Co-building & de-risking companies: a look inside Harvest’s Builder OperationsInside Harvest
Builder Story is a series where we get to know members of the Harvest team and their roles. We sat down with Dr. Maximilian Kerz, Head of Builder Operations, to understand how he plays a hand in co-building globally competitive companies.
Q: Tell us more about your background.
A: My career began in molecular genetics. Working in the lab, understanding the genetics of stem cells and cellular behaviour is vital in advancing therapies for debilitating diseases. I realized that leveraging software has the potential to capture disease insights quicker than normal, which makes a tremendous impact on healthcare and patients. With this thesis in mind, I started my PhD in Health Informatics and focused on monitoring patients through passive remote monitoring, such as smartwatches and smartphones.
Academia is a fantastic sandbox to explore new methodologies and play with novel ideas. But what I learned is that there’s no replacing real-life applications with a solid business model. No matter how many of the best machine learning algorithms you have, none of it is valuable if you don’t have a way of disseminating it among real, incentivized users.
Based on this philosophy, I moved on to start a company in London that focused on matching patient records. A big problem in the healthcare systems today is data silos–clinics, hospitals, they just don’t talk to each other–and that’s what my company solved. As the years went by, my interest in understanding the investor-side of entrepreneurship grew stronger.
I then had the opportunity to take on the role as Chief Technologist at Bayer Pharma’s digital health investment arm, where I helped execute global digital health investments to support the multinational’s molecular pipeline. My experience with them not only widened my perspective of the European markets, but also the global markets in healthcare sectors.
Q: How did you get involved with Harvest?
A: It was really through luck while I was traveling in Canada. I met some people who work at Harvest in Calgary, and we got talking about the vision and the potential for creating globally competitive companies that are locked up here in the Prairies.
Traditional startup scenes such as London, Berlin, and of course, Silicon Valley, have a lot going for them: access to talent, availability of capital, and the mindset to solve big problems. On the flip side, talent is very transient and you need a lot of capital to start something just to be able to pay your salaries. You’re constantly faced with the problem of people leaving or being poached.
In the Prairies, the problems are very different. Talent and capital are abundant, but it’s not readily available due to large multinational corporations that have a strong foothold in this space. Most capital is locked up in family offices and with high net-worth individuals who are just now exploring startups as a new asset class.
But once capital is secured, you can really get going with very few resources. There is such great potential in the Prairies, and I enjoy being part of our growing ecosystem. Harvest’s venture building platform has become a great catalyst for doing just that.
Not to mention, the quality of life in Calgary especially, has been very appealing and a great place to begin building globally competitive companies. The underlying conditions to building companies here, when done right, are surprisingly favourable.
Q: As Head of Builder Operations at Harvest, can you explain what your team is responsible for?
A: We define and set the portfolio strategy in motion. Our team is cross-cutting and has the most versatile application. One day I’m reviewing contracts and other days, I’m initiating share transfers or looking at budgetary requirements to start a company internally. Our bread and butter are identifying opportunities, validating key assumptions required to make successful ventures, and working with our other departments to place founders into appropriate roles, and build a product roadmap.
Builder Ops comes up with the processes for identifying market opportunities and working with founders to develop business plans. Right now, we’re mainly focused on Fintech companies but going forward, we’ll be branching out to other industries like PropTech and InsurTech, which would complement FinTech. There’s also a lot of industries that the Canadian Prairies have a legacy in, like agriculture, energy, and health. These are areas I certainly have my eyes on and plan to tackle next.
Q: Why build Harvest’s portfolio around FinTech first?
A: We’re starting with FinTech because for decades, this industry has not seen the innovation it needs to match our time. The potential to create better financial products with tech is massive. From a global perspective, Canada is significantly lagging behind in the amount of digital products we’re building. But much as we need to play “catch-up” with the rest of the world, we also have the advantage of having seen the pitfalls and successes of other companies in this industry across the globe.
So we can take what we’ve learned from others, adjust the lessons to the Canadian market, and roll them out. It’s not about reinventing the wheel, it’s about making adjustments to fit in the Canadian market.
Q: Generally when we think of Canadian tech hubs, Toronto and Vancouver come to mind. So what makes the Prairies the perfect place to build tech companies?
A: Aside from the industries themselves, it comes down to access to capital, access to talent, less competition, and overall better quality of life.
Traditionally, capital has been locked up in the Prairies with energy and agriculture. It’s kept within family offices or larger corporations. But now, these people are looking for new investment vehicles, and startups are an exciting new asset class. Access to capital is more realistic here and tech has high-profit margins due to its low operational costs.
The market here is also way less competitive than say, Toronto. It’s easier to build momentum and companies in second-tier cities, and then enter the markets, like what we’ve done with Neo Financial and how SkipTheDishes started. The Prairies offer start-ups the ability to offer a competitive salary, attract talent, and make disruptions. Unlike hubs that have a high cost of living, the Prairies are affordable to live and people have a better quality of life.
Q: With so many areas for potential in the Prairies, how do you determine which companies to work with?
A: It’s all about understanding where the greatest opportunities lie within a specific sector and their potential to be tackled. Looking at companies from a market size perspective and the customer segments within is how we’re able to identify these gaps and jump on an opportunity.
Q: How do you build portfolios?
A: We use something called the “co-building model”, which is a form of a keystone or synergetic portfolio model, where we build companies centred around an initial company that has a tremendous shot at capturing a large part of market share down the line. These initial companies are aimed at $1 billion and more in market value and have a relatively defined product road map.
However, when companies start off, they only have a limited amount of resources available. We can’t tackle everything at once. So what our portfolio allows us to do is open up opportunities to build companies around the roadmap of the initial company, but also synergize with the initial company.
It’s about building mutually beneficial relationships and de-risking the portfolio. Essentially we’re creating a portfolio that almost competes as a whole in the market rather than companies competing individually.
Q: What makes Harvest’s co-building model different from traditional venture builders?
A: Early-stage venture funds and accelerators often practice what’s called the “spray and pray” approach. It’s where you try to invest in as much as possible and some will succeed.
Harvest’s co-building model is more targeted–it de-risks the process of growing and scaling a company, and increases the chances of more companies being acquired down the line. Plus, the likelihood that companies within the portfolio may benefit from a company or product being acquired or merged in is a lot higher with our model. We aim to reduce the traditionally high failure rate of new ventures and build exit paths for our companies early on.
Q: How does Harvest de-risk companies and opportunities for investors?
A: The whole idea of de-risking is doing everything you can for your company, before you actually start it. When you have defined and tested your assumptions as much as possible, then you can iteratively start moving forward to test them.
People often start companies under the belief that they’ve identified a problem worth solving, but these companies often fail because the problem they solve for isn’t big enough, not executed well, or it’s not a real problem to begin with.
The way we protect against these issues is to bring in domain experts from industries of interest to assess the problems. We make sure the companies we’re working with and their products aren’t just something that will work once, but will continue to work for the future and have at least a few customers lined-up when we start building.
How you position yourself from a go-to-market strategy and to launch will also determine a big part of your success. And that’s exactly where talent in Harvest shines. We help founders position themselves to execute their goals. We make sure the time invested in a company warrants the reward.
Harvest is also the first iteration of how a scalable venture builder model works. We create stepping stones for risk-moderate people who want to start a company. We’re providing a safer de-risking process for investors to get involved with companies that have gone through the venture building process before–this helps unlock capital in the Prairies.
Q: Does Harvest’s model change if you’re building a startup from scratch (with a brand new founding team) versus building a startup with a corporate venture?
A: The same principles apply to both. Corporations are great because they have more firepower. They can get the right expertise quickly, but they also have a very defined scope. The ability to pivot and build companies and not just products is easier to do when you start from scratch without a partner. We account for the difference in having a defined way to engage with corporations that play to our collective strengths.
Q: What is Harvest’s role with startups to gain access to capital?
A: When companies start out, they’re not often structured in the best way, so they may need to convince investors they’re a worthwhile investment. We help make those connections between companies and investors, and prepare companies to raise capital.
Q: As we now wrap up, what piece of advice do you have for tech startups looking to build in the Prairies, regardless of what stage they’re in?
A: It can be tempting to go with short-term solutions, especially when it comes to money, but try not to make shortsighted decisions. Instead, prioritize the bigger picture. Do everything you can to have the right advisors on your team to help guide you. You can’t lose sight of the long-term game–that’s the future of your company and you have to look ahead and think of the consequences and the day-to-day decisions that impact your overarching goal.
Check out Harvest Builders to learn more about our venture building model as well as the types of founders we’re looking to co-build with.