For this interview I sat down with Marcus Daniels, the co-founder and CEO of HIGHLINE, a venture-backed accelerator based in Vancouver and Toronto.
*This was originally published on the SoftLayer blog.
QV: Y Combinator has become an assumed standard for accelerators by creating its own business model. What do you think is both good and bad about this?
MD: Y Combinator (YC) not only created a new model for funding tech startups, but it also evolved the whole category. Historically, I like to think that Bill Gross’s Idealab represented accelerator/incubator 1.0 and YC evolved that to 2.0 over the past decade, resulting in a hit parade of meaningful startups that are changing the world.
The good is that YC has created a “high quality” bar and led the standardization of micro-seed investment docs for the betterment of the whole startup ecosystem. It proved the model and has helped hundreds of amazing founders with venture profile businesses that are changing the world.
The bad is that there are now thousands of accelerators/incubators globally running generic programs that don’t help founders much. More than half have a horrible rate helping startups raise follow-on capital and almost all never had a single exit from a startup they invested in.
HIGHLINE has a strong track record in our short history and now sees a big opportunity to be amongst the leaders in the evolution of the accelerator industry.
QV: Many accelerators focus on streamlining a program to process cohorts of companies at regular intervals throughout the year, every year. Often, the high throughput these programs expect means they must select companies from applications, rather than the approach you seem to be taking. Can you explain how HIGHLINE is sourcing companies for investment?
MD: HIGHLINE gets over 800 applications a year and targets about 20–30 investments during that time. Out of our last 12 investments, all had either come from referral partners or the team hunting the best founders to be part of our portfolio. Over the years, we have moved from the ideation stage, which comprises the majority of inbound applications, to the MVP in market stage, which is our sweet spot now. We will also focus on low-volume, high-touch advisory support, which is why a lot of time is spent building relationships with founders and adding value to MVP-stage startups before investing helps curate better deals.
QV: Traditionally, investment vehicles (such as VC firms and accelerator programs) have been run by financial industry types, but it seems that you are taking a more entrepreneurial approach with HIGHLINE and constantly evolving your business model. What can you tell me about this?
MD: The best accelerator leaders globally are past entrepreneurs who have some investment experience given how hands-on you have to be with the companies. Without the experience of starting and growing ventures, it is really hard to help tech founders navigate the daily challenges. Also, the best founders get to choose, and they want to work with other top founders in a long-term mentor/advisory/coaching relationship.
QV: How does being “VC-backed” differentiate HIGHLINE from other accelerators?
MD: Having several VCs as investors, such as the BDC and Relay Ventures, gives us an edge in several ways. Firstly, they are not only a great quality referral network for deals, but also a huge help in getting our companies venture-ready—even if they may not invest directly. Secondly, they allow us to internally focus on a specialization in helping venture profile businesses raise follow-on capital, as opposed to the glut of programs that are optimized for entrepreneurial education and lifestyle job creation. Lastly, they put big pressure on the whole HIGHLINE team to both get results for shareholders and build something unique that can be a category leader over the next decade.
QV: Our country is physically large and this seems to have created differentiated tech startup scenes between its cities. How does HIGHLINE collapse the geographic divide by having a physical presence in both Vancouver and Toronto?
MD: HIGHLINE tries to curate and unite the best digital founders, institutional investors, and ecosystem partners across Canada. We position our offices in both Vancouver and Toronto as portfolio hubs for founders who want to be headquartered in Canada, but want to take on the world. Most importantly, we spend time in all major Canadian startup ecosystems and have plans for unique events to bring our curated community closer together.