Venture investors build it themselves
Image: Protocol

Venture investors build it themselves

Protocol Pipeline

Hello and welcome to Pipeline! This week: the studio model matures, shuts down and valuations are up, but you should raise less capital.


  • "VC in 2021: 'The round is going to close this week. There is no deck yet.'" With investors moving upstream, a slide deck may be passé?
  • Why raising less VC funding can be better for a startup. Less stress, more options, more time to grow and more, from Micah Rosenbloom.
  • "Our SPAC's are multiyear, not quick flip type of investments. I'd caution retail investors against investing in these SPACs. These are risky long-term bets where technology risks, competition and projection risks are very real and highly variable." Vinod Khosla, on Khosla Ventures' SPACs.
  • Wealth tax debate. Some VCs don't like the idea of the wealth tax, which has been proposed by Elizabeth Warren and others. Paul Graham says a 2% wealth tax will take 65% of a founder's equity. Some agree while others, like Seth Bannon, disagree.

The Big Story

If you ideate it, co-founders will come

Startup studios are having a moment. The startup studio premise is that venture investors, instead of finding founders with great startups, will come up with ideas and find founders to build them.

The conventional wisdom is that this doesn't work because investors may not have the best ideas, or they can't marry the best ideas with the best founders. And even if they can do that, this doesn't scale.

But studios are now behind some of the biggest startups. Snowflake, one of the biggest exits of 2020, was built in Sutter Hill Ventures — while not a formal studio, it used the model. And that's far from the only one.

  • Opendoor was co-founded by Keith Rabois.
  • Palantir was co-founded by Peter Thiel.
  • Rover was co-founded by then Madrona and now Pioneer Square Labs VC Greg Gottesman. Science Inc., which focuses on consumer-facing products and services, mobile and entertainment startups, has hatched Dollar Shave Club, DogVacay and Play VC — and recently launched a SPAC.
  • Corporations are also jumping in.

"It's time to eliminate the myth that for a startup to be compelling, the founder or CEO must have come up with the idea," said Gottesman. "We now have numerous recent examples of billion-dollar companies started by VCs (Snowflake and Rover) or studios (Hims), and not by the person who ultimately scaled the business."

Startup studio Atomic, which just raised a new $260 million fund, has built out its startup studio, with companies such as Hims & Hers, which recently went public via a SPAC.

  • Atomic also developed companies such as Terminal, Replicant, TalkIQ and Homebound, by replicating its system of building new startups.
  • In the last 12 months during the pandemic, Atomic has started 12 companies.

Atomic, founded in 2013, now has more than 35 people, including engineers, designers and marketers who work on vetting new ideas and helping build them out. Now it's starting a program for founders from anywhere to apply to Atomic; the firm used to reach out and select founders or use referrals.

"This thing is real now," said Chester Ng, general partner at Atomic. "It's working and it's scaling."

In Seattle, Pioneer Square Labs, which just raised a $100 million second fund, has developed a studio focusing on local talent. "The studio gives us months to work shoulder-to-shoulder with founders to co-create companies, a unique opportunity to discover the best ways to accelerate the company into the market," PSL's T.A. McCann said.

The model can scale, said PSL co-founder Geoff Entress. "The startup studio concept is not limited to specific geographies, just to specific talent pools."

Startup studios aren't new: Bill Gross' Idealab and others used them to spin up new startups. And more recently biotech firms like Arch and Flagship have successfully built companies this way. But the new firms have refined the company-building process.

  • Studios like Atomic and Science run a range of tests before starting companies and bring in a range of resources such as distribution and customer acquisition that typical startups don't have access to.
  • In the ideal world, the model brings the best of founder-led startups and venture investor expertise.

It's not going to replace the traditional VC model, but it's another model that can work.



Greg Goldfarb, who is VP of Products and Commerce at GoDaddy, admires the resilience and ingenuity of small business owners. "It is amazing to see entrepreneurs figuring out the new context really quickly to adapt and survive." We sat down with Goldfarb to talk about the rise in ecommerce, the impact of COVID-19, the major trends emerging this year and more.

Read the interview

Inside Track

  • Shopify, which had $120 billion in GMV in 2020, is not competing directly with Amazon — it's providing easier-to-use tools for merchants to sell, Benedict Evans says. It's part of a broader wave of merchants selling direct to consumers and seeking to go around the Amazons of the world.
  • Crypto is back, and it's not just NFTs (though those are potential big businesses as well), Monica Desai says. It's also decentralized finance, which ties into anti-censorship efforts and mistrust of large institutions. Founders are building new forms of communities as well as financial products and meanwhile, large institutions are jumping in.
  • Your latest light reading not doing it for you? How about a book about epistemology, quantum mechanics, multiverse theory, infinity, mathematics, how to raise your children and more? Naval Ravikantrecommends "The Beginning of Infinity" by David Deutsch.
  • How can nonprofits help entrepreneurs innovate? Techstars Foundation is helping some of them with mentorship and financing, writes Brad Feld.

Need to Know

  • Snake eating its tail? SoftBank-backed Greensill lent $350 million to one of its own investors, PE (and VC) firm General Atlantic … which had previously invested $250 million into Greensill.
  • Preseed founders are moving out of Silicon Valley. But those founders didn't necessarily get as much funding. And successful pre-seed fundraising processes took seven to 12 weeks. That and more insights from DocSend's pre-seed report.
  • shuts down. O'Reilly AlphaTech Ventures started as an alternative to traditional VC, providing a structured buyback program to give founders flexibility and avoid heavy dilution. But limited partners dropped out, apparently not happy with the lack of true moonshot venture returns.
  • Pre-money series. A valuations have increased sixfold since 2010. That's according to PitchBook, per the Information.
  • Coursera reveals its S-1. The ed tech company, propelled by online learning during the pandemic, has major investors New Enterprise Associates holding 18.3% of shares, G Squared with 15.9%, Kleiner Perkins with 9.2% and Future Fund with 7.9%.
  • VC diversity still needs improvement, according to a NVCA/Deloitte report. In fact, the racial diversity of investment partners didn't change much at all between 2018 and 2020.
  • From Protocol: Square bought Tidal, not necessarily to get in on the streaming business, but rather to build out tools and finances for musicians.
  • Also on Protocol: What's the outlook for antitrust with Tim Wu joining Biden's National Economic Council as a special assistant to the president — who coined the term "net neutrality"?
  • And again on Protocol: Can this startup do for stock trading globally what Robinhood did in the U.S.?
  • This week in VC history: A year ago, Robinhood experienced a "major outage" for a second day amid heavy volume market action.
  • Your weekend reading: Who really writes Twitter's "Trending" Summaries.

Five Questions With...

Primary Venture Partners' Ben Sun

Ben Sun is a co-founder and general partner at Primary Venture Partners, which just raised a $150 million third seed fund and a $50 million growth fund focusing on New York startups. He was a co-founder of incubator LaunchTime and co-founder of early social networking startup Community Connect, which ran websites like Asian Avenue and Black Planet. He has invested in Coupang,, MakeSpace, Ollie, Mirror, Slice, Bounce Exchange, SelfMade, Shoptalk and Penrose Hill.

What's a secret obsession of yours that most people don't know about?

I'm constantly looking for great talent. I spend more time on LinkedIn looking for it rather than reading tech articles or following founders/VCs on Twitter. I am obsessed with making sure I am connecting with the best people who will either start companies or potentially work at our portfolio companies.

What product or service are you totally, even irrationally, loyal to?

Streaming services; I'm subscribed to five right now. Pandemic binge watching is real.

What problem do you want to see a startup solve?

Climate change. If we don't solve this, everything else is moving the chairs around the Titanic.

What company or startup sector is the most underrated right now?

Businesses that are serving real-world, in-person experiences through travel, events, conferences, etc. Some people think these types of experiences won't come back to where they were before the pandemic, but I think the past year has made people realize just how much they miss in-person connections and relationships.

What's the biggest problem in venture, and what needs to be done to solve it?

Lack of diversity — especially within the Black and Latinx communities. This is not only in VC, but also at the underlying companies. The VC industry as a whole can work to solve this by committing to investing in more diverse founders. We just launched our NYC Founders Fellowship program with the goal of helping aspiring New York City founders meet mentors and engage in rigorous exploration of their business idea in order to get it off the ground. We're aiming to increase diversity in the NYC startup community with this program, and we know the diverse community here is one of New York's greatest assets.

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