What do you do when you get pitched a bunch of really nice startups but you think you can do even better? You roll your own, of course. Or, at least, that’s what Struck Capital is giving a whirl with a $15 million fund and a team of experienced company builders, in addition to its existing $220 million AUM funds, with LPs including Leo DiCaprio.
The new studio is led by Adam Struck and Michael Montero (CTO and co-founder of Resy, which sold to American Express a while back), along with Chairman Tom Ryan (CEO/co-founder of Pluto TV and present CEO of Streaming at Paramount), Struck Studio is turning the typical VC model topsey-turvey. Instead of finding founders with a great idea and throwing money at them, Struck Studio is running a venture studio of sorts, and instead spins up products, spins out companies and then, presumably, goes to a spin class to keep up with the spinning theme.
There are some interesting models out there that are somewhat similar. Entrepreneur First helps people find co-founders to start companies with, VentureDevs builds products and companies with a portfolio approach and Rainmaking studio is working with corporate partners to spin up startups in a new external-R&D model, for example.
“We see trends before they happen, we see problems that have dozens of companies trying to solve them.” Adam Struck
Struck is taking a slightly different approach. The studio has in-house engineers, designers, marketers, strategists and, most importantly, asymmetrical access to information stemming from its portfolio companies. Struck Studio will be coming up with their own ideas, validating them, building MVPs, backing the companies financially and then recruiting the right CEO to be their co-founder to run it.
I didn’t love how the company specifically calls out “the thousands of pitches they receive” as part of the data input for its company building; Founders are worried enough about “having their ideas stolen” when they share their decks and info with potential investors. Typically, I tell startups that worry that “investors have better things to do than to take your idea and try to build a company,” but when that’s literally Struck Studio’s model, things get a little murkier.
“What was interesting for us, especially in 2021, when valuations were going through the roof, we found that founders were not allowing us to do a lot of diligence. The companies we were looking at have a lot of technical and operational debt, even if they had signs of product/market fit. We realized that, given that we’re seeing thousands of deals a year and we’re all former operators, we have a ton of information asymmetries,” said Adam Struck in an interview with me last week. “We essentially do all the ideation, validation and product development on our own. We feel we can do a great job of that just because we can flex the information asymmetries that we have as a byproduct of running Struck Capital and Struck Crypto.”
I questioned whether I would pitch my own startup to Struck, given the above, and clarified with the Struck team how they operate. I asked them “how does a founder know that Struck Studio wouldn’t ‘steal’ their idea?”
“We never steal ideas. The bigger point here is that we actually learn more from the pitches we do not receive than the ones we do— as it relates to Struck Studio,” Struck counters when I ask him the above. “We see trends before they happen, we see problems that have dozens of companies trying to solve them. And, we see major problems that nobody else is working on. Those are the areas where Struck Studio fits in. We see so many ideas and analyze so many markets, so we develop information asymmetries that we understand where the puck is going, where there are greenfield opportunities and what markets have tailwinds and are ripe for innovation.”
In any case, once Struck Studio finds signs of product/market fit, they go find an experienced entrepreneur to run the company. Struck describes it as a win/win; the founders may not have the risk appetite to leave their existing careers.
“We can go to [the entrepreneur] and say listen, we’ve got a sense of product-market fit. We’ve identified your buyer persona, we have incredible investors around the table, come and join us and we’ll give you 50% of the company and spin it out,” says Struck. “From our perspective, and it fits really nicely for the fundraising environment right now.”
The model introduces an interesting dynamic; typically, if an early-stage investor somehow ends up with half the company, the cap table looks a little wonky; it means that there’s less incentive for the founders to perform and to push for a large exit. The studio doesn’t believe that’s much of an issue.
“It’s really critical for us that the venture funds that choose to partner with the studio and lead to subsequent rounds of financing do not view the 50% owned by the studio as dead equity. It’s really critical for us to not only play a massive role in conceptualizing the company and bring it to a point where that hasn’t a product-market fit, but then to really leverage our platform,” says Struck. “We feel like we have enough of a platform and enough of a system that we can continue adding value. We leverage Mike and Tom and the totality of the studio to continually assist with hiring and talent acquisition, to continually assist with product build, tech build, finding buyer personas and helping on the business development front. We’re continuously involved with these companies. So we view it as a very positive thing not a negative thing.”