Manufacturing Equity

Cambridge, April 2026

Four applications of the model emerged

The most developed application, and the basis for the other three. Tonight, “studio” means this one.

From workshop to factory

1906: cars assembled one at a time in a workshop. A well-made car cost about $2,700 and took hundreds of hours to put together.

1913: the moving line. Chassis assembly fell from 12 hours to 93 minutes. By 1914, Ford could produce a car about every 3 minutes. By 1925, the cost of a Model T was $260.

Source: VC Lab / Decile, 2025 (about 600 first-time funds). 

Has one landed on your desk yet? 

You know the products, if not the factories

Flagship Pioneering

Rocket Internet

Atomic

Moderna

Zalando

Hims & Hers

World-changing health platform

a business-model replicator
also Zalora, Lazada

a consumer-brand builder

These companies are the factories’ products. Tonight is about the factories.

Three roles, one firm

Entrepreneur

Operator

Investor

Studio

Entrepreneur: finds and validates the idea. The founder’s job, done by the firm.

Operator: builds it.

Investor: funds it and manages the portfolio.

VC sits in the investor circle; accelerators straddle investor and operator; incubators at the edge of operator.

Venture Studio Forum (2025): “a company that builds other companies and simultaneously acts as an entrepreneur, investor, and operator.”

The studio’s assembly line

Six stages. Gates between them. Most ideas stop before they become companies.

Entrepreneur

Operator

Investor

Validation: is the problem real, and will anyone pay? · MVP: the simplest version that works · Customer fit: real customers keep buying · Then the studio recruits a CEO and spins the company out.

About ten ideas in, one company out.

Ford made the assembly line. Toyota later added a cord to the line: any worker could pull it and stop the line when something was wrong. The gates are the studio’s cord.

After Gutmann (2019), venture-building process. 

For decades, capital has moved closer to the work

Financial

Operational

Private equity

Venture capital

PE: Binfare et al., Institute for Private Capital (2022): leverage’s share of buyout value creation fell from 46% before 2000 to 22% in 2008 to 2019; Kaplan and Strömberg (2009), financial, governance and operational engineering. VC: VC Platform, The Power of Platform (850 firms): platform staff grew from 1 in 16 to 1 in 8 of VC team members since 2000.

The capital arrives before the vehicle

History shows new private assets maturing along similar paths.

Agile private capital

A standard vehicle

Rules make room

Data and benchmarks

Wealthy families’ money, operating often on high trust and aligned incentives.

YC’s post-money SAFE only arrived in 2018.

1978: US pensions allowed into private equity after decades of PE activity.

Institutions follow. IPSs for large capital allocators are slow to evolve. 

Studios today

No standard vehicle, no benchmarks: a studio doesn’t fit most investment policies. So studios and agile investors improvise.

Venture studios have an ecosystem

Seven players. We’ll use these entities to discuss how incentives and responsibilities are aligned (or not).

LPs
fund investors

Fund II ...
later vintages

Fund I
the fund

GP
runs the fund

Studio (OpCo)
the equity factory

Studio Partners
usually own both

NewCos
the new companies, the products

Outside Capital

Overlap: same owners

Structures, simplest first · 1 of 5

The single studio

Studio
HoldCo = OpCo

Studio Partners
the studio’s owners

NewCos
the companies it founds

founds and builds

owns NewCo equity

Work: runs, builds

Equity: who holds the shares

Overlap: same owners

Structures, simplest first · 2 of 5

The single studio, plus a syndicate

Studio
HoldCo = OpCo

Studio Partners
the studio’s owners

NewCos
the companies it founds

Syndicate
outside investors

co-invests, deal by deal

founds and builds

keeps a founder stake

Money: capital, fees, payments

Work: runs, builds

Equity: who holds the shares

Overlap: same owners

Structures, simplest first · 3 of 5

The single fund: a VC fund with a studio-sized fee

LPs
fund investors

Fund I
owns the companies

GP
runs the fund

Studio (OpCo)
the studio team

Studio Partners
own both

NewCos
the companies it founds

capital

runs it

carry

invests

holds the equity

(large?) management fee

builds, paid from
the fee

Money: capital, fees, payments

Work: runs, builds

Equity: who holds the shares

Overlap: same owners

Structures, simplest first · 3 of 5

The single fund: a VC fund with a studio-sized fee

LPs
fund investors

Fund I
owns the companies

GP
runs the fund

Studio (OpCo)
the studio team

Studio Partners
own both

NewCos
the companies it founds

capital

runs it

carry

invests

holds the equity

management fee

builds, paid from
the fee

monthly bill-back, under an MSA

Money: capital, fees, payments

Work: runs, builds

Equity: who holds the shares

Overlap: same owners

Structures, simplest first · 4 of 5

The studio, plus a dedicated fund

LPs
fund investors

Fund I
the dedicated fund

GP
runs the fund

Studio (OpCo)
the factory

Studio Partners
own both

NewCos
the companies

Outside lead
prices a round

capital

runs it

fee and carry

invests

holds equity

builds

keeps a founder stake

Money: capital, fees, payments

Work: runs, builds

Equity: who holds the shares

Overlap: same owners

Structures, simplest first · 5 of 5

The dual entity

LPs
fund investors

Fund I
invests in both

GP
runs the fund

Studio (OpCo)
the factory

Studio Partners
own both

NewCos
the companies

Outside lead
prices a round

capital

runs it

fee and carry

invests

holds the equity

builds

keeps a founder stake

invests in the studio

owns a slice of the studio

Money: capital, fees, payments

Work: runs, builds

Equity: who holds the shares

Overlap: same owners

Fictional V.S., the dedicated fund, up close

Follow the money

Fictional V.S.: illustrative

LPs
fund investors

Fund I
the dedicated fund

GP
runs the fund

Studio (OpCo)
the factory

Studio Partners
on both sides

NewCos
the companies

Outside lead
prices a round

capital

runs it

fee and carry

invests

holds equity

builds

MSA fees

keeps a founder stake

Money: capital, fees, payments

Work: runs, builds

Equity: who holds the shares

Overlap: same owners

Three questions already in your head. 
What does the GP fee buy?
What does the MSA buy?
Where are the guardrails?

Fictional V.S., the dedicated fund, up close

Where pay doesn’t follow function

Fictional V.S.: illustrative

LPs
fund investors

Fund I
the dedicated fund

GP
runs the fund

Studio (OpCo)
the factory

Studio Partners
on both sides

NewCos
the companies

Outside lead
prices a round

capital

runs it

fee and carry

invests

holds equity

builds

MSA fees

keeps a founder stake

Money: capital, fees, payments

Work: runs, builds

Equity: who holds the shares

Overlap: same owners

1

2

3

4

1 Who gets paid. Is the build paid for twice? Three times?

2 Who sets the price. Without an outside lead, the Studio sits on both sides of the round.

3 Who decides what lives? LP money can prop up the studio’s weaker companies.

4 Who owns what. The same partners on both sides?

Read the management services agreement (MSA)

If you’re an LP in the fund

The marking trap

Fictional V.S.: illustrative

LPs
fund investors

Studio Partners
on both sides

Fund I
leads the round

Studio (OpCo)
book value up

NewCo
first priced round

Outside lead
absent

2

marks up the studio’s book

Founding equity sits on the books at almost nothing. The studio’s own fund leads the first priced round. The book jumps, on a price set by a related party.

Ask who set the price.

choosing sides

Pick a seat

Fictional V.S.: illustrative

LPs
fund investors

Studio Partners
on both sides

Fund I
THE FUND

Studio (OpCo)
THE FACTORY

One NewCo
THE PRODUCT

Outside lead
prices a round

If you could buy only one, which?

Own the factory: shares in OpCo
Finance its output: Fund I
Buy one product: a NewCo

Not better, but a different shape.

Studio portfolios: fewer zeros, a fuller middle, a thinner tail

VC portfolios: total loss is the most common outcome, with a long tail of outliers

Illustrative shapes, by multiple of money invested. VC: about 65% of financings return less than 1x; about 4% return more than 10x (Source: Correlation Ventures).

BVSR’24: similar median growth, but VC shows a far wider spread and more outliers; studio outcomes cluster. Exits sooner: 4.5 years against 5.3. Studio side: 38 deals.

Scheuplein and Kahl (Germany, 2017): company builders’ portfolio companies grew employment faster than other VC-backed companies.

Best-funded studio companies raised about half what top accelerator companies did, and grew faster.

Each source is imperfect. None says studios win. Together they say studios are different. Judge this with the power-law playbook and you’ll misread it.

Let’s talk about the data

Fictional V.S. at today’s costs

Let’s look at today’s venture studio economics, employing a Lean Startup method.

Fictional V.S.: illustrative

Validation
[$20k · 2 mo]

MVP
[$250k · 9–12 mo]

Customer fit
[$150k · 3–6 mo]

Spin-out
Venture dependent

$9M

average value per company, at exit or in cash returned, for Fictional V.S. to earn back its build costs plus 15% a year. 
It doesn’t need a unicorn (but might get one with further financing). 
It needs a steady run of solid companies.

Fictional V.S.‘s costings, illustrative. Assumed studio equity take of 30% per NewCo; 15% a year. Illustrative Lean Startup stage costs in brackets.

Fictional V.S., the dedicated fund, up close

Alive, but a mixed mission

Fictional V.S.: illustrative

LPs
fund investors

Fund I
the dedicated fund

GP
runs the fund

Studio (OpCo)
the factory

Studio Partners
on both sides

NewCos
the companies

Outside lead
prices a round

Money: capital, fees, payments

Work: runs, builds

Equity: who holds the shares

Overlap: same owners

Outside clients
services work

outside revenue

Studios selling venture services to corporates: about 18 alive for every one closed.

BVSR’24

The revenue keeps it alive, and pulls it away from building companies.

From the workshop to post-lean

Workshop
One at a time

Ford
Fast: the assembly line

Toyota
Good: Lean Manufacturing

BYD / Tesla
Factory as one big robot

Building companies

Lean’s unit of work was the minimum viable product. In a post-lean, venture studio context it becomes the minimum viable venture: the smallest version of the business that can win customers, get paid, deliver and repeat.

Post-lean and the minimum viable venture: Clausen and Hassel (2026, discussion paper). 

Lean startup assumes certain parts are expensive

Studios today run on Lean Startup: build the smallest thing, test it on customers, learn, repeat.

Validation
[$20k · 2 mo]

MVP
[$250k · 9–12 mo]

Customer fit
[$150k · 3–6 mo]

Spin-out
Venture dependent

problem identification, problem validation

solution validation

optimisation

growth

Under this conventional venture paradigm, the fastest studios aimed to launch a venture in under 100 days.

When cloud computing cut the cost of starting a company, VCs adapted. AI is now retooling the assembly line itself.

Step names after Gutmann. Cloud precedent: Ewens, Nanda and Rhodes-Kropf. Fictional V.S. costs: illustrative.

Cost and time collapse in a Post-Lean paradigm

Fictional V.S.: illustrative

Validation
$20k · 2 mo
→ $5k · 1 wk

MVP
$250k · 9–12 mo
→ $10k · 2–3 wk

Customer fit
$150k · 3–6 mo
→ $20k · 4–8 wk

Spin-out
Venture dependent,
funded by the seed raise

$9M → $0.7M

The MVP gets 25 times cheaper. The company gets about 10 times cheaper. Customer fit is the strongest indicator of forward revenue, and now takes most of the pre-launch budget.

AI won’t just make studios faster. It’ll lower the bar they have to clear.

**Not all studios and industries are the same. E.g. DeepTech vs Software, BioTech vs Digital Services

Average value per company the studio needs to earn back its build costs plus 15% a year. Fictional V.S.‘s costings; assumed NewCo holding of 30%.

In a post-lean agentic coding paradigm, the costs of the founding function plummet.

Remember Ford

The MVP is now the Model T. When something becomes cheap, it stops being an advantage.

$2,700

1906, built one at a time

$850

1908, the Model T launches

$260

1925, the Model T

How things get made

Lean Startup assumes building is the expensive step. When building costs decline, the MVP stops being the constraint. What’s scarce is knowing which experiments are worth running, and which to stop. This knowing is the foundational edge of the venture studio.

Hassel et al., for “venture production”: ventures as the products of a repeatable process.

A founder alone can build the product

A studio’s stake is a founder’s stake, because the studio did the founding.

A founder alone, first product for about $10,000

What studios still bring: customers, scaling, the people

AI puts the product within reach of one founder. The venture still needs judgment, domain expertise and a system that sells, delivers and repeats. That’s the studio’s job now.

$10,000: Fictional V.S.‘s new costings, illustrative. Product versus venture: Clausen and Hassel (2026, discussion paper).

Ask to see a system, not a story

Fictional V.S.: illustrative

Validation

Rule: 20 interviews confirm it

20 × $5k = $100k

MVP

Rule: 50 weekly users in 3 weeks

6 × $10k = $60k

Customer fit

Rule: 10 paying customers

3 × $20k = $60k

Spin-out

Seed priced by an outside lead

2 companies

$220k for 2 companies: about $110k each

Ask to see three ideas it kept funding and three it stopped. Does the record explain both?

Where do we sit in the model?

What each seat owns, and is exposed to

Fictional V.S.: illustrative

LPs
fund investors

Studio Partners
on both sides

Fund I
THE FUND

Studio (OpCo)
THE FACTORY

One NewCo
THE PRODUCT

Outside lead
prices a round

Factory: the plant and every stake. Every term, plant cost and leakage included.

Fund: the output, at a price. Lives with two of the conflicts: who sets the price, and who decides what lives.

Product: one exit value, the dilution ahead, and the studio’s services.

From trust to contract

Family groups have built companies this way for generations: a venture studio by another name.

TRUST
family groups, family offices

CONTRACT
a standard vehicle

Rules make room

Data and benchmarks

at-cost service agreements, independent marks, benchmarks

Economists describe business groups as substitutes for missing institutions, with one risk that comes with any group of related companies: tunnelling, value moved between them at another party’s expense. 

Inspecting a studio means checking how much of the trust has been turned into contract.

Credit line: Khanna and Yafeh. 

Rewiring Fictional V.S. · rungs 1 and 2

Climbing the ladder

Fictional V.S.: illustrative

LPs
fund investors

Fund I
the dedicated fund

GP
runs the fund

Studio (OpCo)
the factory

Studio Partners
on both sides

NewCos
the companies

Outside lead
prices a round

capital

runs it

fee and carry

invests

holds equity

builds

keeps a founder stake

rung 1: owns a slice of the studio

Syndicate
rung 2: follow-on

1

2

3

4

Money: capital, fees, payments

Work: runs, builds

Equity: who holds the shares

Overlap: same owners

Rung 3 · three more changes

Same money, different wiring

Fictional V.S.: illustrative

LPs
fund investors

Fund I
buys by rule

GP
runs the fund

Studio (OpCo)
funds its own build

Studio Partners
on both sides

NewCos
the companies

Outside lead
every round

capital

runs it

fund-running fees only

invests

holds equity
buys into secondaries

builds

keeps founder stake

owns a slice of the studio

Syndicates / VCs
follow-on

1

2

3

4

Money: capital, fees, payments

Work: runs, builds

Equity: who holds the shares

Overlap: same owners

1

The fund stops paying for the build.

2

An outside lead prices every round.

3

The fund buys part of the studio’s founder NewCo shares, at the lead’s price, in every company that raises.

4

The same partners still own the seller and run the buyer. Smaller, not gone.

Not zero conflict. Conflict you can see.

First: which kind of factory is this?

Six questions

Drawn from proposed questions for studio investors (Moiana, Ghezzi and Rangone, Business Horizons, 2026).

One last Ford story

1903: John and Horace Dodge supply Ford’s new company with about $10,000 of parts, and take 10% instead of cash.

~$35M

paid to them by 1919, dividends and buyout

They didn’t buy the products. They owned a piece of the factory.

Thank you.

Questions?

Scan to download the diligence handout and worksheet
vs.tomwest.io/diligence