Recap & Why This Matters

We’ve covered a lot of ground—some hard lessons learned, some wins, and a ton of math to back it all up. So far, here’s the journey:

• In The Math Behind Our Startup Studio, we laid the groundwork for how studios work financially—how much it costs to build companies, why operational efficiency is key, and how success is a game of momentum. Spoiler: studios don’t break even right away; it’s a process.
• Then in Startup Studios: A Clearly Defined Model or Moving Target, we dove into how studio models evolve over time and why no studio is a one-size-fits-all. We shared how Builders sharpened its focus, shortened validation cycles, and stopped compensating founders during early validation. It’s been a constant game of refining and adapting.
• And finally, in How Does a Studio Return Money?, we tackled the big question: how do you actually generate returns? We talked about portfolio strategy, managing burn, and how secondaries and spinouts play a huge role in keeping the studio machine alive. Think long game—not quick wins.

Now, it’s time to apply all of that to the real-time changes we’ve made at Builders —the upgrades, the math, and what it all means moving forward.

The Eternal Studio Question - Holding vs Dual Entity

First off, a structuring question most studios ask themselves when they launch. Well, to be honest, most studios are still wondering what the right structure is. What’s clear is that there’s no standard here, though there are signs of overall themes and frameworks that seem to work and favour certain investors and studio operators more.

From what I’ve seen in the wild, most studios launch as a more traditional family business with multiple companies in a holding. In most cases, a studio aims to become just that: a group of newly formed, freshly validated companies that the studio co-built and holds a stake in. Depending on the model, founder-first or idea-first studios own 25–40% of the companies.

This holding model with sub-companies is financed at the holding level, most of the time with an assumption of how many companies can be built with the capital raised. The first funding rounds usually end up around €5 million—that’s investment capital and studio operating costs combined. The investors' stake in the holding varies based on the studio founder’s track record and liquidation preference terms, like with any other seed investment.

OK, that’s what makes the most sense at the start. After the initial years of building—or at least touted as the standard- what has been the standard—is having a more traditional fund next to the studio operational company that supplies capital to build and invest in the companies created.

To me, this model only makes sense at scale, which implies one first needs scale, mainly because of the way studio operations are financed. With funds, one will assume management fees finance the operating costs, but the harsh truth is that the 2% will never cover that effectively unless the fund size is larger than logical. Sure, fees can be stretched, but the more custom the fund is, the more it loses its purpose as a relatable investment structure for investors.

Hold your horses, though; there’s definitely a place for such a structure, but the math and the how on it we’ll cover down the line when it makes the most sense. For now, this is referred to as a dual-entity model. Yep, studio lingo keeps growing and growing.

The inevitable outcome

Back to what has changed to our model that influenced our math today. Over the years, we’ve constantly made smaller updates and upgrades to our model. Around the end of 2023, we’ve made more drastic changes to make everything click together. To name a few, for now, we’ve removed compensation during validation, laser-focused our scope, reduced time to validate with even more tech, opened up the residency to technical co-founders and lowered tranched our investment from incorporation and up. Much of it was because we understood that growth is different than a seed-orientated studio team and, as needed, less capital and could attract financing earlier.

Whilst these are all learnings on their own, and we could go days in every one of those changes and learnings, it all comes down to this: How much value can the studio produce with the total sum of capital raised with a decent spread? Like modelling a fund, the studio has the same foundation at the outset. The big difference is that operating costs are 40-60% of the capital consumed versus 20% of a fund. Yep, that’s a number never touted in a studio deck.

Ultimately, a studio is the operating cost + capital needed per build multiplied by the survival rate.

In Builders’ case, those strategic changes to our model redefined our modus operandi. While it didn’t influence our overall masterplan, we understood that a breakout moment was inevitable—yes, Thanos… inevitable. Those decisions made way for a greater spread of learning and co-building a series of companies with frog leaps in progress. Combined with our love for intelligent and magical software, the stars further aligned. OK, back to math.

Studio Financial Modelling

When we started financing the studio holding, we modelled that we needed €6M to build eight companies in four to five years. With the strategic updates we referenced earlier, we were 2.5 years into the five, and with those changes, the model became more efficient, needing €4.5M for the same result.

So, let’s get on with the math. That comes out to around €560k for each company launched; if that sounds steep, it includes the costs of failures, countless validation cycles, and enough pre-seed investment to reach seed. That’s a pretty decent amount. By the way, the studio industry average is between €500k and €1M globally. What becomes evident is that momentum and survival rate heavily influence the math:

Value created – cost per build × survival rate = Asset Value

In short, doing the math is less about hitting a perfect number and more about maintaining operational excellence—reducing the cost per build while keeping survival rates healthy.

Building cost

Another way of calculating the cost per build is this simple formula:

(Operational cost per year + invested capital that year) / companies launched

Historically, studios launch one company in the first year, then ramp up to two, three, and even five companies per year. The costs in the early years vary wildly, with operational expenses standing out as a sore thumb while the studio accumulates equity value. Near the end of the capital spend, we found our average cost per build settled closer to €300k.

The biggest plus? Costs go down year after year as the number of companies launched increases. However, there’s a catch—the most efficient and successful companies often leave just as you hit that sweet spot. At that point, the studio balance sheet might only show a modest equity value, and your next round will need to raise at a severe premium on net asset value. Logical? Not always.

The takeaway? Momentum and efficiency are everything—cost per build should be your north star.

Steady-state as she goes

To sum up, there 2 challenges here, I believe it safe to assume you are here because you are investing in a studio, launching a studio or considering you might want to build with a studio.

• The first challenge is that the math only makes sense when calculated in a steady-state model, meaning that the opportunity cost to get there should have a separate line item.
• Secondly, the preferable per-company cost basis is reached near the end of the initial capital raised. So, one should hard sell the last year, not the overall results.

Okay, assuming you need to convince yourself and others, based on numbers, not just gut feeling, a studio will make outsized returns. The best way would be to create a one-page steady-state financial model. One of our first investors asked us to do so in our earlier days when he felt like the model was too complicated to explain.

Studio Financial Model 1-Pager (Steady-State)

Understanding how a startup studio works financially is critical, especially when you move beyond the initial launch phase and aim for sustainable operations. The 1-page-steady-state financial model is a clear snapshot of what a studio looks like when running at full capacity—steady, predictable, and scalable.

Rather than focusing on short-term wins or isolated success stories, this model highlights the studio’s core financial structure, revealing how operational costs, investments, and company launches balance over time. It’s less about make-believe exits and more about creating a sustainable system that continually produces companies with a repeatable process.

The steady-state model boils everything down to key variables and assumptions: how many companies you launch annually, how much capital you allocate per company, and how survival rates at each stage affect overall returns. These inputs help explain how studios generate value over time—eventually achieving a point where the cost per build stabilises, and the portfolio value exceeds the capital invested.

Inputs that matter

Reaching steady-state requires launching 4 companies per year while keeping capital deployment predictable. We modelled cash investment at €150k per company, aiming to generate early momentum and maintain efficiency. The key assumptions that shaped our strategy:

Cashflow

Ultimately, a studio, like any seed company, is defined by its use of cash. You get the gist if it's efficient, deployed fast enough, etc. It needs to be explainable and not a consolidated spreadsheet from hell. No matter the structure, it boils down to this.

Initial Value Creation

Cash might be king, but raised capital must translate into equity value. At incorporation, we ensure the cash-in matches the value created. A studio operating company is a business and should aim for profitability. In our steady-state model, we also count additional equity value created after a seed round. Let’s break it down with some numbers.

A studio is built to create value but is measured on cash flow. Because studios start pre-team and pre-incorporation, the first real indicator of success is the portfolio reaching Seed or A valuations. Sure, most companies will not have venture-size returns once they’ve reached Seed, but until a studio gets external investors in at Seed in their portfolio, it's not valued on its portfolio alone.

Route to steady state

When plotting the math over the years, it becomes apparent how much capital one would need before getting to the steady stage target. Yes, it doesn't account for survival rates at this point because it would get impossible to follow, but again, it's also safe to assume that those expression-level events didn't happen in the 4th year yet.

Disclaimer: These are numbers that fit specific industries and geographies, whilst the numbers in your region might be higher, the math is universal

Once you’ve modelled your studio to reach steady-state, the next challenge is maintaining capital efficiency and avoiding dilution traps. Next up, how to take some chips off the table.

Studio Market Fit - Evergreen mode

Once you’ve hit steady-state, the challenge is staying capital-efficient and avoiding dilution traps. Most studio holdings won’t be able to raise another round after 4–5 years at preferred valuations unless investors also value the studio operations. We’ve never pitched that way—assuming when it’s valuable enough, the portfolio speaks for itself.

Instead, Builders presses an alternative model by taking some chips off the table early. The goal is to secure liquidity without sacrificing long-term value creation.

How? It depends on legislation. This could involve transferring the shares you already manage to a fund (dual entity) you manage. In some cases, it could be a secondary. However, it would mainly involve transferring ownership between entities related to the studio. This flexibility ensures the studio can attract specific funding while maintaining liquidity without losing significant equity. Ultimately, a hybrid approach keeps the studio well-funded while preserving long-term equity value.

Ultimately, taking chips off the table isn’t about reducing risk—it’s about keeping the machine running while retaining long-term value.

More on that later. With this math, the studio shows it has reached studio market fit, and the next steps can be taken.

Begin with the end in mind

Ultimately, the steady-state model ensures sustainability, but staying focused while adapting is the real challenge. Keep building, scaling, and spinning out companies that create real value. The long game isn’t easy, but it’s worth it.

Continually optimise for cost per build, influenced mainly by the cost of the optimal team and the number of companies launched each year. Set all goals to reach steady-state before the end of capital. Even without a fund for spin-out returns, this will prove the studio needs to keep the capital flowing.

Day to day

At its core, nothing has changed. Validate with great entrepreneurs in residence, show early revenue potential, prioritise happy customers, and secure follow-up financing. Ultimately, math is just a tool—what matters is how you apply it to create something extraordinary. What’s your next move?

Cheers, your friends at Builders 🖖🏻