by Francisco Gomez
Talent is one of the most important parts of the studio model. While company creation funds have a repeatable playbook for founders to follow, the quality of the founder talent is what drives efficiencies and quality in ideating, testing, and also what generates exit velocity and big outcomes. Considering the importance of talent in the model, one of the questions we hear most often is why a talented founder, who likely has other funding options, would choose to work with a studio as opposed to building in the traditional venture model.
The team at Vault has spoken with over 150 studios and company creation funds and we have consistently heard the following reasons that talented founders choose to work with company creation funds:
- Ability to focus on building. When founders create within a company creation fund, they are able to focus on the product or service they want to build, instead of having to spend ample time working on things like HR, legal, and accounting. This allows founder talent to spend their time where they are most energized to spend it.
- Ideating and testing. Founders can leverage a company creation fund’s process to ideate and test across several capabilities with a high degree of capital efficiency. This allows them to choose the newco with the strongest leading indicators of success so they can select a more likely winner to spend their next few years developing. Typically companies formed within the company creation fund model have much stronger validation of product-market fit prior to formal launch.
- Access to resources and talent. In a traditional model, the founder must work with very limited resources in the early days of testing and MVP launch, and then work hard to recruit high-level talent to grow the team quickly. Through the company creation model, the founder will have access to support resources such as finance, legal, marketing, and more from day one, as well as strong recruiting support to grow the team as the idea and the company scale.
- Access to follow-on capital. Capital efficiency is one of the strongest points of the company creation fund model. This is largely due to milestone driven capital deployment that allows a company to test and scale with internal capital. This model allows a founder to focus on the core of scaling the company with ample runway, follow-on capital, and more opportunistic external fundraising.
- Opportunity to work on multiple projects. Once a founder has entered the talent network of a company creation fund, they can dive into a project that has all of the resources, talent, and capital to scale quickly. This model enables them to work on multiple ideas in the time it might have taken to create one externally. It will also provide the fund with a pool of serial founders ready to lead a new idea.
We have repeatedly seen founder talent move towards the company creation fund model from many different backgrounds including VC, consulting, operations, and others because it allows them to focus on their main interest, building product. The model is built to ideate, test, and build at a high degree of efficiency through support functions and repeatable processes which allows a founder to work on multiple ideas as opposed to one. The creation of talent networks is still one of the most important pieces to get right in this model, and a focal point of our diligence process because we see it as one of the biggest advantages in creating outsized outcomes.