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BetaKit is proud to introduce Hard Knocks, presented by Mantle.
This four-part series shares insights, war stories, and lessons learned from key players for a raw look behind the scenes with those who drive and define Canadian tech: the founder, the investor, the advisor, and the ecosystem builder.
Marcus Daniels believes Canadian tech is facing an “Old Yeller” moment.
Well, not entirely. To Daniels, Canada does a fantastic job cheering for its triumphs, even those he considers to be “superficial wins.” However, he believes the real test comes when things aren’t going well, and it’s time to pull the plug.
“Our companies in Canada, I think, are going to be under immense pressure over the next 10 years,” Daniels said in a recent interview with BetaKit. “If we don’t galvanize the different elements of our ecosystem, and sometimes have the harder, not just conversations, but decisions, we are going to be left behind dramatically.”
“We need to either iterate or we should move on.”
For Daniels, this is personal. Over a 26-year career as a entrepreneur, angel investor, and now CEO of hybrid corporate venture studio and VC firm Highline Beta, he both wins under his belt and the battle scars to prove it.
“I like the joke that I’ve graduated from the wooden roller coaster to a metal one,” he said. “There’s less chance of death now in my career and where I’m at, but the oscillations are still real.”
For Daniels, the roller coaster of entrepreneurship has peaked and plummeted, once even on the same day: in the early 2000s, he won a Startup of the Year award before leaving the event to lay off most of his team. “Effectively, you’re getting the superficial accolades that you’re a great entrepreneur, but I actually failed,” he said.
His foray into mentorship, starting as the managing director at Extreme Startups in 2013, was his way of tackling the Canadian ecosystem’s rough spots, particularly at the pre-seed stage. But the solution went further than just throwing cash at young upstart companies.
“I always felt that a lot of the value early on at that stage was timely capital into companies, but then trying to find ways and networks beyond Canada, so companies headquartered in Canada could effectively grow and scale, or at least find out the truth that it’s not going to work out faster, and move on to the next thing,” he added.
Extreme Startups existed before programs like Techstars and 500 Startups had arrived in Canada. There were a handful of accelerators that were helping companies raise their first round or push out a first product, but the vast majority had never seen an exit. “Accelerators solved part of the problem, but they weren’t going to create enough ecosystem impact,” he added.
In 2014, Extreme Startups merged with Vancouver accelerator GrowLab Ventures to create Highline. The objective was to be the first pan-Canadian acceleration platform to get pre-seed startups venture ready. The merging programs had a decent track record, with three profitable exits and over 90 percent of their combined ventures obtaining follow-on funding.
Highline’s initial checks into Drop, Koho, and Lighthouse Labs, would prove fruitful, but Daniels noted other gaps needed filling, particularly helping Canada’s talent find a co-founder. The term ‘venture studio’ was not as ubiquitous then as it is now, but Daniels saw it as the ideal framework to provide entrepreneurs with what he termed a “synthetic co-founder.”
“Great venture studios often are serving as a synthetic co-founder —they’re not calling themselves a co-founder—that are helping founders who have not found that partner in crime yet to build something epic.”
“Sometimes we’re not honest that there isn’t enough value created there.”
Daniels, along with Lauren Robinson and Ben Yoskovitz, founder of Year One Labs, one of Canada’s first venture studios, aimed to create more than just a run-of-the-mill acceleration program with Highline Beta. He said running a venture studio model the right way means filling gaps by offering founders something truly unique and differentiated.
“I’m hell-bent, laser-focused on how we scale the Highline Beta platform to effectively win more by being more additive,” he said. “We don’t want to be doing things that are duplicated in the Canadian ecosystem.”
For Highline Beta, this additive value lies in partnering startups with large, global corporations. As the venture studio, it plays the role of translator and marriage counsellor, bridging the gap to help young startups and established corporations that are early in their digital transformation work together to discover and validate growth opportunities.
But value propositions aren’t set in stone; they change over time, and so should the ecosystem around them, Daniels said. Here is where he believes things get tricky in Canada.
“We like to throw out initiatives and make an announcement, then we try to go through the first level of value creation,” he said. “Sometimes we’re not honest that there isn’t enough value created there.”
To Daniels, ecosystem builders, be they accelerators or incubators, focus too much on the programmatic layer, and not enough on what startups truly need: cash. He said early-stage founders need funding to quickly figure out if their big idea is actually worth the grind.
He believes Canada’s reluctance to face these tough decisions could lead to its tech sector falling behind in the global tech race over the next 10-year cycle.
“We need to either iterate or we should move on.”
Hard Knocks is presented by Mantle.
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Originally published on BetaKit : Original article