Ep#14: Venture Studios vs. Traditional Startups with Ben Yoskovitz

Welcome to Startups Decoded, where we uncover what it really takes to build and scale startups. I'm Andy Walsh, founder and strategist. Each week we will bring you actionable insights and real stories. Let's dive in. Hello and welcome back to Startups Decoded podcast. Looking at growth strategy and insights we can gain from expert guests. And today we've got someone who's got a breadth of experience that I'm excited to learn more about. Ben Joskevich from Highline Beta. Welcome, Ben.

Thanks for having me, Andy. I appreciate it.

I always like to set up these conversations with understanding you and the real theme that I'm seeing come through across all the episodes I've recorded. Now we've got eight live at the moment, more coming, of course, the breadth of your skills that people have and the journey that they take. So firstly, I'd love to get a little bit of a top level on yourself as far as what you're doing now at Highline Beta and what Highline Beta does.

Sure, yeah. Happy, happy to. So Highline Beta is a venture studio and venture capital firm. Essentially what that means is we're building and funding startups from scratch. I think for me, a venture studio has to be building and funding in our model. We're working with corporate partners quite often, or family offices sometimes as well, where we're collaborating with them on the actual ideation, validation and building. So we always think about how do we bring more ingredients to the table. So a corporate partner that could be the first customer or the first, you know, distribution partner for a new startup, maybe they have access to data or domain expertise that we want to leverage. So work with corporates, work with family offices to build and fund new startups. And we started Highlight. I started highlighting beta nine years ago, so it's been quite some time. But before that I was doing a whole variety of different things. It's been like a mixed bag since I started my first company in 1996. Highline beta, we have about 22 companies in the portfolio today across a few different industries and verticals, both building from, from scratch and also pre seed investing. So we're also doing both of those things as well. And so if we talk more about the venture studio model and how that works, you know, quite nuanced, lots of different variety to it in terms of how people are trying to leverage this model to build good companies.

Yeah. And what you touched on there is critical in that breadth. And you started life as a founder. You, you've gone through an acquisition with salesforce and then the venture studio ride. So that full gamut of what you're doing. And we had Neil Gosch on an episode recently. We were chatting before the show and Neil did a great job of setting up venture studios and he broke it down into three parts. Which was the entrepreneur who's the idea machine ultimately as far as early insights, validation, market opportunity. Second one being the operator, so who comes in to run the portfolio company. And the third being investment and that's obviously into the studio itself, but also ongoing. How does a Portco raise funds, which I love. And I think that your breadth of skills neatly lines up to that across the full range. So looking back from your career, you talked about 96 and your first journey as a founder. Was that fresh out of university for you?

It was while I was at school actually. So I think between third and. No, between second and third year, third and fourth year. I don't know, it's a long time ago, but started, you know, first company in 1996. The. The web was just starting really. Right. The Internet had existed for a while, but it was being used by academics and governments. So web comes out, you know, we're talking Netscape era and met a few guys that were trying to start a web agency basically. So imagine a world where it was complicated to build a website or complicated to build an e commerce site or. Or complicated even to build a web application. I mean that that concept barely existed. So we started this small company doing that, ran that company for a while. We were acqua. Hired by a bigger agency in the US in like 1998 or so, right before, you know, the dot com crash. So lived through that whole experience, ended up starting another company in like 2007 which was a software company in the recruitment space that didn't work out then started actually what really was a venture studio in 2010. We didn't call it that at the time because that that terminology sort of existed but wasn't really popularized. And so we called it an accelerator. It was year one labs. We made five investments and we were building companies from, from the very beginning, putting founders together, throwing ideas in. One of those companies ended up being acquired by Airbnb. So that was another interesting experience. Then you mentioned, you know, working at a startup in product where I was running product for a company called GoInstant that was acquired by Salesforce. So I went through that journey, spent a couple of years at Salesforce, then joined another startup where I was angel investing. So it's this mishmash of being a founder Running product and building software products, also being an investor and then combining all of those things into the venture studio model and starting Highline Beta. Yeah.

And the theme that I love it because it resonates with me because it's who I am too. Every guest I've had has had the most, like I'd say bouncing around career. There's nothing linear about where they move and I think that breadth of experience is critical today and we'll definitely explore that in the episode as far as what skills you need to have as a founder today and how you go through to ultimately, you know, either exit or create a commercially successful business. So for you, I'd love to look at today if you were to give a founder advice, your one thing would be make sure that you have enough customers who have a problem with something that you can solve or an opportunity that you can create for them. Doesn't exist for you in 1996? Was that even on your radar or did you just see an industry growing that you could be a part of and generate revenue additionally or even before you graduated from college?

Right, yeah, there was no lean startup, didn't exist. I mean it hadn't been codify, didn't really exist. We were really just trying to help businesses get onto the web. Like that was the pitch. I mean so again it's so, it's so long ago, but that was really the pitch was, hey, the web is going to be big. People are going online looking for stuff, people are going online to buy stuff. You need to be on the web. That was the pitch. Some people understood that and wanted to be early adopters of that. Others thought that was insane. And I mean people thought email wasn't going to be a thing. People thought email was a fad. So that, that was the era. So there was no rigorous methodologies how to validate a problem, how to test things in market. Everything was also hard to build. So, you know, I'll give you an example. I remember very clearly building a e commerce website for a company that cost about $400,000 to do. And by the way, I'm in Canada, right? It was a buck fifty to a US dollar, right? So it's not like we were charging insane amounts. We were 22 year old kids but it cost $400,000 because building an E commerce website was borderline impossible. And today you can, you know, Shopify for 29.99amonth or whatever it costs. So the world has radically, radically changed. The speed of everything was slow, so there wasn't a Whole lot of rigorous methodology on validating a problem, testing and iterating, prototyping was just like, do you want to get on the web? Oh yeah, you do. I mean we're talking about like yellow Pages, you know, like let's move the yellow pages onto the Internet. Like that. That was the era I was playing in.

Yeah. And I heard someone summarize the evolution of the Internet quite nicely. As far as Web one being read only, you talked about the academic approach, Web two being that two way piece where you can contribute as well as find information. And then web three, which is sort of happening now is this four dimensional model where you're looking at blockchain technology, you're looking at independent authentication within that and ways to create ecosystems that don't require sometimes a platform. And it's definitely a huge evolution in that. So your experience, you mentioned the acquisition within Salesforce. You're a go instant and you're a product person. Right. Like that was 2007, I think.

No, that was, that was later. That was 2012 actually.

Okay, yeah, 2012.

So a long time ago.

That's 100% and I think, you know, 13 years ago ultimately for you as a product person then compared to now, advice that you would give to your internal team, to your Portco boards that you're on. What are some of the big differences that you see from a product perspective on, on insights development, build valid foundation, et cetera. And then I'd love to be able to go deeper on some of those too.

Sure. Yeah. So I think fundamentally I think the process is the same. So again, you know, if you, if you wind back a little bit before 2012 or, or you know, in that, in that range, Lean Startup Eric Reese has written Lean Startup Steve Blank has written Four Steps to the Epiphany. I remember reading those books and being like, that's how things are supposed to be done. That's how you're supposed to, you know, test and experiment and learn rapidly. And then we applied all of those principles to year one labs which was applying this lean methodology to building and funding companies, then brought that to go instant. And so, you know, and then I think that sort of rapid experimentation, prototyping, learning, all of that has remained actually basically the same. I think the difference now is maybe the speed with which things can be done has just gotten faster and faster and faster. So cheaper too, I would say, you know, cloud computing and all of. So cheaper in a way. Yes, but, but I look more at the speed with which you can do things today. Even compared to how you could do things, call it, you know, 10 years ago, 15 years ago, and that's probably the most so methodology and how you approach it and how you, you know, define your riskiest assumption and come up with an experiment to do that and run that. I think that's still the same for the most. It's the speed with which you can now do things, particularly, I guess now with AI and what you can just generate and create with AI tech that allows you to go faster, run more experiments simultaneously, and try to increase the build, measure, learn cycle so that you can get to the right answers.

Do you think that we're at a point now that if you don't have any product experience, but you're someone who's an operator or you've worked in a big tech company before, that you could start a business without product experience and build something that's robust, that you could make money off. Do you think that we're at that stage yet?

It's a good question. I'm biased because I am a product person at heart, and I've had this conversation with a few folks, including founders, who are like, do we really need product people anymore? What is the role of. Aren't they just an air traffic controller, by the way? Air traffic controllers are super important, but it's a terrible analogy, I guess. But aren't they just coordinators, you know, Aren't they just the people, you know, you know, taking the requests and feeding the requests to the developers and the developers build the thing? And. And I'm like, that's not really what product is about. It's really about the craft around what should get built, how it should work, how do you measure the value of the stuff that you're creating? So, you know, I think the short answer to the question is, yeah, you there? We're probably at a point, certainly from a execution level, where almost anybody can say, I have an idea, I want to build something. I use some AI coding tool to generate the web application or whatever it is that I want. I can build a website, I can connect Stripe, I can start charging money, and I'm in the game. So I think, yes. The short answer is, literally anybody can do that. And you do not have to be technical or have product skills. I think to build the right thing for. For the right customer is still really, really hard. So just because I have more tools in the toolbox doesn't mean I know how to use those tools. And so that's where I think, whether you think of them as A product manager or you think of somebody who has the, you know, now in AI, they're using this term that like taste, which might just be a human's way of defending itself against him or herself or themselves against AI. But I'm going to cling to it for a moment. Say, like, who's the crafter of the thing, who's the one that looks a customer in the eye, really understands what they need, and then translates that into the software that's getting built? That's still really, really hard to do because if that was easy and you and I could just build random stuff, we would just have. Every company would be successful, which is not true. In actual fact, I'm not sure the success rate of startups has improved since the beginning of time.

Yeah. And if you look at historical data on PitchBook, I'm sure it would tell you the same story as far as fund success, founder success, and there's a little bit of scrutiny in the data that you would need to look at as well, as far as companies that don't go through fundraising that become independently successful as well. But what you touched on there for me is interesting. I've got one of my port codes. I'm an advisor on. The founder is not a product person and she's building a prototype to be able to get validation herself and then hopefully get early revenue and then use that to inform where to go next. Because finding the right team of co founders is challenging too. Right. If you've got an idea and you might have a marketing background, legal background, finance, whatever that is, finding the right co founder from a culture fit and from a technical skills is really complicated.

Agreed. Yeah, yeah, totally agree with that. What I would say is there's no excuse now for somebody who has never built software before, whether from a technical design or product perspective, there's no excuse, just given where the tooling is today, for that person not to take a swing and do exactly what you've just described, which is, I have an idea. Maybe this person is a domain expert in a vertical. Right. So they understand the market. And she says, I know what the pain point is because I've lived it. I just don't have the tools or the skillset to go build a thing that's not a limiting factor anymore. I mean, I. You can use so many things like I've been playing with lovable as an example, and lovable is just you prompt it and it spits out code. It's not perfect by any stretch of the imagination. But to get a Prototype done to put it into somebody's hands to see if you're in the right direction. Like that's a couple of days of work now. And so there's just no excuse for saying, I have an idea, but I need a technical person. It's like, no you don't. Or I have a, I'm a domain expert in something, but I've never built software, so I don't understand how to do product. It's like not a limiting factor anymore to really craft something, to really build something, to build something that really works, that scales, I think that's a different story. But to prototype stuff, everybody can do that.

Yeah, it touches on an important topic as far as validation. And validation is more important than ever. And it feels like what these new platforms have opened up is the ability to get indicative feedback early around product solution fit. And if you can get revenue momentum on the early stages of launch from a product and from an investment standpoint, all the VCs that I talked to are all saying the same thing is from an investment point of view now there's a lot more scrutiny as far as revenue growth and early impact rather than a concept. And that early stage category, like I hear a lot of talk around the fact that that early stage investment might start to disappear a little bit and investors going back to what it was 10 years ago into the traditional sort of seed series, a round rather than the early stage. And people went back earlier and earlier to try and get better returns long term with smaller investments. But that early revenue now allows someone to feel confident as a founder, an operator, but also as an investor. You're seeing the same kind of thing.

Well, I think, I think what it opens up is the idea that not every business has to be venture scale and not every business has to be funded by venture capitalists. So if you have domain expertise in a particular space, if you've done sufficient problem validation where you have some kind of insight and you know what needs to get built and you can use the various AI tools and tooling to get something up and running, start to validate it, start to generate revenue, you might decide that that's not a business that requires enormous amounts of capital to scale and you could operate that business quite successfully and maybe even profitably. So I think it, it unlocks those pathways to build those types of businesses always existed. I think people always felt like VC was the coolest thing to do, go raise tons of capital, go for the big swing, go for the big exit. Like that was just the credibility and the cool factor of that. And I'm like, yeah, that's cool. I've seen it, I've lived it, it's cool. It's a fun experience. Raising millions of dollars and then burning millions of dollars and failing sucks, by the way, just in case anybody's unclear on that. But then you know what's also cool? Just building a real company that solves real problems and making money. So to me, I think it's unlocked that. I think venture studios have emerged and are gaining popularity at that super early stage because of the recognition of just how hard it is to actually build the right thing, put the right brand on it, move things in the right direction. So again, even if I have the tools, I have all the prototyping tools in the world, but I really don't know how to validate something properly. I don't really know how to figure out what are the most riskiest assumptions that I have. I don't really know how to hire the next person that I need. Studios are there to be co founders to those types of founders that need that type of support and I think are playing that early, early role both from a work product perspective as in putting in effort along with the capital that sometimes you do need to hire contractors or do other things or go to market tests. So I don't think pre seed goes away. I think VCs when, when markets wobble, VCs tend to go later stage because it just feels more de risked. I think what happens is a proliferation of businesses that don't require as much capital, which venture studios can still play a role in because they're not necessarily always building venture scalable businesses, but also could legitimately be bootstrapped to enormous success.

Yeah, and I had Jeff Becker from Adler GP there in New York here with me and he was talking about their thesis and the way that they make assessments is they actually get a short list of startups in the office and they're looking two, three month time to spend with them to understand founder fit culture, fit their product a little bit more, to make more informed decisions in that early stage. And they're having huge success on fund one and going into fund two at the moment. And it's fascinating to sort of that space to sort of compare that model. And you touched on it a little bit in there. I'd love to look at now with product build and validation. Venture studio versus a traditional startup. You touched a little bit there around experience internally sort of how do you see the difference and I guess ultimately the value in A venture studio to be able to validate a business early, feel confident to launch it, and then make sure that it retains, I guess, good product health through that journey.

I would say that venture studios are, they are meant to repeatedly build businesses so they should be more rigorous in how they do the validation. So, you know, founders tend to have what I describe as a reality distortion field around them. You know, they have an idea or a vision, they believe it's true, it hasn't been brought into the world yet, so it's net new. So there's no proof that it's going to work. But I just like, I fundamentally believe this thing is going to work and I'm a genius and we're going to make this happen. And you know, when that reality distortion field gets so strong around a founder, they usually just run. They know they're supposed to validate, they know they're supposed to test like, come on, that that stuff's been around for, for a long time now, but they just skip some steps. They just believe so much in themselves or their own vision. And founders need that to get up in the morning and fight the fight of building something that new. You need some level of reality distortion field. If it's too strong, you're probably going to run into a wall and crash. And so even though they know what they're supposed to be doing, they're like, I'm going to skip, I'm just going to do this because I'm right. A studio is a more rigorous methodology. It says no, no, no, we're going to follow these steps. We're going to, in a way, stage gate these things. We're targets that we're trying to hit around certain things that we want to see done. We're not trying to take the art and the magic out of startups. We're trying to balance that with a bit more, call it science. And so and a studio, its whole job. And therefore the people that work at the studio should be experts at this because they're doing it all the time. They don't keep going with the startup and focus on scale. That's not their expertise necessarily. It's always that, what I call minus 1 to 0, 0 to 1 phase. And so if they're experts at that, the rigor by which they do that, the standards that they set should be higher. Which, you know, the hypothesis or the thesis is that by doing that better, better companies come out the other side of that process. And so to me it's like everybody knows what they're supposed to be doing. It's a question of whether you do it and to what degree you do it or not.

Yeah. And the it's interesting. I'm doing an episode soon on human behavior and the elements of pack versus tribe behaviors. A pack people who have similar passions and they're a little bit more objective about what they're doing. Your tribe are the ones that are there. Right. Or die. Right. They'll do anything for you. So when you're in a startup and you have your tribe and everyone's so focused on the mission, it becomes an echo chamber of sorts. Right. So you're self validating what you need to do. Whereas the objective conversation is ultimately, as a founder, if you have an idea, you don't want to prove yourself wrong. It takes a very pragmatic person to be able to have experience.