How venture studios actually make money (and where the IRR comes from)

A venture studio makes money in two ways a traditional fund does not combine: it earns cash from the operating work it performs inside a company, and it takes equity — at formation, when ownership is cheapest. Because it co-founds rather than merely funds, its stake per company is higher, and the returns it reports lean on that ownership at the earliest, lowest-priced moment. That is the whole economic story; the rest is detail and caveats.

How does a venture studio make money, exactly?

Strip away the branding and a studio has three revenue lines.

The first is founder-grade equity. A studio does not write a cheque into a round priced by someone else; it helps create the company, often supplying the first idea, the first hires, the first product and the first customers. In exchange it holds an ownership position far closer to a co-founder's than to a seed investor's. Where an early VC might own low single digits to low teens after a priced round, a studio commonly holds a materially larger slice at formation — the precise figure varies by studio and deal, but the structural point is fixed: you own the most when the company is worth the least.

The second is operating and advisory income — cash. The studio runs the work: building product, opening commercial doors, hardening operating discipline, running the fundraises themselves. That labour is billed or compensated in cash, sometimes with an equity premium attached to the hands-on contribution. This is the line that keeps the lights on between exits, and it is the line a pure fund does not have.

The third, where it exists, is fund economics — management fees and carried interest on third-party capital, the classic “2 and 20.” Not every studio runs a fund; many are balance-sheet operators. But a studio that raises an external vehicle adds the same fee-and-carry engine a VC runs, layered on top of its operating model.

The honest distinction worth drawing is between studios whose upside is tied to fees on assets under management and studios whose upside is tied to whether the companies actually succeed. Those are different businesses wearing the same label. We have written about why we sit firmly in the second camp in the operator-investor model; here we are concerned with the mechanics that make either version work.

Why is the studio's ownership higher than a VC's?

Because it is paid in equity for work, not for capital, and it is paid before the company exists in any priced sense.

A VC's ownership is a function of cheque size divided by post-money valuation. The studio's ownership is a function of contribution at zero — founding IP, founding team, founding customers — converted into founder shares before the first external price is set. Two consequences follow. The studio's cost basis per percentage point of ownership is lower than any later investor's, and its stake is established at the moment dilution risk is highest but valuation is lowest. The arithmetic of multiples is unforgiving in exactly the direction that favours formation-stage ownership: a position taken at a €1m notional that survives to a €100m outcome compounds at a rate no €20m-entry cheque can match, even before any operating premium.

This is why studio economics are so sensitive to concentration. Pure-selection investors spread bets and optimise for picking the one company that returns the fund. A studio picks fewer companies and works inside each, optimising for contribution. Fewer names, higher ownership, deeper involvement — the model only pays if the studio can genuinely move outcomes, not merely select them.

What is the venture studio IRR everyone quotes — and is it real?

Here the discipline of honest economics matters most, because a single number circulates constantly and is almost always cited without its caveats.

The most-quoted figure comes from the Global Startup Studio Network (GSSN), whose 2022 research surveyed 258 studio-created startups and compared their returns with traditional startups. GSSN reported an average internal rate of return (IRR) of roughly 53% for studio ventures against roughly 21% for traditional startups, alongside faster milestones — about 25 months from formation to Series A versus roughly 56 — and higher graduation rates (around 84% of studio startups raising a seed, 72% of those reaching Series A). These are widely repeated as the headline case for the model.

They are also estimates, and should be read as such. Three caveats are non-negotiable: 1. Self-selection and survivorship. The dataset is studio-supplied and studio-favourable by construction; studios that failed quietly are under-represented. 2. IRR flatters speed. IRR is annualised, so the studio's shorter time-to-milestone mechanically inflates the rate relative to a slower VC path — even where the absolute multiple is comparable. Compare total value to paid-in (TVPI) alongside IRR before drawing conclusions. 3. Small, young, illiquid samples. The asset class is recent; few studio portfolios have run a full fund cycle through liquidity, so reported returns lean heavily on unrealised marks.

The fair summary is this: the structural reasons a studio should out-earn a passive fund — higher formation ownership, operating leverage, faster cycle times — are sound, and the third-party data points the same way. But the specific multiples are industry estimates, not audited fund returns, and anyone quoting “53% IRR” as settled fact is over-claiming. This is not investment advice, and past or projected returns are no guide to future outcomes.

How does a listed studio's economics differ?

Most studios are private, financed by a fund with a fixed life — typically ten years, after which capital must be returned. A listed studio inverts several of those constraints, and the differences are economic, not cosmetic.

The first is permanent capital. A public balance sheet does not expire. There is no fund clock forcing a sale to return capital to limited partners at year ten, which means a listed studio can let positions compound on their own timeline rather than the fund's. As we have argued on why we went public, the listing is an acceleration mechanism, not an exit.

The second is how value is reported. A private studio's value lives in private marks visible only to its LPs. A listed studio carries its holdings as net asset value (NAV) — the mark-to-market value of its portfolio — and publishes regulated financial accounts, a certified cap table, and a financial calendar that the market can scrutinise. The discipline runs the other way too: public reporting forces honesty about marks that private vehicles can defer.

The third is where the shareholder's return actually comes from. In a fund, an investor's return is the fund's net IRR after fees and carry. In a listed studio of our kind, the shareholder owns the operating company directly: the balance sheet compounds through operating income and the equity value of holdings, not through management fees skimmed off assets under management. The interests line up — the listed entity wins when its portfolio companies win, not when its AUM grows.

A side-by-side comparison

Compared across five dimensions, the three models diverge clearly. A traditional VC fund earns primarily through management fees (~2%) and carried interest (~20%), with ownership set by cheque size divided by post-money valuation, a fixed fund life of around ten years with an obligation to return capital, and value reported only through private LP marks; shareholder alignment is fee-driven. A private venture studio earns through operating and advisory cash plus founder-grade equity taken at formation, on a fund- or balance-sheet-dependent timeline with private marks; alignment is mixed, depending on whether the studio is fee- or success-driven. A listed venture studio earns through operating income and NAV growth — fund fees only where an external vehicle is run — with founder-grade equity on a permanent balance sheet, portfolio value published as regulated mark-to-market NAV, and a return that compounds with the portfolio; alignment is squarely success-driven. GSSN figures cited in this comparison are third-party estimates for context only; they are not Pyratz Corp. figures and are not a forecast of any return.

Where this leaves the model

The venture studio earns its keep by doing the work and owning the upside that work creates — higher ownership at formation, cash for operating, and, for some, fees on outside capital. The eye-catching IRR numbers are directionally consistent with that structure but should be treated as estimates, weighed against TVPI, and discounted for survivorship and youth. The listed variant changes the financing, not the logic: permanent capital, public NAV, and a return that accrues to ordinary shareholders rather than to fund managers' fees.

For the operator's case behind this structure, read Capital is not enough: the operator-investor model and Built to compound. For how a public listing reshapes a studio's balance sheet, see why we went public.

Frequently asked questions

How do venture studios make money?

Venture studios make money in two or three ways: founder-grade equity taken at a company's formation (when ownership is cheapest), cash from operating and advisory work performed inside the company, and — for studios that run a fund — management fees and carried interest on outside capital. A studio's upside is therefore tied to ownership and operating contribution, not only to fees on assets under management.

Why is venture studio IRR higher than traditional VC?

Structurally, a studio owns more of each company because it co-founds rather than funds, and it reaches milestones faster, which inflates an annualised metric like IRR. Third-party research from the Global Startup Studio Network estimated studio IRR at roughly 53% versus around 21% for traditional startups — but these are self-reported, survivorship-prone estimates and should be read alongside TVPI, not as audited fund returns.

Is the 53% venture studio IRR figure reliable?

It is a widely cited estimate, not a guarantee. It comes from a 2022 GSSN study of 258 studio-created startups and is subject to self-selection, survivorship bias, and the fact that IRR flatters faster cycles. Treat it as directional evidence that the model can outperform, not as a precise or assured return.

What is the difference between a venture studio and a VC fund?

A VC fund supplies capital into rounds priced by others, earns fees and carry, and operates on a fixed fund life. A venture studio helps build companies from zero, takes founder-grade equity, and earns operating income — so its ownership per company is higher and its returns depend on contribution rather than selection alone.

How does a listed venture studio differ economically?

A listed studio uses permanent capital, so there is no fund clock forcing exits to return money to limited partners. It reports portfolio value as net asset value (NAV) through regulated public accounts, and its shareholders own the operating company directly — the balance sheet compounds through operating income and equity value rather than through management fees.

Follow our regulated disclosures and NAV reporting via investor relations, or read the thesis behind the model in Capital is not enough.

This is not investment advice. Third-party figures cited above are estimates, not forecasts, and no return is promised or implied. Pyratz Corp. (PyratzLabs) is listed on Euronext Access Paris (ticker MLPTZ, ISIN FR0013371507); trading resumed following completion of the post-RTO re-listing. Rely on official regulated information and, where appropriate, seek independent professional advice.