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We started Highline Beta in 2016. As we approach 9 years, we’re reflecting on everything we’ve learned and what comes next. The original thesis was “simple”--work with big companies to validate new opportunities beyond their core and spin out new startups. Those new companies become investable opportunities for us, de-risked through the validation work we do and the ongoing relationship they have with the corporate partner. We successfully championed corporate-startup collaboration models (Colgate-Palmolive, AB InBev, Intuit), got Fortune 500 companies to co-create new ventures, and 2x cash-on-cash returns to our initial investors within 18 months.
In the early days, very few people were familiar with the venture studio concept. We’d often get asked, “What is a venture studio? How does it work?” In hindsight, we were a bit early.
Highline Beta 2.0 kicked off late 2019 / 2020 when we closed our 1st institutional GP/LP fund with RBC and BDC Capital as anchor LPs. The next mission was to prove that we could build & fund a portfolio of 20+ startups that successfully went through our 0-1 model, and attracted top tier 3rd party follow-on capital (thanks, in part, to our institutional VC rigor).
We knew there’d be plenty of ups & downs, but if successful, we would earn the right to scale both our venture studio platform and our role as a Day 1 institutional VCs, by attracting significantly more capital from global investors.
The period from 2020 to 2023 was transformative for venture studios, largely shaped by two key events: COVID-19 and the collapse of Silicon Valley Bank (SVB). At the onset of the pandemic, many VCs and LPs became more risk-averse as they focused on triaging existing portfolio companies. In 2021 there was a massive influx of startup capital and traditional VC models due to low interest rates and stimulus-driven liquidity, but SVB's collapse marked a significant moment for venture studio models as the funding cycle time increased. The number of venture studios globally peaked at ~1,000, but has since contracted, because of challenges faced in building a sustainable business model through revenue-generation and raising capital.
Highline Beta doubled down on investing in our venture studio platform and continued to work alongside amazing founders & corporate collaborators, building high quality ventures with <20% ownership (on average), ensuring aligned interests with founders, corporate collaborators and co-investors (versus the industry’s average 30% to 50%+ equity stake).
Venture studio startups are supposed to have a higher success rate (50% survive after 5 years) than traditional startups (10-30% survive after 5 years). Highline Beta starts 2025 with a portfolio of 21 startups in which 81% raised $1M+ follow-on, 1 successful exit & zero failures.
There will be failures, but also outlier returns and our 2nd strong exit will be announced soon. We’ve proven that our venture studio model works and that we’re strong pre-seed capital allocators vetted & trusted by leading institutions.
2024-2025+ kicked off a new evolution as AI has further transformed how startups are built and funded within venture studio models.
AI is fundamentally reshaping the venture capital industry. Many firms will be disrupted with a weakening value proposition to founders and LPs. How founders raise pre-seed capital, how much capital they need to get to product-market fit and what hands-on venture support they need is all changing in real time.
We’ve invested heavily to improve our venture studio platform’s value proposition, venture capital operations and foster AI innovation internally. Most importantly, we’re building off a strong foundation & profitable platform to now scale via vertical venture studios.
Through all of this experimentation we’ve learned a lot. It’s what inspired Ben to write content about venture studios, including on how to recruit founders/CEOs, how to design a corporate venture studio, how to build the right venture studio team and more. It’s also what convinced us that the future of venture studios is vertical.
A vertical venture studio builds and funds startups in a specific niche. In our view, the niche should be focused. For example, “Insurance” is too high level, because there’s a wide variety of startups you could build in insurance that are barely related. We’ve done a lot in insurance, working with corporate partners such as American Family Insurance, Green Shield, Cincinnati Insurance, Munich RE and others. We’ve also built startups (Flora, Relay Platform acquired by At-Bay) and made investments (Walnut Insurance)--but all of these examples vary widely. Flora is a D2C fertility insurance company, whereas Relay Platform was a spinout from American Family focused on reinsurance workflows (and eventually pivoted into B2B enterprise quoting for cyber insurance). In both of these cases, Flora and Relay, the playbooks used to validate, go-to-market, build the product, secure partnerships, monetize, etc. were different. So a vertical studio needs to go narrower.
It’s difficult to say, but generally we believe that there are startup opportunities in every vertical. As we build vertical venture studios we’re thinking of a few criteria:
Most importantly, a vertical venture studio needs a competitive advantage through access to assets that are not easy to acquire. Assets may include: domain expertise, customers, partners, co-investors, acquirers, data, etc. You can’t build a vertical venture studio without being “on the inside” of the vertical.
When you look at our current portfolio there’s definitely concentration in a few areas including financial services, insurance and logistics/sustainability. But going forward, we’re all-in on vertical venture studios.
Each vertical venture studio will:
We’re currently working on a few vertical venture studios, and will announce our first one soon.
After 9 years, we’re even more bullish on the venture studio model and see the potential to specialize in order to constantly improve how we build startups and the outcomes that result.
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