Build, Buy, Partner, Invest… Spin-out? How Venture Studios Help Create Portfolios and Optionality

August 2, 2022

Every big company needs to grow and innovate beyond its core.

To do so, every big company needs to build new ventures, internally.

Do you believe both of those statements are true?

At Highline Beta, we do. And we’re seeing a growing interest from big, ambitious companies to invest in internal venture development, with an increasing focus on moving into more transformational, disruptive, or growth innovation opportunities. 

Benjamin Yoskotvitz, Founding Partner, Highline Beta

Here’s an additional statement: Big companies can’t do everything on their own. To accelerate their innovation and growth objectives, every big company should partner with, invest in, and acquire startups.

Do you believe that’s true? 

Many companies already partner with, invest in, and acquire startups. Unfortunately, these efforts are often siloed in different departments or groups. It’s rare that we see a consolidated structure or effort across build, buy, partner, invest that allows a company to properly identify and validate market opportunities and problems to solve, and then determine the right way to move forward.

Let’s add one more tool to the toolbox: spin-outs. At Highline Beta, we believe every company should incubate new ventures and then spin them out as independent startups. Of all the options — build, buy, partner, acquire, invest — spinning startups out may seem like the most radical. But is it really any crazier than acquiring a startup for $100 million and hoping you can successfully integrate its people and technology? Or trying to build a new venture internally within the limitations of a risk-averse organization?

Of all the options — build, buy, partner, acquire, invest — spinning startups out may seem like the most radical. But is it really any crazier than acquiring a startup for $100 million…? 

We believe that every company should take a portfolio approach to growth innovation and use every tool in the toolbox. This means having the capacity to build new ventures internally, partner with, invest in and acquire startups, and yes, build new startups and spin them out. Ideally, this is all done by a unified group of people within your organization that work collaboratively to identify and validate opportunities first, before deciding what tool to use.

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As a hybrid venture studio and venture capital firm, Highline Beta doesn’t only help our corporate partners spin out new startups. We also work closely with internal venture building teams helping them validate, build, and scale new internal businesses. And we identify potential startups for investment, partnership or acquisition. Highline Beta works with corporate partners to facilitate and enhance their capabilities across build, buy, partner, acquire, invest, and spin-out. We’re equally comfortable working on an internal corporate venture, a startup partnership, or a startup spin-out, because we don’t believe that any one of these is always the answer.

We’re also an investor. We believe this should be a fundamental part of any venture studio model. Our willingness to invest capital means we’re looking to share the risk (and the reward) with our corporate partners. One of the many advantages of the spin-out model is finding other investors and collaborators willing to share the risk and the burden of scaling a new business. In contrast, when building a venture internally, you own the entire business, but you’re also completely responsible for it. 

Our investor lens — a perspective and expertise in identifying potentially scalable businesses — is critical to our work, whether we’re spinning out a startup or not. When working with a corporate partner on an internal venture, we know there isn’t an opportunity to invest. Our investor mentality still guides our validation work, and our honest perspective on that internal venture. If we don’t believe enough in something to invest (whether we can or can’t), why would we encourage our corporate partners to keep going? 

How to Start Working with a Venture Studio

We recognize that spinning out a startup sounds a bit crazy. Most big companies have a tendency to want to build and own everything. While open innovation efforts are increasing – where there’s a willingness to collaborate with startups actively – big companies still struggle with how to make these relationships work and scale.

Most big companies have a tendency to want to build and own everything. 

So how do you engage with a venture studio? First, you need to understand what they focus on and how that aligns with your goals. Some venture studios focus primarily on helping with internal venture building and don’t have a capacity to invest in spin-outs. These fall more towards traditional service providers or agencies. Some venture studios focus primarily on spin outs and investing, and want to move as quickly as possible through the venture validation process in order to find investable opportunities. The risk is that there’s not enough alignment with your goals, or value that will be delivered back to you, through the creation of the startup. Some venture studios, like Highline Beta, work across these approaches, providing broader optionality to corporate partners in terms of build, buy, partner, acquire, invest or co-create.

Finally, think about engaging a venture studio as an experiment, especially if one of your goals is to explore spin-outs. We are always hesitant about big, top-down innovation framework projects, where a corporate partner is trying to build the “perfect innovation factory.” It doesn’t work. Instead, engage a venture studio – or multiple venture studios – on individual projects. See how they operate, and how quickly they create value. See how they help you make portfolio decisions around what opportunity areas to explore and how.

Building new ventures, partnering or investing in startups, or spinning out startups are all, in effect, experiments with some level of risk. By tackling one specific opportunity area first, you can determine if a venture studio partner is going to work flexibly within your innovation mandate, while simultaneously encouraging you to push the envelope further and explore new, creative ways of achieving your growth innovation goals. 


Benjamin Yoskovitz is Founding Partner of Highline Beta, a hybrid corporate venture studio and venture capital firm that helps ambitious companies grow beyond their core through internal and external innovation. He is also the co-author of Lean Analytics. Highline Beta is one of InnoLead’s strategic partners. 

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