A quick guide to choosing a Venture Studio

Not all studios are created equal. Choosing the right one can be one of the most important decisions a founder makes in the early stages of building their startup but it can be hard to know what 'good' looks like if you haven't worked with one before.

Here are our top 6 things to think about when you're looking for your venture studio match:

1. How much equity will they take?

Equity is the main way a venture studio is compensated for their involvement in a startup and the amount they take can vary significantly. At Paloma, we take 15% ordinary shares, which is on the lower end compared to most studios.

Generally we wouldn't recommend giving away more than 30% to a venture studio. In the early stages it's important to maintain a solid stake as a founder—not least because it's your business, but also because future investors may have concerns about you being disincentivised if you've given up too much ownership on day 1.

2. What are they actually giving you in return?

Different studios offer varying levels of support. At Paloma, we function like a co-founding team, working closely with our venture for ~2 years to accelerate their journey to product market fit. We help with everything from the tech build to the go to market plan and even company incorporation and set up, operations, finance, legals.

3. How do they work?

At Paloma, we work directly alongside our founders as though we were part of their in-house team. We collaborate closely on decision-making, stay connected to the customer, and ensure the product is built with real-world feedback in mind. Our team remains consistent for the full ~2 year period, and many of our team members transition in-house with the venture when it "graduates."

Some studios function more like development agencies that work in isolation from the founders. We wouldn't recommend building tech in a black box.

4. What's their track record?

What ventures have they built? What are they particularly proud of? At Paloma we always encourage potential founders to speak directly with our current portfolio founders for first-hand feedback. Don't be afraid to do your own due diligence on their companies.

5. Do they understand the venture space?

Not all venture studios are equally versed in the startup ecosystem. Building a day-one venture is a very different process from developing products for big-budget clients or building small services businesses.

6. Do you like them as people?

Building a startup is a long and intense process. You'll be working closely with whoever you chose, so it's essential that you get along well with the team. Can you have open, honest conversations? Are they approachable? Are they going to be fun to work with? Trust your gut and steer clear of any bad vibes.

A final takeaway—don't be afraid to ask tough questions! A good venture studio will want you to feel informed, comfortable and excited about the process ahead.