Building a Tough Tech Venture Studio

Welcome to the frontier of innovation that doesn’t get VC Twitter likes or SXSW panels, the mud-covered, steel-reinforced, and sometimes radioactive frontier of “Tough Tech” (my word, I’m trying to come up with something to distinguish not-consumer, not-university, not just-apps). This isn’t SaaS, crypto, or your fourth AI wrapper for ChatGPT, this is the real economy: agriculture, water, energy, geography, oil, minerals, metals, and waste. This is where building a venture studio likely matters most but is also likely hardest to build. This is also where most smaller towns need to focus, since software engineers capable of anything aren’t valuable in an every-city-has-coders world; to thrive, every city should build innovation and entrepreneurship based on the resources and experiences they already have, rather than trying to reinvent themselves as Also-Silicon-Valley.

Foremost, why a Venture Studio and not an Accelerator?

If coworking spaces are adult dorm rooms and accelerators are speed dating for startups (which, by the way, they aren’t and shouldn’t be, but most are no better than networking spaces), venture studios are a bit more like the parents who actually raise the company, having done the fun part of R&D to make the baby. They don’t rent desks or throw demo days, they birth the business, hire the team, provide the infrastructure, and stay up all night doing the hard work until it can survive on its own. A venture studio isn’t your investor. It’s your cofounder. It doesn’t wait for pitches. It generates ideas, validates them, builds the founding team, and stays embedded through market-product fit ( yes, I know it’s product-market fit, saying it the right way is wrong) and scale.

I’ve been following

John-Erik Hassel

and Matthew Burris, two of the leading authorities on venture builder models, and through their work published, I wanted to take a closer look at the economic impact of venture studios by way of how we might specialize them for tough tech towns. “I find that venture builders aim at reducing risk and maximizing return on investment by pre-defining a uniform outcome following its for-profit nature, noted John-Erik Hassel. “They therefore aim to produce and support startups like on a factory assembly line. Venture builders aren’t just incubators, accelerators or investors.”

In the realm of Tough Tech, where you can’t just code your way out of a broken water grid or soil degradation, this model is not just helpful, it’s necessary. Venture studios solve the failure point of every incubator that thinks innovation means inviting ideas from the outside and hoping someone has the grit to follow through. Studios flip that script: they start from the inside, align capital and capability from day one, and only spin out companies when they’re built to survive the regulatory gauntlet and supply chain chaos that define industrial transformation. In other words, this isn’t startup theater, it’s startup manufacturing.

“The venture studio model has produced some of the most promising companies of the last decade-with net IRRs that make traditional VC look soft. 60% Average net IRR is a slap across the face to VC’s ~30% top quartile returns.” — Matthew Burris

A Tough Tech Venture Studio is a masochist’s playground, an economic developer’s answer, and a bureaucrat’s worst nightmare. You don’t iterate your way into carbon-neutral ammonia production or vertical geothermal wells. You engineer, permit, dig, deploy, and pray the sensors work. So, how do you structure a venture studio that doesn’t blow up (literally or financially)?

Building a Venture Studio

Legal Structure: LP/LLC Hybrid or Series LLC

Set this up as a dual-entity model. The studio itself should be a C-Corp or Series LLC (for asset protection, pass-through flexibility, and governance clarity). The startups spun out of it can be Delaware or Texas C-Corps ( Texas given the recent changes in Texas that make it as ideal as Delaware), backed by standard convertible instruments. If you’re dealing with infrastructure or land, use LLCs to hold and manage those hard assets. Consider a holding company with subsidiary SPVs for each venture. This lets you separate risk, allocate capital cleanly, and offer unique participation for aligned partners.

What is involved in a Venture Studio?

Sources of Capital: Asset-Heavy Meets Network-Rich

You won’t fund this on pitch decks alone because the model of a venture studio is not that of real estate, incubator, or startup; in effect, it’s all three. You’ll need a capital stack as layered as an oilfield geology survey:

• Philanthropic or catalytic capital from family offices or place-based funds (Rockefeller Foundation, Schmidt Sciences, etc.)
• Public-private grants (DOE, USDA, SBIR, NSF, ARPA-E)
• Strategic investors like ag conglomerates, water utilities, defense contractors, and energy majors
• Institutional LPs interested in ESG, climate, or sovereign tech
• Real asset capital: tap infrastructure funds and REITs for co-locating physical assets

Your investor deck won’t be sexy (though the elevator pitch can and must be) it’ll be a 40-page PDF with cash flows, land leases, energy credits, and geological risk profiles. Own it.

Real Estate: Buy Dirt or Co-Locate

Tough Tech doesn’t work from WeWork. You’ll need physical infrastructure:

• Labs: For materials testing, sensors, bio-agriculture, and fuel cells
• Pilot fields: Agtech needs land, water tech needs flow
• Warehouses and micro-factories: For prototyping, testing, and early production
• Co-location with national labs or private R&D clusters: Piggyback on their testing and compliance systems; look for Opportunity Zones, industrial districts, or underutilized public land.

Partners: Not Advisors! Operators

If you think “mentor network” or referrals to investors gets startups anywhere in this world, you’re still thinking like an inexperienced software founder. You need:

• Universities, not to own your companies or gatekeep IP, but to expose their research and patents to student entrepreneurs who are empowered by your studio to commercialize in the private sector
• Industry consortia like the Clean Energy Buyers Association or AgriTech America
• Economic development corporations who want jobs, exports, and capex
• Fortune 100 strategic partners who will pilot and buy your stuff
• Veteran operators from John Deere, Halliburton, Schlumberger, Archer Daniels Midland This studio should serve as the free-use commercialization engine for academia: allowing founding teams to start companies without shackling them to the molasses of tech transfer offices.

Ideation and Validation: Engineering Meets Empathy

Here’s where most incubators and accelerators fail: they teach people to talk to customers as though customers of an existing thing know how an innovation will work. They try to brainstorm ideas with sticky notes and LinkedIn polls; ignorant, when what works in startups is execution (marketing and delivery), not an idea seeking funding.

In venture studios, you validate because people that have experience know that they’re doing:

• Teams comprised of industry entrepreneurs
• Talking to growers, drillers, utility managers, and farmers
• Reverse engineering IP portfolios from public datasets and research databases
• Using geographic data, water rights, climate impact reports
• Participating in standards boards and regulatory bodies

Your ideation is not a sprint. It’s trench warfare.

Team Building: Hire for Scar Tissue

No MBAs or pitch contest winners. You want:

• Former founders who’ve failed in hardware (yes, they’re experienced and determined)
• Principal investigators from DOE/NSF-funded projects
• Product people who’ve built hardware/software interfaces
• Regulatory and environmental consultants
• Public Affairs professionals to deal with the institutions, legislators, and market impact
• CFOs who can finance infrastructure AND equity rounds

Resource Provision: Stack the Deck

Centralize key shared infrastructure:

• Marketing: not advertising or promoting (though sharing that is helpful), knowing the market
• Legal: land use, IP, permitting
• HR/People: Hard Tech HR is different; it’s union-savvy, safety-minded
• Fundraising: grant writing, pitch decks, SBIR, tax credit monetization
• Manufacturing: shared prototyping, CNC, 3D print, microbatch labs
• Regulatory: food safety, emissions compliance, FDA/EPA/DOE reporting
• Storytelling: documentation, science comms, policy decks

Active Involvement: Embedded Co-Founders

You don’t advise the startups. You are the startups. Studio team members are:

• Interim CTOs, ops managers, BD leads
• Board members with operational stakes
• Co-signers on grants and pilot agreements
• Marketers so that the ventures have markets

Scalability Focus: Commercialization or Bust

You don’t scale via paid ads. You scale by:

• Proving unit economics at small scale
• Securing public-private procurement (municipalities, ag cooperatives)
• Partnering with OEMs and infrastructure providers
• Licensing tech to multinationals with existing scale

You have to industrialize the startup, not just grow it.

Long-term Relationship: The Studio is the Startup

These aren’t portfolio companies. They’re limbs of your body.

• Stay involved through Series A and B
• Keep equity even after outside teams take over
• Serve as the manufacturing and regulatory arm long-term

You’re not an accelerator; you’re a womb.

Equity Stake: Earn It, Don’t Demand It

Venture studios typically take 30–50% at pre-seed and dilute down over time. But it’s not about the stake, it’s about contribution:

• Who did the science?
• Who secured the land?
• Who did the pilot?

Split remaining equity with the team according to labor and capital; cliff everyone involved in a new venture and then vest based on time and contribution. You too, be a cofounder, not a landlord.

Build What the World Actually Needs

Tough Tech feeds us, fuels us, and cleans up the mess the last century left behind. A venture studio in this space must be willing to shovel manure, wear hard hats, and explain geothermal rights to confused city investors. It’s not glamorous, it’s essential, and it’s critical that if you’re hoping to transform your town to better serve the new economy, attract entrepreneurs, and create jobs, you need to do this; not coworking spaces, not an accelerator, and not some incubator pretending to help, build a venture studio designed for the sectors already strong in your city.

If you’re serious about building this, I want to hear from you. Because the world doesn’t change through SaaS dashboards and buzzword decks. It changes through sweat, steel, and the stubbornness to turn atoms into value.

Originally published at https://seobrien.com on June 17, 2025.