By: Benjamin Yoskovitz, Founding Partner @ Highline Beta
In 2010, Raymond Luk, Alistair Croll, Ian Rae and I got together and created Year One Labs, an early stage accelerator program. It was named intentionally: we designed a 1 year experiment to see if we could take incredibly early stage startups (ideas really, because no one came to us with an incorporated entity), great founders, a little bit of capital and leverage Lean Startup methodology to build great businesses.
We kicked things off at the earliest stage possible. In some cases we sourced founders we wanted to invest in and put them together. Ideas were thrown into the mix with founders, and startups emerged. You couldn’t start the startup creation process earlier than Year One Labs, and at the time there were very few, if any, accelerators in Canada, and no venture studios (that I’m aware of.) And in many respects, reflecting on the experience, we weren’t really an accelerator, but in fact a venture studio. Early stage accelerator / studio / incubator models emerged quickly after Year One Labs, including Extreme Startups, FounderFuel and GrowLab.
At the time, venture studios were few and far between. Idealab had been around for a while, but other successful venture studios such as Science were still a couple years away.
Year One Labs gave founders up to $50,000 and 12 months to build and launch something in-market, get traction, and secure the next round of funding (from external investors.) It’s a pretty small amount of money, but a great reminder of how far founders can go with minimal resources. We actually triaged the money too–founders didn’t get $50,000 up-front–instead we defined milestones, using Lean Startup methodology (note: Lean Startup by Eric Ries hadn’t been published yet, but he was blogging, and there was a fair bit of material from Steve Blank and others) to help us map out the steps of validating a problem, a solution and early traction. I wouldn’t suggest that you can always build a startup for $50,000 or less, and “lean” doesn’t mean being cheap, but we didn’t think it was necessary at the time to invest more.
In the end we made 5 investments. Three of them didn’t make it, although one of those did go on to raise external financing (Highscore House.) One of the startups, Massive Damage, still exists today and is operating successfully. And one of them, Localmind, was acquired by Airbnb (which went public in late 2020.) Although it’s a small sample size, our success rate (40%) was higher than what you’d expect from a typical venture capital fund. We had 3 failures, 1 double and 1 home run.
Building startups from scratch takes time. You need all the right ingredients in place to make it work, and even when everything looks good, it’s difficult to predict what will happen. We had great founders (all of whom went on to amazing careers in tech, including a couple of them that started successful companies), interesting ideas, some capital and a strong methodology, but it was also very early days for accelerators / venture studios. Looking back at the experience, there are many lessons learned, which I think can further improve the success of the venture studio and venture capital models. Year One Labs did very well but at a small scale; the challenge is building on the model we used but with a much larger portfolio.
In some ways, Year One Labs was a precursor to what I’m now doing at Highline Beta. We’re lucky to have considerably more resources at Highline Beta (including talented people, more capital through a separate institutional venture capital fund and the benefit of more years experience), but fundamentally the goal is the same: take the earliest stage ideas/startups, with great founders, and build awesome companies.
We’ve added a key corporate component to the mix, where we believe that the assets living within large organizations (i.e. domain expertise, distribution/network, capital, IP, under-utilized assets, geographic breadth, data, etc.) can be unlocked to the advantage of startups (creating win-win scenarios between startups and corporates.) And Lean Startup methodology, which was nascent at the time of Year One Labs, has also evolved significantly. After Eric Ries’s book came out, there was a flurry of experimentation and learning. The concepts of problem/solution validation, product-market fit, growth marketing and more all emerged and grew. Through my work with Alistair Croll in writing Lean Analytics (2013), I was exposed to a ton of great entrepreneurs and intrapreneurs that were practicing Lean Startup, but also blending in Design Thinking and Jobs to be Done. After Year One Labs, I put theory into practice through Lean Analytics, but also blending ideas/concepts/frameworks from other approaches as well. These methodologies, and the subsequent shared learnings from countless entrepreneurs, bloggers and innovators has made how we build things clearer and more refined.
It turns out, the ingredients required to build a great startup are not so radically different from when Year One Labs was in business, but I do think we’ve improved on them through our learning, experience and model at Highline Beta.
People often asked us with Year One Labs why there wasn’t a “Year Two Labs.” One of the main reasons is that we couldn’t, at the time, figure out how to make it scale. It would have required scaling the number of startups we built, growing the team, funding operations and having more capital to invest. Year One Labs was funded on a very small amount of money, and no one took salaries. We talked about doing a typical accelerator model (i.e. 3 months for a small investment and smaller equity stake) as a way of scaling the number of deals, but weren’t convinced that model would generate the returns we were looking for. We talked about raising a fund, but didn’t have the success criteria at the time, or frankly, the interest, to do so. We couldn’t figure out a sustainable, scalable business model for Year One Labs to live on the way it was created.
Five years after Year One Labs (from 2011 to 2016), and Highline Beta was born. This time with different partners in Marcus Daniels and Lauren Robinson, but with essentially the same goal. And now with the resources needed to build a successful, scalable business and a larger portfolio of venture-backable startups. Since 2016, Highline Beta continues to iterate. With Year One Labs, given it’s 1-year mandate, we didn’t have that opportunity to really test and adapt the model. At Highline Beta we experiment with our approach, leveraging our collective experiences. This means testing new services, new financing structures, going into new verticals, working with new corporate partners, building new models and more. It’s been an incredible journey so far, and as we approach the 5-year mark, I certainly recognize, and I know the team does as well, that we’re still at the beginning of doing something incredible.