Why We Built a Product Studio (Not an Agency)

We turned down $150K in agency work last quarter.

Not because we’re successful enough to be picky. Because taking that work would have killed what we’re building. When you’re an agency, client revenue is your lifeline. When you’re a product studio, client revenue can become your poison.

This is the story of why we chose the harder path—and why it’s the only model that makes sense for the AI era.

The Three Models (And Why Most People Confuse Them)

Let’s clear up the definitions first. Three models dominate the “we build software” space:

Consultancies sell expertise and hours. You hire McKinsey or Thoughtworks for strategic advice, process improvement, or enterprise implementation. They bill $200-500/hour. They don’t own equity. They move on when the engagement ends.

Agencies sell execution and deliverables. You hire them to build your app, design your brand, or run your marketing. Fixed-price projects or retainers. They deliver what you specify. You own everything. They’re incentivized to say yes, ship, and move to the next client.

Product studios build products as equity partners. You bring an idea and domain expertise. We bring product development capabilities. We take 10-25% equity instead of full payment. We stay involved post-launch. We succeed when you succeed.

The distinction isn’t semantic—it’s structural. Different incentives produce different outcomes.

Why Agencies Optimize for the Wrong Things

The agency model has a fatal flaw: revenue maximization conflicts with product quality.

Here’s the dynamic every agency founder knows but few admit:

Your client wants a feature. You know it’s wrong for their users. But they’re paying $150K and insisting on delivery. Do you fight them and risk losing the contract? Or do you build what they asked for, collect the check, and move on?

Most agencies choose door number two. It’s rational. It’s how you stay in business. It’s also how you build products nobody wants.

The metrics that matter to agencies (billable hours, project margins, client retention) have zero correlation with the metrics that matter to products (user growth, engagement, retention, revenue).

Worse, the agency model encourages feature factories over product thinking. Clients come with spec documents. Agencies execute spec documents. Nobody’s incentivized to ask: should we build this at all?

The result is predictable: 67% of agency-built MVPs fail within the first year. Not because the code was bad. Because the product was wrong from the start.

The Product Studio Model: How It Actually Works

Product studios flip the incentive structure. We don’t get paid to build what you want. We get paid when what we build succeeds.

Here’s the standard deal structure:

Equity stake: 10-25% depending on stage, risk, and involvement level. Median across the industry is 17%. Early-stage ideas command higher equity. Validated products with traction command lower equity.

Reduced cash payment: We charge 30-50% of market rate for development. Sometimes zero if we’re betting big on the outcome. The equity compensates for the discount.

Ongoing involvement: We don’t disappear after launch. We’re board members, advisors, or active operators. Our incentive is long-term value creation, not short-term delivery.

Portfolio approach: We build multiple products simultaneously. Some fail. Some breakeven. A few become huge winners. Like venture capital, we’re optimizing for asymmetric upside.

The economics work when you compound equity stakes across multiple products. Build ten products at 15% equity each. Eight fail or plateau. One becomes a $10M exit. One becomes a $50M exit. That’s $9M in outcomes versus maybe $1.5M in agency revenue for the same work.

But it only works if you’re good at picking ideas and building products. That’s the risk. That’s why most agencies stay agencies.

The Data: Why Product Studios Win

The numbers tell a clear story.

Venture studios (another name for product studios) have a 44% better success rate than traditional startups. Not marginal improvement. Not noise in the data. Nearly half again as likely to succeed.

Traditional startup success rate: ~20% (survive past year three) Product studio success rate: ~30% (based on GSSN Global Startup Studio Network data)

Why the gap?

De-risking through expertise. Product studios have built products before. They know the patterns. They spot the obvious mistakes. They’ve debugged the deployment pipeline, negotiated the infrastructure contracts, refined the onboarding flow. First-time founders are learning. Studios are applying.

Resource efficiency. Studios share infrastructure across portfolio companies. Design systems. Component libraries. DevOps pipelines. Authentication services. Payment integrations. Each new product launches faster because it inherits from previous products.

Portfolio diversification. One product can fail without killing the business. Studios can take bigger swings because they’re not betting everything on one outcome. Agencies can’t afford to take risks. Studios can’t afford not to.

Network effects. Each product teaches lessons that benefit the next. Each founder introduces the studio to new domains. Each success attracts better partnerships. The value compounds in ways pure service businesses never experience.

The data backs this up across the industry. Studios consistently outperform solo founders and first-time teams—not because they’re smarter, but because they’re applying accumulated learning.

The Case Studies Everyone References

Two names dominate product studio conversations: Atomic and Flagship Pioneering.

Atomic has built 100+ companies since 2012. Their model: recruit founding CEOs, pair them with product/tech teams, build and launch in 6-12 months. Take equity stakes. Provide ongoing support.

Their portfolio includes Hims & Hers (now public, $1.6B market cap), Homebound (raised $100M+), and Bungalow (raised $65M+). Not every company succeeds. But the winners create outsized returns that compensate for the failures.

Atomic’s public success rate: roughly 1 in 3 companies reaches significant scale. That’s 33%—well above the startup average of 20%.

Flagship Pioneering takes the model into life sciences. They don’t wait for founders to approach them. They invent companies from scratch based on scientific hypotheses.

Their most famous creation: Moderna. Yes, that Moderna. The COVID vaccine company now worth $25 billion.

Flagship founded Moderna in 2010 with an insight about mRNA therapeutics. They recruited the CEO (Stéphane Bancel from biotech, not academia). They built the company from the ground up. They stayed involved through IPO and beyond.

That single success justified decades of studio operations. But they didn’t stop there. Flagship has founded 100+ companies. Total portfolio value exceeds $100 billion.

The lesson isn’t “build the next Moderna.” The lesson is: product studios can build category-defining companies when they combine domain insight, operational excellence, and patience.

Why the AI Era Makes This Model Inevitable

Three shifts make product studios uniquely positioned for the next decade:

1. Speed Enables Portfolio Strategies

AI development tools (Cursor, v0, Lovable, Bolt.new) compress build time from months to weeks. What used to require a full engineering team for six months now takes one engineer and AI tooling for one month.

This changes the math of product studios. If you can build and validate ten products in the time it used to take to build one, your portfolio diversification improves 10x. More shots on goal. Better odds of hitting a winner.

The agency model can’t capitalize on this speed. Agencies optimize for billable hours. Faster building means less revenue. Product studios optimize for outcomes. Faster building means more products, more equity stakes, more asymmetric bets.

2. Validation Speed Matters More Than Build Speed

The bottleneck in product development isn’t coding anymore—it’s learning. Can you get from idea to validated demand in weeks instead of months?

Product studios can move faster because they’re not constrained by client approval processes. No stakeholder meetings. No change requests. No sign-offs on every design iteration. Just ship, measure, learn.

This matters enormously in the AI era. Technologies shift quarterly. User expectations evolve constantly. Being able to pivot without contractual negotiations is a superpower.

3. The Market Is Massive and Growing

The AI market was $184 billion in 2024. It’s projected to hit $826 billion by 2030. Every industry is rebuilding products with AI-native architectures.

This isn’t a gold rush—it’s a tectonic shift. And tectonic shifts favor those who can build multiple products simultaneously across multiple verticals.

Agencies chase clients. Product studios chase markets. When the entire market is being rebuilt, the portfolio approach wins.

The Challenges Nobody Talks About

Product studios are harder to operate than agencies. Let’s be honest about why:

Capital Requirements

Agencies are cash-flow positive from day one. You bill clients. Clients pay. You cover costs. You’re profitable.

Product studios run negative for years. You’re funding development. You’re covering operating costs. You’re not getting paid market rates. You need runway—either from previous exits, outside investment, or hybrid revenue models.

Most studios fail in year one because they run out of money before any equity stakes pay off. The math doesn’t work unless you have capital to sustain operations while products mature.

Team Building

Agencies can hire execution-focused developers. “Build this feature per the spec.” Clear task. Clear success criteria. Manageable for mid-level talent.

Product studios need product thinkers. People who can operate under ambiguity. Who question assumptions. Who balance speed and quality. Who understand that “done” means “validated,” not “deployed.”

This talent is scarce. And expensive. And hard to retain when you’re not paying market-rate salaries because you’re betting on equity upside.

Client Expectations

Founders who approach product studios often expect agency dynamics. “I’ll pay you to build my idea.” But that’s not the model. We’re not service providers—we’re co-founders.

This creates tension. We push back on ideas. We say no to features. We insist on validation before development. Some founders love this. Some founders hate it.

Managing that relationship—being collaborative without being subservient—is an art form. Agencies optimize for client satisfaction. Product studios optimize for product success. These aren’t always the same thing.

Portfolio Management

Juggling ten products simultaneously is chaos. Each has different customers. Different tech stacks. Different market dynamics. Different timelines.

You need systems. Shared infrastructure. Reusable components. Standardized processes. Without this, you’re not a studio—you’re ten startups run by the same team, which is just ten times the stress with none of the benefits.

Building that operational backbone takes time. Most studios underestimate how much operational excellence matters when you’re context-switching between products daily.

The Vibery Model: Hybrid by Necessity

We’re not purists. We can’t afford to be.

Pure product studios need millions in upfront capital to sustain operations until equity pays off. We don’t have that luxury. So we run a hybrid model: selective client work funds owned product development.

Here’s how it works for us:

30% of capacity: Client work. We take on projects where we believe in the founder and the idea. We charge reduced rates in exchange for small equity stakes (5-10%). This generates cash flow to cover operations.

70% of capacity: Owned products. We build products we conceptualize, own entirely, and operate ourselves. Vibery Edu is the flagship. More are in the pipeline.

The client work subsidizes the owned products. The owned products generate the asymmetric upside. Over time, as owned products succeed, we reduce client work to zero.

This isn’t the ideal model. Ideally, we’d be fully funded and exclusively building owned products. But it’s the pragmatic model. And pragmatism beats idealism when you’re bootstrapping.

What We Look For in Partnerships

When we do take client work, we’re selective. We look for:

Founder-market fit. Do you deeply understand the problem you’re solving? Have you lived it? Do you have insight others lack?

Willingness to co-build. We’re not executors. We’re co-founders. If you want an order-taker, hire an agency. If you want a thought partner who challenges assumptions, we’re interested.

Realistic timelines. We build fast, but we don’t ship garbage. If you need something production-ready in two weeks, we’re not the right fit. If you need something validated in two weeks, we can probably help.

Equity alignment. We take stakes when we believe in the outcome. If you’re not willing to give equity, we’re probably not the right partner. We want skin in the game on both sides.

This filters out 95% of inquiries. That’s intentional. We’re optimizing for long-term partnerships, not short-term revenue.

What This Means for Founders Considering a Studio Partnership

If you’re thinking about working with a product studio (us or anyone else), here’s what you need to know:

When a Product Studio Makes Sense

You’re non-technical and need a technical co-founder. Product studios can fill that role. We bring product development capabilities. You bring domain expertise and market access. Equity split reflects the contribution imbalance.

You need speed to validation. Studios move faster than hiring a team. We have infrastructure, processes, and experience. You get weeks, not months, to your first real user feedback.

You value product thinking over execution. If you have a spec and want it built exactly as written, hire an agency. If you want a partner who’ll push back and suggest better approaches, studios are better.

You’re capital-efficient. Giving equity instead of paying cash preserves runway. If you have $100K in the bank, spending $50K on development might kill you. Spending $15K plus equity might not.

When a Product Studio Doesn’t Make Sense

You have a clear spec and just need execution. If you know exactly what to build and just need hands on keyboards, agencies are more efficient. Studios add value through product thinking. If you don’t need that, don’t pay for it with equity.

You want full control. Studios have opinions. We’ll challenge your assumptions. If you’re not open to that, the partnership will fail. Founders who need total autonomy should build in-house or hire agencies.

Your idea is in a slow-moving industry. Product studios thrive in fast-moving markets where speed to market creates advantage. If you’re building for enterprises with 18-month sales cycles, the speed advantage evaporates. Traditional development might be better.

You’re well-funded and can hire a team. If you’ve raised $2M and can hire three engineers, you probably don’t need a studio. We add value when capital is constrained and speed matters. If neither is true, build in-house.

The Broader Bet We’re Making

Product studios are making a bet about how product development evolves. Here’s ours:

Bet 1: Building becomes commoditized. AI tools make implementation faster and cheaper every year. The scarce resource shifts from “can you build it?” to “should you build it?” Product studios excel at the latter.

Bet 2: Distribution remains the moat. Anyone can build a clone. Not everyone can reach customers. Studios compound distribution advantages across portfolio companies. Each success strengthens the brand, expands the network, and makes the next launch easier.

Bet 3: Speed compounds. The faster you validate, the faster you iterate. The faster you iterate, the faster you find product-market fit. Studios optimize for iteration speed. That advantage compounds over time.

Bet 4: Equity > cash for asymmetric outcomes. Agencies cap upside at billable rates. Studios cap downside at operating costs but have unlimited upside through equity. Over a decade, equity stakes in five successes outperform cash revenue from fifty clients.

These bets could be wrong. But if they’re right, product studios aren’t just a business model—they’re the business model for AI-era product development.

Why This Model Isn’t for Everyone

Most software companies shouldn’t become product studios. Let’s be clear about that.

If you have a strong agency brand and recurring revenue, don’t change. Product studios are harder to operate and riskier to scale. If your agency is profitable and growing, optimize that model. Don’t abandon certainty for philosophy.

If your team loves execution over product thinking, stay an agency. Product studios require constant context-switching, ambiguity tolerance, and strategic thinking. Some people thrive in that environment. Most don’t. Build the company your team will love working in.

If your clients are enterprises with fixed budgets, agencies work better. Enterprise clients need predictable costs, detailed contracts, and milestone-based payments. Equity partnerships don’t fit their procurement processes.

If you don’t have capital or exits to draw on, hybrid models are brutal. Funding owned products while doing client work is exhausting. You’re always under-resourced on both fronts. It’s sustainable long enough to reach liftoff. It’s miserable for years before that.

This isn’t a “one model to rule them all” argument. It’s a “know why you’re choosing your model” argument. We chose product studio because our goals (build multiple products, take asymmetric bets, compound equity value) align with the model. If your goals differ, your model should too.

The Vibery Vision (And Why We’re All-In)

We’re building Vibery Product Studio with a ten-year horizon. Not ten quarters. Ten years.

In year one, we’re mostly client work. Funding owned products. Building infrastructure. Learning what works.

In year three, we’re 50/50. Half client partnerships. Half owned products. Several products in market. Early revenue. Some failures. Portfolio taking shape.

In year five, we’re mostly owned products. Client work is rare and highly selective. Multiple products generating revenue. Equity stakes in partner companies starting to exit. Compounding kicking in.

In year ten, we’re a studio with 20+ products, a recognizable brand, and a track record of building AI-native products that scale. Client work is effectively zero. Revenue comes from owned products and equity liquidity.

That’s the vision. We might not hit it. Most studios don’t. But if we do, it’s because we chose the model that aligns incentives with outcomes.

What We’re Building Right Now

Vibery Edu is our flagship. AI-powered learning platform that adapts to how each student learns. We’re building it as a product studio: owned entirely by us, funded by selective client work, built with AI tools to maximize speed.

It’s our proof of concept. Can we build a product worth using? Can we find product-market fit? Can we scale it profitably? If yes, we validate the model and unlock the next product.

We’re not hiding behind client work. We’re not waiting until conditions are perfect. We’re shipping. Learning. Iterating. Showing, not telling.

Next products in the pipeline:

AI-powered content workflows for small creator teams
Automation tools for service businesses drowning in repetitive tasks
Internal tools we’re building for ourselves and plan to productize

Each teaches us something. Each shares infrastructure. Each increases our odds of hitting a big outcome.

Most studios are secretive about their model. We’re not.

We’re sharing our thinking for three reasons:

1. Attracting the right partners. If you read this far and thought “this is exactly what I need,” you’re probably a good fit. If you thought “this sounds chaotic and risky,” you’re probably not. Self-selection saves everyone time.

2. Learning in public. We’ll document what works and what doesn’t. We’ll share revenue numbers, equity structures, and post-mortems. Transparency attracts people who value honesty over hype.

3. Raising the bar for the model. Too many studios are just agencies with equity clauses. They’re not building products—they’re billing cheaper and hoping for exits. That poisons the model. We want to show what product studios can be when done right.

The Honest Truth About This Path

Building a product studio is harder than running an agency. You make less money in the short term. You take more risk. You deal with more ambiguity. You juggle more complexity.

But if you succeed, you build something agencies can’t: a portfolio of products that compound value over time.

Agencies sell time. Product studios build assets. Over a decade, that difference is everything.

We chose this path because we want to build products, not invoices. We want equity stakes in successes, not fixed fees for effort. We want to look back in ten years and see a portfolio of products we’re proud of—not a list of clients we executed specs for.

That’s why we built a product studio. Not an agency.

Building something ambitious? We work with founders who value product thinking, speed to validation, and long-term alignment. If you’re non-technical but deeply understand a problem worth solving, join our waitlist. We’re selective, but we’re looking for the right partnerships.

Interested in the model? We’ll be documenting our journey—revenue, equity structures, successes, and failures. Follow along on Twitter/X or subscribe to our newsletter to see how this plays out in real time.