The most underwhelming moment for an entrepreneur in a startup ecosystem is the ribbon-cutting on yet another accelerator. Confetti flies, politicians pose, local media snaps a shot of the logo on the wall, and everyone goes home to wonder why venture capital still doesn’t show up. If you’re not familiar with why your region isn’t flush with VC dollars, start here: Why Venture Capital Avoids Your Startup Ecosystem. The short version? It’s not your climate. It’s not your cost of living. You have tech people. And no, it’s not because of a lack of capital.
Venture capital avoids your ecosystem because your region isn’t producing fundable companies.
Before you roll your eyes, be realistic about what makes a company fundable: startups with experienced teams, with unfair advantages in distribution, go-to-market, or technology; scalable business models with early traction; and a meaningful path to exit. Now ask yourself: what part of a local accelerator is delivering that?
Here’s what we know from working with ecosystems across the country: Accelerators usually fail the fundamental tests of venture capital readiness. The accelerator in town likely has a lot of events, they do have a great many people come through, and they do offer panels and talks. We call this “startup theater” because it looks good and as far as your local leaders are concerned (keeping voters happy), it’s probably sufficient to do that. People in my line of work increasingly scratch our heads and wonder why the founders continue to be there.
VCs avoid regions for a few common reasons:
- No distinctive deal flow: If your accelerator just picks from local applications, you’re drawing from a shallow, often inexperienced pool. Most founders applying are doing it for the free coworking space and mentorship.
- Lack of market-driven focus: Accelerators often run generalist programming. Venture capital, on the other hand, chases market signals. If you aren’t sector-specific, and your startups don’t understand or lead their market, investors don’t care (and shouldn’t).
- Over-indexing on pitch training for appearances: Too many accelerators spend more time on slide decks than supply chains but worse, when you look at what they’re doing, they’re not helping any more than polishing the standard pitch deck template. Most have no idea of the psychology behind how an incubator like Founder Institute orients what a team says, and as a result, Demo Days are literally theater. Real traction happens behind the scenes.
- No capital leverage: Accelerators rarely commit meaningful capital. Without real skin in the game, they can’t attract co-investors who rely on smart, aligned lead capital.
So, what does that mean? That your region’s shiny new accelerator isn’t really an engine of innovation. It’s a signaling program; one that signals, clearly, that you’re not ready for venture capital. You could argue it’s a sparkplug, a bit of a jolt for the engine, but in and of itself, they tend to fall short because they aren’t an engine.
Article Highlights
Invest in Venture Studios: An Actual Business that Builds Startups
Where accelerators recruit startups, Venture Studios invent them. Picture a studio as a startup foundry. It begins with a market problem, not a pitch. Studios validate ideas, hire founding teams, build MVPs, and often pre-sell before launch. They don’t hope a founder walks through the door with a billion-dollar idea, they create the conditions for it.
Unlike an accelerator, a Venture Studio is a business itself.
It holds equity in every company it spins out. It funds early development, shares infrastructure across its portfolio, and earns returns when those companies succeed. Studios typically retain 30% to 70% equity in each venture at formation, acting not like mentors or even investors, but like co-founders.
Funding comes from studio capital, outside investors, or often a dedicated fund. Some partner with corporations; others are funded by previous exits. But all operate on a focused, measured cadence—producing a few high-quality companies each year instead of hoping one out of 100 applicants finds traction.
I was going through some of Morrow’s Global Startup Studio Network work and it would seem venture studios have a success rate of nearly 30% to 60% for their startups reaching scale or exit (compared to 1% for accelerators). That’s not a small improvement. That’s a different game entirely.
Seriously, what the hell are you doing (cities and even investors) not demanding these things are in place?
If you need more academic analysis to support why that works, consider the recent research shared by John-Erik Hassel: Köhler, R., & Baumann, O. (2016) – Organizing a venture factory: company builder incubators and the case of Rocket Internet. Available at SSRN 2700098.
Their analysis of Rocket Internet revealed the not-so-secret behind its startup factory success:
- Centralized Control Beats Distributed Autonomy – Unlike incubators and accelerators, venture studios own the venture. They direct resources, strategy, and execution.
- Modular Teams and Shared Infrastructure – Venture studios deploy internal HR, legal, product, and marketing teams across ventures, increasing speed and efficiency.
- Replication > Reinvention – Startups launch from templates. Novelty takes a back seat to execution precision.
- Venture Ideas Come Last – The system comes first: a platform of talent, tools, and tactics. Ideas are plugged in after the infrastructure is ready.
- Rapid Iteration and Internal Benchmarking – Ideas are benchmarked constantly and cut quickly when underperforming.
This is not a startup incubator (which should be what you ALSO have for entrepreneurs!). It’s a startup assembly line. The most successful venture studios act like manufacturers:
- Process-driven
- Outcome-focused
- Relentlessly efficient
And if you’re building or evaluating a studio, you don’t need to start from scratch. Recently, Matthew Burris compiled an exceptional resource at Venture Studio Forum: a curated, up-to-date library of real-world pitch materials from across the venture studio ecosystem. This deck bundle includes:
- 27 Venture Studio Pitch Decks
- 1 Studio Partner Deck
- 3 EIR Presentations
- 4 VC Fund Memos
- 33 VC Fund Decks
Each resource was sourced through deep Google-fu and updated as of July 31, 2025. Use it to:
? See how top studios are positioning themselves
? Benchmark your deck structure and narrative
? Get insights into how LPs and GPs are presenting their funds
It’s a window into the playbook of the most sophisticated builders and investors in the world. And if that’s not the kind of transparency and benchmarking your region needs, what is?
Why Civic Dollars Belong in Studios, Not Startups
Let’s make this political: If you’re a city, state, or EDC allocating public money to support startups, you have a fiscal responsibility not to light it on fire. Founders will tell you they want capital. But giving tax dollars directly to early-stage startups is a moral hazard. Most will fail. Most should fail. That’s how innovation works.
But investing in a Venture Studio? That’s different. That’s funding an innovation company; a job creator, a commercialization engine, and a measurable, revenue-bearing entity that can (and had better) be held accountable for outcomes.
Here’s why it works for government:
- Studios are sector-specific by design. A region wants to be a leader in agtech, clean energy, or medtech? A studio can specialize. It builds what the market lacks.
- Studios create durable infrastructure. This isn’t about free panel discussions and pitch nights. Studios build reusable systems (HR, marketing, engineering, customer acquisition) that lower the cost and increase the success rate of startups.
- Studios are measurable. You want results? Look at companies formed, jobs created, follow-on capital raised, revenues generated. Studios perform.
- Studios attract private capital. They have a track record, leadership, and equity to offer investors, not just a parade of founders asking for checks.
And this doesn’t mean they’re *not* for entrepreneurs with ideas! What they’re doing is specializing, focusing, and developing in the infrastructure, so you don’t have a fintech founder languishing among everyone else with an idea, you have a fintech founder who might be meaningful to the work the FinTech Venture Studio is doind.
The kicker? Venture Studios don’t even need that much from public partners. A lease on a building. A grant to co-fund prototype development. Access to procurement pipelines. This isn’t a blank check to chase dreams. This is civic infrastructure for innovation, built on a proven business model.
Build What Works to help Entrepreneurs Building What Might
I’m working closely with public sector leaders, private investors, and veteran operators who are all recognizing the same thing: we’ve been investing in the wrong things. If you’re serious about economic development, if you want innovation that creates jobs, revenue, and pride in your community, let’s talk about venture studios.
This isn’t hypothetical. It’s working. And if your region doesn’t get there first, someone else will. Let’s build it.
Thanks STARTUP ECONOMIST and Paul O’Brien! I’m right there with you! Working on an article now on the cashflow focused studio strategy and what it means for regional economic development strategy.
The biggest value of the venture studio model for economic development is that the studio model can be adapted to the region, local needs, local capabilities, and deliver more targeted results while still delivering a return. This allows an evergreen strategy to emerge where economic development can seed engines of economic growth that become self-sustaining and even growing.
Matthew Burris Absolutely spot on. I’m glad you’re pushing this forward.
Too often, economic development is trapped in a binary: subsidize outside companies to relocate, or fund programs that “support” local entrepreneurs with no long-term ownership, equity, or infrastructure. The venture studio model breaks that cycle.
What makes it powerful isn’t just that it creates #startups, it’s that it builds a repeatable economic engine tailored to the region. Studios hire locally, build sector expertise, and reuse infrastructure across ventures. That’s how you go from chasing jobs to manufacturing them.
Looking forward to your article; let’s keep putting pressure where it belongs: on results.
If any civic leaders want to explore what a regional studio could look like in their sector or community, let’s map it out. This is the kind of investment that pays for itself and grows.
Thank you for the shout out Paul O’Brien and for sharing your insight about this topic!
Acceleration is most misunderstood by accelerators, and especially by those who fund them. Great scoop Paul O’Brien
Love the sentiment LOL Most accelerators probably do the opposite
IMO: They accelerate to Demo Day, while everything else hasn’t moved LOL.
Studios are like Nightclubs / music venues. They provide the stage, the lighting, the PA, etc. But it’s up to bands to show up, promote, perform, etc. Startups are A LOT like bands… most would – and should – fail.
Mark Simchock great analogy! Because “studios” aren’t just offering the stage, they’re curating the lineup, tuning the sound, and running the whole production. It’s not just about access. It’s about orchestration.
The flexibility of the model is the best feature of the model for economic development. Adaptation is key. The model can adapt to the local capabilities, local needs, and ground truth realities. Build for cash flow, build for PE or M&A exit, or even build for VC. Each is distinctly different exercises.
Great work and insight Paul!
Paul O’Brien Yeah. That makes bettter sense. Thanks. I’ve just mainly been thinking about startups as bands. That is, they should be creative and seek an audience. They should also in most cases fail.
Imagine applying the studio model but with AI agents integrated for each key role — Product, Ops, Marketing, Finance. The efficiency gains, reduced costs and faster execution cycles could transform the studio into a self-scaling machine!
Whole heartedly agree — seasoned entrepreneurs managing a specific playbook that allows younger entrepreneurs to bring the energy and roll through with fairly aligned equity is a much better long-term platform than accelerators.
Pre-Series A doesn’t have enough momentum for the accelerator model to thrive.
Rufat Karimov because it’s already process-driven and modular, integrating AI agents is not a bolt-on, it’s a natural evolution but the risk is that AI agents could reinforce shallow execution if the underlying processes aren’t strong to begin with.
Studios gain efficiency by codifying excellence, not just speeding up tasks. Much of that excellence is in experience, connections, and creativity that only people have – and AI can never meaningfully have.
So, the question becomes: how do we ensure these agents aren’t just mimicking generic startup advice, but are actually aligned with high-quality decision-making frameworks that evolve over time?
In other words, who trains the trainers? And how do we audit what the machine is learning across ventures?
Graham Gintz the issue is that accelerators depend on momentum that doesn’t yet exist. They assume traction, team cohesion, and market clarity that most early-stage ventures simply don’t have. Or they enroll early-stage ventures because, frankly, they can’t get later applicants and they’re just seeking to make money from founders.
Studios impose structure from day one.
Hence the question I’m pushing: are we not misallocating public and private capital by continuing to fund accelerators when the earliest stages clearly require integration, not coaching??
Well said! Thanks for validating the choices I’ve made
Great idea! Also look toward crowdsourcing vehicles like Legion-M.
Really appreciate this one, I’ve been banging the table for this approach, especially when dealing with lab to market.
Paul O’Brien – Thanks for the insight and the shout-out!
This is a great write up by Paul O’Brien that explains why Project25.ai is a studio vs. an accelerator i.e. we don’t watch 1000’s of pitches and tell people “no” all day. Ideas are sourced through an AI model looking for opportunities, the Project25 team or can even come from a company or university looking to get a software product in market quickly.
Thanks for sharing Joe Berti. And for highlighting the distinction so clearly.
What you’re doing with Project25.ai reinforces the core value of the studio model: it’s not about gatekeeping ideas, it’s about sourcing, validating, and building systematically. Integrating AI to surface opportunities adds another layer of leverage, especially when the goal is speed to market, not just mentorship.
Appreciate the mention and the work you’re doing to evolve the model.
Human stays behind every agent to train. First comes strong process built by humans. AI agents should operate inside a well-defined operational framework that captures the studio’s best practices. Then comes “Human-in-the-loop” — Experienced operators review, refine and adapt AI recommendations, ensuring they stay aligned with strategic objectives and market realities. In other words, AI agents don’t replace the creative and relational edge of a studio – they make it compounding by embedding that excellence across every portfolio company at scale.