already working at a great tech company and able to secure a job pretty much anywhere
    - Not working at a great big tech company
    - Lifestyle and the freedom of flexible working in a distributed team
    - The option to work across multiple projects and companies
  • Privilege: Already enjoying great pay and benefits and wealthy by any measure
    - If they can afford it, a greater risk-reward upside than playing it safe
    - The opportunity to benefit from a potential sale, or a fund maturing
  • Privilege: Already enjoying the fruits of an exit or IPO
    - They have likely already earned all they need for a good life - this is the cherry ;)
    - The opportunity to pass on their experience and wisdom to the next generation
    - Engagement with the industry without undergoing a new startup journey
  • Privilege: Already could go and become a VC
    - Access to a formidable network by virtue of the brand
    - The opportunity to invest in the dealflow themselves
    - Getting to truly practise their craft, working deeply across a range of projects

Oh lets’ not forget having some good old-fashioned fun again, building something new in unchartered territory. It’s a long list you need to cover and it will come down to finding people at the right stage of their career and life.

The General Partner (GP), Limited Partner (LP) structure of VC firms (good Quora on the setup right here) inspires a model for the Creative Capital Studio to mirror and build on. It maintains a simple and clear two or three-tier structure, with experienced General Partners at the heart. It also offers Limited Partnerships to the extended network of the studio, allowing an outer tier of industry leading experts to ‘join’ the studio, whilst maintaining their current roles. LPs, rather than investing their money in a fund, invest their time in return for participation in the fund and to benefit from the potential upside of the success of the studio.

-General Studio Partner: Full-time commitment, greater returns
-Limited Studio Partner: Part-time commitment, lesser returns

Remember, our studio creates its portfolio through equity for services. This GP/LP structure also creates a super network effect for all aspects of the business; dealflow, promotion, talent, recruitment, emerging tech, and market insight.

Step 4. The Partners

With the talent covered, let’s focus on the Creative Capital Studio’s clients, partners and collaborators, Startup entrepreneurs, and VC firms.

Startups As Partners

There are potentially thousands of startups to collaborate with in any given market. That doesn’t necessarily make it a good business strategy though. The Creative Capital Studio has to operate with the same level of rigor and expertise in generating and filtering dealflow as that of a leading VC firm. VCs are after all the king-maker, truffle pigs, selecting the best of the best startup entrepreneurs and startups to invest in. It’s a game of odds, and you should never fear filtering the lion’s share of the accessible market to develop the strongest of portfolios.

Applying The Filter
The Creative Capital Studio works only with second time entrepreneurs or with teams who have been through one startup founding experience. That filters 90% of the market from the get go. The focus is on taking smaller amounts of equity in return for short-term, high impact, tactical, services rendered. So the studio needs to work on the candidates with the better odds. The risk is high in working with first time entrepreneurs, who are learning not only in the areas of the Creative Capital Studio’s stack, but also learning for the first time to recruit people, administrate a business, build offices, build product and fundraise. Fundraising alone, learning to pitch the business, establish a network of potential investors, and working your way through to the general partners of the firm, is gruelling and hard won experience. This means that the risk of working with inexperienced partners still learning to ride the bike is much greater. The road of agency-startup collaboration is littered with broken dreams and corpses for this very reason. So we’re taking our odds from 1,000 to one to 100 to one.

The World As 100 Startups
Let’s look at the world as 100 startups. We filter 90 of them as they are first time entrepreneurs, leaving us with a market of ten remaining startups. Nine out of the remaining ten filter the Creative Capital Studio, as the dominant mindset of second time entrepreneurs will be that they don’t need help. Having run the full gauntlet before, they do not need external help, and especially would not part with equity for something they can handle themselves. This leaves us with the one enlightened partner… The second time startup entrepreneur, or an experienced team, who are self-aware, who know what they don’t know, and crucially who understand the strategic benefit of taking the right help at the right moment to advance their goals. They do so even if it means giving up a small amount of equity, in the knowledge that it will exponentially increase the value of their remaining equity. That is Startup X, the client partner of the Creative Capital Studio.

VC Firms As Partners

Pig in Crown Embroidery Library Inc.

The second set of partners are VC firms, to which the Creative Capital Studio serves as strategic partner. Many VC firms have developed their own set of value-add services to help with dealflow and to improve the fortunes of their portfolio companies. Google Ventures operates probably the strongest design advisory service, but beyond that the ability of most VCs to get their hands dirty in the creative categories, or indeed at all, is limited. This is where the Creative Capital Studio comes in, acting as a tool for VC firms to consult on their portfolio companies, de-risking and improving their chances of success. Our service stack is additive rather than competitive, fostering a symbiotic relationship that incentivises VCs to pull the Creative Capital Studio into their deals. This generates dealflow for the studio from the greatest truffle pigs in the game. Conversely, the studio itself exposes VCs and its own investors to dealflow generated in the course of its activities, by virtue of operating at the coal face of the industry.

Diversity Alert!

Going to briefly break the fourth wall again. All this talk of working only with second time entrepreneurs and teams naturally skews on diversity. Having experienced a modest degree of success, I was struck at how so many in a similar position, people privileged enough to explore new opportunities with time and capital to hand, looked a lot like me. We’re not benefiting from the vast array of outrageous talent and valuable perspectives out there. Our products, industry, and society are poorer for that. I believe it is the responsibility of all of us in industry to break that cycle, truly for everyone’s good. The studio should be working both ends, the experienced teams yes, but it should also selectively invest in the untapped well of talent in under-represented groups who have not had the opportunity yet. Not just because it is ‘right’, but because we will build better services, companies, and societies as a result. The only people who fear a level playing field are those that fear the limits of their own abilities and rely on undue advantage.

Step 5. The Model

We have our stack, talent, partners, and corporate structure lined up. Time to bring it all together. With this pool of expertise and funding, there are two lines for the platform to operate…

Outside-In: Working with external startups in return for equity
Inside-Out: Acting as a foundry, developing the studio’s own startups


The Creative Capital Studio operates as a form of super advisory, delivering value-add services in return for equity or other forms of risk-reward. This serves as an antidote to the broken advisor model, which is increasingly disenchanting startups who give up valuable equity in return for an open-ended and oft-unfulfilled contribution from the advisor. Startups usually allocate between 2% to 5% of their total equity to the advisor pool, so on an individual advisor basis, this usually means between 0.25% to 1%. The employee equity pool is usually between 5% to 10%. The Creative Capital Studio makes a play for between 1% to 10% of equity from the startup — allocated to the holding company of the group. The amount of equity is dependent on the range of services rendered. Other than equity, the studio can collect ‘alternative’ compensation such as royalties, profit share, and licensing revenue. Let us not ignore the new crypto ‘funding’ paradigm – cryptocurrency and tokens, depending on restrictions, allow for almost instant liquidation of stake.

Given the comparatively smaller level of equity commanded, the Creative Capital Studio must work across multiple projects a year. So the task is to gather a wide range of equity from many startups for the portfolio. The studio works on specific tactical needs on a short-term engagement basis, before extracting itself completely. Operating under a developed method and platform, the Creative Capital Studio is able to efficiently get a very specific, important, job done and then transition out. This is in contrast to a typical startup studio working on its own startups, which is consuming all bandwidth managing perhaps a maximum of two to four companies long-term, in parallel. The tactical, mission oriented arrangement is in greater harmony with startup investor expectations. They do not expect to see critical operations such as product or tech ‘owned’ outside the confines of the startup. Let’s look at some example engagements…

Example I — Culture / Org / Development / Recruitment
Startup X is a seed stage company. Yet to achieve product market fit and having grown rapidly, it is time to shape the company for the next stage of its development. Startup X’s founding team works with the Creative Capital Studio to surface the company’s values, vision and mission in order to provide a clear North Star to inform all decisions. Together they shape the corresponding organisational design as well as recruit the talent required for growth. Developmental frameworks and coaching support are put in place for the founder and key members of the founding team to assist them in the journey. The Creative Capital Studio receives equity in return for its services.

Example II — Design / Engineering / Process / Recruitment
Startup Y is a series A stage company. Currently, their product sits on web and iOS only. Customer and investor pressure requires launching the Android version of their experience within six months to be live and ready for their peak season. Startup Y works with the Creative Capital Studio to shift to a dual platform delivery process and team, as well as design and engineer the Android experience. The Android app is delivered within four months, allowing for testing and code base stabilisation two months before the peak. In the course of that process, an android engineering team is recruited for Startup Y, ensuring self sufficiency by release. The Creative Capital Studio receives equity in return for its services.

Example III — Full Service
Startup Z is a well-known, series B stage company. It has enjoyed success, but now needs to demonstrate growth and potential to secure further financing. Their board and lead investor has directed the leadership, who are feeling the strain, to seek outside assistance. Startup Z works with the Creative Capital Studio to facilitate a revised vision and mission for the company as well as supporting the founders and key teams with developmental frameworks. Together they work on an updated product vision and brand. The teams work together on the product experience to ship the 3.0 of the product, whilst new talent is recruited. After a six month engagement, with Startup Z ready for it’s C round, the Creative Capital Studio steps aside, receiving equity in return for its services.


Whilst the balance of the Creative Capital Studio’s resources are focused on working outside-in with external startups on short-term, high impact, tactical engagements, the studio also has the ability to act as a foundry on its own ideas. It deploys its resources and expertise (product, people, growth) to rapidly develop, iterate, and ruthlessly filter a selection of ideas. A small selection of ideas are then tested for product market fit. Tomes have been written about this side of the startup studio operations, so I will leave it at that.

What about Luck?

Almost forgot that one. You can not plan for luck or good fortune, but you sure as hell recognise it after the fact. You can, however, improve the conditions for good fortune to befall you. Disposition and character undeniably inform what kind of energy you attract from the universe and the simple act of leaving the house each day improves the conditions for serendipity. I can’t tell you what kind of person to be, but I can share that physical space is key to improving your odds. Opening up the ustwo studios to friends and extended network from all over the world was a game changer. Having a space to meet, host, and gather people, undeniably boosted the number of serendipitous collisions we experienced. So open your doors wide (of course with the proper protection of your IP).

The examples of New Lab, and Pioneer Works in Brooklyn, demonstrate the immense power of space and playing host. Betaworks recently announced Betaworks Studios, their member’s club for builders, the aim most likely not being solely to generate revenue from membership dues. The true value is about what happens at and around the space. By positively and authentically cultivating the conditions for serendipity, the universe tends to bend towards you.

All Together Now

Illustration by Liam Oscar Thurston, Creative Director at

For the Creative Capital Studio to be successful requires the threading of the eyes of multiple needles; gathering the talent, developing a compelling stack, funding, and finding the small fraction of the startup market you can work with. All tied together with a compelling investment proposition for seasoned investors and an incentive mechanism for the team that drives the studio and the extended network.

Despite the US focus of this piece, just like the rapid spread of the Startup Studio model, the Creative Capital Studio model can be established in any market. The more competitive the market, the more awesome and compelling the team and the value proposition will need to be. And you will need to be ‘money-can’t buy’ exceptional as you will be competing with the next best, paid option. But hey, I never pretended it was going to be easy, and the truth is that nothing that is truly great is easy.

The Wrap

Anyway, that’s what I would do. It’s not the re-invention of the wheel, and operators in the startup studio space as well as progressive studios will recognise many components of the model. However, it is a path forwards for the creative class. So please take it, break it, steal it, kick it, love it, fix it. Whatever you do, please move the discussion forward.

It is on each of us to change the terms of business for the creative class. In doing so, we can unlock new opportunity and possibility not only for our people, but also for the wide range of partners such as startups, enterprise, private equity, and investors. We must take what is currently considered alternative into the mainstream. In that regard our greatest work still lies ahead of us.

Edmeads & Pine ‘Portrait of William Blake1802

“I MUST create a system or be enslaved by another man’s; I will not reason and compare: my business is to create.” - William Blake, 1808

What about this nomad’s quest for a home? Today, I am setting out on this very path with FKTRY, a first take on the Creative Capital Studio model. I intend to do so under an ‘open source’ business model, sharing insights, learnings, mistakes, documentation, and much more as I build with old friends and new. But that’s all for another day.

See you out there…

Happy to continue the discussion on social using the hashtag #SOTDN2020, or at @ezyjules.

Please Pledge Parental Leave

If you have read this far and are in the creative industry in the US then please ‘Pledge Parental Leave’. For so many reasons, we need to improve the support we offer our working parents and a simple pledge can make the difference.


Deep thanks to the many I have met with to help unfold these topics. In particular for the generosity of wisdom, time, and mind of:

, , , Lucie Greene, , and the TWG family, , Camille Hearst, , , James Weiss, , Chris Stephens, , , ittan, , , and . Nod to Liam Oscar Thurston, Creative Director at, for his wonderful illustration for the Creative Capital Studio blueprint.…

Your Soundtrack (65m:51s) available on Soundcloud

Joy Division — Love Will Tear us Apart (Original) 3:08
La Roux — In For The Kill (Skream Remix) 5:03
Caribou — Melody Day (Four Tet Remix) 4:45
Jimi Hendrix — All Along The Watchtower 4:08
Donna Missal — Hotline Bling (Drake Cover) 3:13
Louis — Pink Footpath (Original Mix) 6:15
Mr Flagio — Take A Chance (Extended 12" Version) 8:05
Major Lazer — Get Free (ft Amber of Dirty Projectors) 4:49
Seba ft MC Conrad — Planetary Funk Alert 9:55
Daft Punk — Around The World — Harder, Better, Faster, Stronger 7:29
Marcos Cabral & Shux — A Lifetime Groove 11:52
Isreal Kamakawlowo’le — Somewhere Over The Rainbow 5:08

Reference/Resource Table


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Jules Ehrhardt

First Human @fktry / former owner @ustwo / founder @pledgepl . Design / tech / startup / crypto / life. |