Highline Beta: The Perfect Blend of Business and Venture Studio
Founded in 2016, Highline Beta is a Toronto-based venture studio with an impressive track record. What sets the studio apart is its engagement with large corporations. In fact, Highline Beta has a hybrid operational structure that includes a traditional venture capital fund and offers operational services to companies for their Corporate Venture Studio (CVS). Some of its clientele include businesses such as RBC, Colgate-Palmolive, Green Shield Canada, Morneau Shepell, and others.
At Highline Beta, it all begins with an idea. The idea can originate from within the studio itself or from a potential founder who submits a proposal. Once the idea is accepted, their efforts focus on validating the problem through primary and secondary research. This involves user interviews, market analysis, and other methods. If they determine the problem to be significant and unsolved, they advance the idea to the preliminary validation stage. Before building an actual product, they create simulations and prototypes to test demand. For example, they may launch a landing page and ads to test value propositions. They can also develop a clickable prototype and present it to potential customers to secure letters of intent. Their goal during this second phase is to strengthen belief in the solution (and, by extension, the opportunity) and establish a roadmap for what needs to be built.
Here is a brief overview of the key questions they aim to answer before incorporating the company:
- Is the problem significant or painful enough for a user or a specific group of users?
- Have we identified early adopters and what distinguishes them?
- Do we have a clear idea of the potential solution?
- Do we understand the key value proposition of the solution and why it matters to or resonates with early adopters?
- Do we have a concept of the potential business model and willingness to pay?
- Do we believe we have a competitive advantage or an unfair advantage?
- Do we have a potential partner company interested in this opportunity?
Once the ideation process is complete, founders are recruited through various methods, primarily via their network. The Highline Beta team regularly engages with entrepreneurs with the aim of connecting with them before they’ve incorporated their company or launched their startup. This process helps assess whether they align with the studio’s culture and values. Additionally, the studio hosts events and maintains a small community of founders called the Founder Pool, allowing them to stay in touch with founders over time. The studio occasionally posts job offers for “Founders in Residence” when the situation demands it. Regarding funding, Highline Beta invests up to $1 million in each startup, up to the Series A stage.
Interview with Marcus Daniels, CEO and Co-Founder of Highline Beta
Marcus Daniels is a founding partner and serves as the CEO of Highline Beta. He is also a co-founder and former CEO of Highline VC, a former Managing Director of Extreme Startups, and has been an angel investor for over 7 years. With more than two decades of experience as a serial entrepreneur and operational leader of startups, Marcus has built an impressive track record of pre-seed investments. He holds an MBA from the Smith School of Business at Queen’s University and a BA from McGill University.
1. What differentiates you from other players (VCs, studios, accelerators, etc.)?
Venture studios fund and build startups from incorporation. This means they must be capable of “rolling up their sleeves” to help founders with the earliest validation work, building an initial minimum viable product and getting to market as quickly as possible, while also providing the capital to do so.
Highline Beta works with a founder from Day 1 and spends six to nine months providing hands-on support from senior team members. This includes the founding partners (Marcus Daniels & Benjamin Yoskovitz), a Head of Technology, Head of Design and Head of Growth working each day with founders to build and launch a minimum viable product (MVP) not just advise or do office hours. Highline Beta’s venture capital fund backed by institutions invests up to $500K in the first year. Accelerators are typically 3-month programs with a large cohort of startups. We focus on one startup at a time and work very deeply with them.
2. Corporations seem to have a lot of interest in this concept. Are you seeing this enthusiasm? If so, can you elaborate on how this interest manifests itself (e.g., participation as LP, Co-investor, client, etc.)?
Corporates are growing more interested in the venture studio concept because it provides them with an approach for building new ventures (internally or externally) that have a direct, strategic fit with their core business. Corporate venture capital (CVC) might also serve this function (i.e., identifying strategic-fit startups for investment), but a venture studio takes on this responsibility right from the inception, offering corporate partners the chance to influence the development of the new ventures under construction.
At Highline Beta we see interest from corporates as clients, LPs and co-investors. Corporate partners are looking to build their own venture studios, which we can help them with. They’re looking to invest in the creation of new startups as LPs or co-investors, whereas most CVC is for later stage deals that tend to be Series A & beyond.
3. What are the advantages of this concept for you?
Our goal is to bring more of the “ingredients” together that are needed to build and launch a startup successfully. Every startup needs a great founder (and eventually a founding team), a validated problem, a minimum viable product, a go-to market strategy and capital to execute. The venture studio model is about bringing these “ingredients” and resources together at the earliest stages possible. It’s the right combination of people, expertise and capital to build and fund quality startups.
4. What are the challenges you or your organization have encountered (costs, founder flow, etc.)?
Building startups isn’t easy. It takes a lot of resources and incurs a fair bit of risk. You need the right combination of many elements to make it work. For example, we’ve gone through validation sprints exploring new ideas only to invalidate them and must “start at the beginning.” It may take several attempts before you have enough validation and conviction to decide it’s worth incorporating, starting and funding a new startup.
We often think of this like a puzzle. You have a bunch of pieces that fit together, but you haven’t figured out how to put them all in place. And occasionally, a piece is missing. It may be the wrong founder/market fit (where the founder isn’t a fit for the idea you’re exploring), or you lose a corporate partner early, etc. The question is whether you can persevere through the challenges to build great companies.
5. What are the next steps for your organization?
We will continue to build and fund 4-5+ startups per year in two broad themes: Financial Wellbeing for All and Creating Sustainable and Resilient Operations. These are two big areas of focus for us, where we’ve already built and funded numerous startups and worked alongside our corporate partners. We will continue to iterate on our venture studio approach, refining and improving it constantly–you can never stop learning and iterating when it comes to how you build startups. We will continue to raise capital for Highline Beta in order to have the money needed to fund the startups we build. And we will continue to support our Fund 1 portfolio as they begin to scale.
6. Which of your startups is one to watch in the coming months, and why?
We think all of our startups are worth watching in the coming months, so it’s difficult to pick only one. So here are a few examples:
Parachute: A financial wellbeing company that helps people to consolidate debt, earn cash-back and get onto a plan for financial recovery. The company has a great early customer base of active users and continues to grow. They’re solving a real pain point in the market for people who can’t get sufficient help from banks and want to avoid being caught in sub-prime lending.
Requity Homes: A rent-to-own platform helping people buy their first home in a cost-effective way. The company recently secured financing to accelerate home purchases and is set to have a significant impact on the Canadian housing market.
Moselle: A SaaS startup building automated inventory management software for small e-commerce ventures. Moselle’s customers lack the resources and sophistication to improve how they operate and in turn scale. Moselle solves this problem through technology & AI.
To learn more about Highline Beta, please visit Highlinebeta.com