Pioneer Square Labs (PSL) launched today. We led the round and I’m joining the board. PSL, based in Seattle, is a not a VC firm, accelerator, or incubator, but instead is a startup studio, which is a company that creates companies.
The co-founders are Greg Gottesman, Geoff Entress, Mike Galgon, and Ben Gilbert. Greg is a co-founder of Madrona and long-time VC. Geoff worked with Greg at Madrona for a decade and is one of the most prolific and successful angel investors in the Pacific Northwest. Mike was the co-founder of aQuantive which was acquired by Microsoft for $6.2 billion. Ben was a co-founder of Madrona Labs with Greg.
PSL was announced today at GeekWire’s conference and there’s an extremely comprehensive post explaining how it works at Top Seattle investors raise $12.5M for new ‘startup studio’ Pioneer Square Labs. Marcelo Calbucci, who is part of PSL, explains in his post Next Chapter: Pioneer Square Labs, why he joined and what’s unique about the approach.
At Foundry Group, we’ve experimented with lots of different things around company creation and early stage investment. In addition to our direct investing, we co-founded Techstars which has had a profound impact on company creation around the world. Techstars now owns Startup Weekend and Startup Week, which extend Techstars impact on and support of the Entrepreneurs Journey. We’ve made over 60 investments through FG Angels – our AngelList syndicate – and are one of the most prolific investors on that platform. We’ve invested in over 30 VC seed funds and emerging managers, supporting even more investors and founders at the early stages.
We have a lot of investments in Seattle. Currently active ones include Rover.com, Spare5, Moz, Glowforge, Cheezburger, and Impinj (via our Mobius funds). Previous investments include Gist (acquired by RIM) and BigDoor (which failed). Mattermark, which is based in San Francisco, just opened an office in Seattle. Techstars has a big presence there, including much of the team from Startup Weekend. And we have another new investment based in Seattle that should close mid-October.
We’ve known and worked with Greg Gottesman for over a decade. We consider him one of our closest friends and most trusted partners in the VC world. We’ve had ups and downs together, which is critical to building a real relationship in this business (if everything is good, it’s bullshit, and if everything is bad, it’s no fun.)
When Greg started talking to us about the idea for Pioneer Square Labs, we were immediately interested. Two of our Seattle investments – Rover.com and Spare5 – came out of the Labs effort that Greg created at Madrona. While Rover.com preceded Labs (and was actually a Startup Weekend project that Greg led the team for), it was the prototype for Labs so we understood the concept well. Both Rover.com and Spare5 are doing great and validated the premise of the Labs concept for us.
The last piece of the puzzle was how to fund something like this. I encouraged Greg to have an extensive syndicate of VCs and angels as the goal was to build an engaged, invested community around PSL. The result is a magnificent group of 13 VCs and over 50 angel investors.
When we saw the opportunity to invest even more in Seattle, working with three of the strongest leaders we know in the early stage market with an amazing collection of VCs and angel investors, jumping in with both feet was a no-brainer.
Glowforge has started taking pre-orders with an expected ship date of the pre-orders of before the end of the year. It’s one of the most magical products I’ve ever been involved with. It’s in the “show, don’t tell” category, so spend three minutes of your life and see what you can do with it.
For the next 29 days, Glowforge 3D laser printers are available for 50% off the retail price. In addition, if you buy using my referral code, you get another $100 of the price.
There are many times when I love what I get to do. Watching a product like Glowforge come to life, and being involved as an investor, is one of them.
Last Tuesday, while I was enjoying a week off the grid, AvidXchange announced they had raised a $225 million financing led by Bain Capital Ventures. I’m psyched to be joining the board of a company co-founded and run by Mike Praeger, a friend of mine for over 20 years.
It was big news in Charlotte, North Carolina where AvidXchange announced the groundbreaking on a new headquarters complex in the N.C. Music Factory. And, Matt Harris from Bain Capital Ventures wrote a good thought piece titled Submerging Payments, Part II on why AvidXchange is such a big deal.
This was an atypical investment for us as we participated in the financing through our Foundry Group Select fund. While we do late stage investments via Foundry Group Select, up to this point we’ve only used it to invest in companies we are already investors in. AvidXchange is our first Foundry Group Select investment that we weren’t previously investors in.
The price of admission for us to make an investment like this is that we think the company is extraordinary and will be an unambiguous long term market leader. But we see lots of late stage investment opportunities like that and consistently pass on them as it’s not where we engage. And, when Mike initially called me for advice on the financing he was putting together with Bain Capital Ventures, it didn’t even occur to me that it might be something we’d invest in.
But then Mike called me about some more stuff a week later. During this call, he asked if I’d be open to joining the board of directors as part of the financing. I told him that I couldn’t as we don’t join boards for companies that we aren’t investors in. Mike then asked if we’d be willing to invest if he could get Bain Capital Ventures to give us some of their allocation (they committed to the entire round.) I told Mike I didn’t think this made any sense given our strategy and we left it at that.
A few days later, Mike emailed and asked if he and his wife Cindy could come to Boulder to spend some time with me and Amy. We hadn’t seen each other in many years and it seemed like a fun evening if they were already traveling. A week later we had an awesome dinner at Oak and then Mike, Cindy, and I stayed up until after midnight at the St. Julien talking about AvidXchange. Mike again asked me if I’d consider investing. This time I told him I’d run it by my partners and get their feedback.
Seth, Jason, Ryan, and I had a long conversation about it after going through the AvidXchange financing deck and monthly financial package. I expected that we’d decide to pass and set up the conversation with them this way. But I was pleasantly surprised that they were all interested in exploring it more. Besides thinking this was an outstanding business at first blush, there were three other things that caused us to consider breaking our rule about late stage investing.
1. My long standing relationship with Mike. We met through YEO in Boston in the early 1990s when we were each running our first company. Through YEO, I got to know Mike and Cindy (who is also an entrepreneur and was in YEO) very well. A few years after Amy and I moved to Boulder, Mike and Cindy sold their first company and moved to North Carolina. Their experience in Charlotte has been similar to ours in Boulder, as they made it their home and immediately went to work building their next business and their life. In 2000, Mike co-founded AvidXchange and has been building it ever since. While we haven’t seen each other in person for a while, we periodically go back and forth on email and have a deep emotional intimacy that comes from the relationship we built through our time in YEO.
2. We are very interested in investing in fast growing companies in different geographies. When we started Foundry Group in 2007, we stated that we would invest in companies throughout the United States. While roughly 33% of our investments continue to be in California (San Francisco, Los Angeles, and a third city to be named in a week or so) and 33% of our investments are in Colorado (primarily Boulder and Denver), we have developed deep networks in many different cities, including Boston, New York, Seattle, Portland, and Minneapolis through the other 33% of the investments we’ve made. And, through our deep relationship with Techstars, our reach and network is even further and includes cities like Detroit, Kansas City, Austin, Chicago, San Antonio, and San Diego. When the opportunity to invest in one of the fastest growing, and most significant tech companies in Charlotte appeared, we couldn’t resist.
3. We could do our unique thing alongside one of the best fintech investors in the industry. We have enormous respect for Matt Harris and his work at Bain Capital Ventures. While this is the first time I’m working with Matt, my partner Seth has known him going all the way back to high school and Mark Solon, one of the managing partners at Techstars, worked with him during his time at Village Ventures. While fintech is not one of our themes, we think of AvidXchange as Glue in the fintech world, which gave us a comfortable lens to view it through.
Before making a decision to invest, we talked to each member of our advisory board to get their feedback. We knew we were onto something when several of them asked if they could invest alongside us in the round. Their feedback, as one would hope from an advisory board, was direct, clear, and ultimately supportive.
With that, we decided to invest and Mike got me to join the board after all.
One of the most enjoyable things I get to do in my job is to be involved in creating amazingly fun products. If you hang around in our office at Foundry Group you see plenty of Makerbots, Fitbits, an Oblong Mezzanine, an Occipital Structure Sensor, ModRobotics Cubelets, littleBits, 3D Robotics drones, and Spheros.
Now we’ve got some BB-8s (from Sphero) in our office. And if you want one, you can buy one right now.
The story of Sphero and BB-8 makes me smile a huge smile. I’m a massive Star Wars fan and saw the first Star Wars movie in 1977 when I was 11. I had a digital LED Star Wars watch from Texas Instruments that I wore proudly every day. Recently, I’ve been wearing Star Wars Vans. Yoda adorns lots of spaces in my world and “Do or do not, there is no try” is one of my mantras.
Sphero was originally known as Gearbox when it entered Techstars in Boulder in 2010. It’s origin story is summarized in the Techstars Founder Stories series and our journey with Ian Bernstein, Adam Wilson, Paul Berberian, and the team they subsequently assembled has been awesome.
Shortly after we led the seed round the company changed its name to Orbotix. It released its first product – Sphero – a little over a year later and was off to the races.
Last year, Orbotix did an unusual thing. With two successful products under its belt (Sphero and Ollie), the team was working on the next product concept. At the same time, Techstars had partnered with Disney to create the Disney Accelerator. While Orbotix was now a substantial company (with around 50 people), Paul, Ian, and Adam decided to go through the Disney Accelerator to create their next product. They had no idea what it would be, but they just wanted to isolate themselves from the rest of the company and invent the next thing. Paul spent 50% of his time in LA and the other 50% of his time in Boulder. Ian and Adam spent 100% of their time in LA and went through the first Disney Accelerator program.
The story of how BB-8 came out of this has been talked about plenty of times including an article in Wired and this morning on the front page of the Denver Post. It’s a great example of the power of a prepared mind, magical technology, and the Techstars corporate accelerator dynamic.
Today, Orbotix is called Sphero. The latest product from Sphero is BB-8. And, as a Star Wars geek, I couldn’t be happier to have a tiny part in bringing BB-8 to life.
Six weeks ago I wrote a post titled The Silliness Of Recapping Seed Rounds. I described a situation that occurred in one of our FG Angels investments that I thought was short sighted on the part of the VC involved and the CEO of the company. I characterized the situation as “silly” and specifically didn’t call out the people as my goal was to be instructive around the startup landscape, not to complain (we are big boys and will deal with whatever) or to try to generate a different outcome. I accepted what happened, wrote my post, and moved on.
Over the next few days I had a few emails and phone calls with the VC and the CEO. I was told that my post generated some attacks, both professional and personal, and plenty of thought and reflection on the situation.
I was willing to engage (even though I said I was done in my post) due to my “fuck me once” rule. If you aren’t aware of it, I wrote a chapter about it in Do More Faster (although Wiley made me call it the “screw me once rule.”) While the exchanges had a little emotion in them, they were generally calm and rational.
At some point, I was asked directly by the CEO what I would have done in the situation. My answer was simple – I would have given the early seed investors some percentage of the company as part of the financing. Given the amount raised, the new financing, and the cap, I would have asked the seed investors to waive the terms and instead accept a smaller percentage of the company than they would have otherwise gotten. Instead of pricing the new round at $100,000 pre-money (effectively wiping out the several million dollars of seed money already raised and spent), I would have set a higher pre-money but sized it to be reasonable given all the other dynamics.
When asked what the range I would give to the seed investors post financing, I said 10% – 15%. I didn’t do spreadsheet math to get there – I just figured that the economics of the round ended up with the seed round getting about 33% (the max I think most seed rounds should end up getting) and then take meaningful dilution from there.
The CEO committed to doing something here, which I told him I respected. Yesterday, I got the docs giving the seed investors, which included the FG Angels group, 12% of the post money cap table.
I’m glad the CEO and the VC investors did the right thing. I also appreciate it as it sets an important tone in the seed stage ecosystem. And, most of all, I’m happy to give them all another chance in my book.
A few weeks ago I reposted some great advice from Fred Wilson for pitching entrepreneurs:
“Fundraising is simple: find investors that get excited about your company.”
Our experience with Spare5 and their experience raising money from us, where we just led a $10 million Series A Financing together with Madrona Venture Group and New Enterprise Associates, fits this quote perfectly.
Matt Bencke, Spare5’s CEO, had a conversation last November with Jason. I remember Jason walking into my office and saying that he’d been thinking about something like this for a while and was super excited about how Matt was describing what Spare5 was going to do. Within a few days, Ryan, Seth and I also spoke with Matt and his co-founders and agreed to participate in their $3.25M Series Seed round.
While it helped that our long time friend Greg Gottesman had been working Matt for a while and that Spare5 was the first company to emerge from Greg’s Madrona Venture Labs project, Jason bouncing up and down about it in my office when describing his excitement to me was the real spark.
Since then the team at Spare5 has made great progress. We are psyched to be leading this round with the same VC team that made up the company’s first round. For the last several months we have had an insider’s view into Spare5’s progress, promise, and challenges. We love what we see.
Spare5 is bringing a unique approach to a massive problem that is riding huge trends. More and more companies are swimming in data – both signal and lots and lots of noise. Whether your company is posting content, selling online, training machines, and / or trying to understand what people think, you need human insights more than ever before. Spare5’s micro-task platform gathers targeted peoples’ inputs, and synthesizes them into valuable insights. The other side of this trend is the fact that we’re a society addicted to our smartphones. Spare5 aspires to give everyone a host of new choices about how to spend spare time productively and make a buck while doing it.
If you have dirty data or not enough of the good, actionable kind, check out www.spare5.com/product. If you are some particular combination of audacious, ambitious, and inspired check out www.spare5.com/jobs. And if you’re just plain nuts, download the iOS app and let Spare5 tap into your particular kind of crazy today.
Dealing with email is something I have become an expert in out of necessity. While it’s out of control, it’s a chore that is wired into my work in a deep way that, regardless of the explosion of real time communication channels, will likely continue to be the least common denominator for communication for the next 100 years.
That is one of the reasons why I’m interested in seeing the projects that come out of the Context.IO App Challenge, a long-format online hackathon that I’ll be judging in a few weeks along with David Cohen, Fred Wilson, Matt Blumberg and Josh Baer.
Context.IO is a product of Return Path, where I’ve been on the board since 2000. It’s an API that developers can use to build applications that integrate their users’ email data (contacts, files, messages, threads, receipts, and rule-based notifications). We’re expecting to see a healthy mix of inbox management tools along with apps that deliver value in other ways outside the inbox. A few of my favorites that have been built in the past using Context.IO are Mailtime, Paribus or Airhelp.
A common question is if projects from a hackathon can become a successful business. Not all ideas will be winners and it depends on the goals of the event and participants. There is certainly a higher chance with an online hackathon like this one where you have months to build something amazing instead of 24-48 hours. One of our portfolio companies, WootMath, won a similar App Challenge back in 2013.
In some ways, the judging criteria we’ll all be working from are basic questions any founder should ask themselves:
I’m looking forward to seeing what gets built.
I participate in multiple conference every day. While I can’t change much about the general tediousness associated with 15 different people all joining a call within a five minute window, I can do something about the misery of pressing 18 different numbers on a phone to join the call.
MobileDay solved this problem for smart phones several years ago when it launched. If you want to join a conference call (or any phone call) on your iOS or Android phone, just use MobileDay. Press one button – join whatever call is next on your calendar – automagically.
But it gets even better. MobileDay just released a feature which lets you push the call from your smartphone to any conference room phone. Until now, while I can do one touch dialing into a conference call from my iPhone, I still have to dial 18 (or 19, or was it 20, or does it need a 9 at the beginning, damnit) numbers on the ubiquitous Polycom phones in conference rooms. And, amazingly, sometimes I give up and just use the speaker on my iPhone, which is truly sad and pretty awful compared to the dormant Polycom it is sitting next to.
The new Push feature available for MobileDay Business subscribers can be pre-programmed to connect with any device: Polycom or desk phone. Meetings can still be initiated with MobileDay’s revolutionary one tap and then pushed to another device. Push is keyword sensitive: once I have pre-programmed a device and named it after the meeting room it lives in, whenever I am in a scheduled meeting in that room, MobileDay gives me the option to connect with that device. As with all MobileDay calls there are no numbers to remember – all you have to do is press the green button that pops up on your smartphone and you are in your call.
My favorite products are ones that just work like magic. MobileDay has created several of them, and Push is one of those things that suddenly makes my life a lot better. If you are nostalgic for the days when you had to get up, walk across the room, and manually change the channel on your TV, you probably won’t be into Push. But if you like things that just work and you make a lot of conference calls, go try it and let me know what you think.