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.
It’s been a blast to get to know and work with Eliot Peper. His book, Uncommon Stock, is the first one that we published at FG Press. If you want to read – and comment – along with me, grab a copy of Uncommon Stock on BookShout.
I asked Eliot to write a short post about how he’s feeling and thinking about the category of “startup fiction” now that the book is out in the wild and he’s getting some great feedback.
Following are his thoughts.
Business case studies have wrestled through many different components of entrepreneurship. Bloggers and Quora have picked up the slack for the situations those case studies miss. Management books delve into every nook and cranny of strategy and tactics. Talking heads discuss the ins and outs of everything from product development to investment theory. Gurus wax lyrical about vision and lean, focused execution.
But there’s one critical piece of entrepreneurship that these experts miss. Their analyses emphasize the rational. They draw out lessons-learned from business experiences and try to share best practice with aspiring entrepreneurs. Knowledge is important and many experts are happy to share their thoughts (whether you want to hear them or not!). But they too often focus on the brain at the expense of the heart.
Building a business is a human experience as well as an institutional one. That’s why I love Brad and Amy’s frank discussions in Startup Life. In thinking about growing an organization it’s easy to forget that it’s all made up of individuals. These people lay the groundwork and set the course for the companies they found. They also struggle constantly with work/life balance, relationships, burnout, and team dynamics.
It’s a truism in venture capital that startups fail most often not because their product explodes, but because their team implodes. If you think high-school had a lot of drama, try a high-speed tech startup. Inspiration, betrayal, falling-outs and last-minute-comebacks are par for the course. Everyday I’m blown away by the incredible entrepreneurs I know and work with. Their passion fuels them through the equally challenging rational and the irrational halves of company building.
The emotional reality behind the scenes in every startup is what inspired Uncommon Stock. I thought that fiction could give an intimate peek into the minds of founders. Early readers have pointed out something that I find hugely cool: the other benefit of Startup Fiction is that its so damn accessible.
People who read non-fiction books about entrepreneurship tend to already be engaged in the startup world in some way. We’ve worked for a startup. We read Techcrunch regularly. We go to SXSW. Living and breathing that world, it’s easy to forget anyone else is out there. But readers that aren’t engaged with tech and picked up Uncommon Stock simply because they wanted a good page-turner are reaching out to say how awesome it is to steal a glimpse into our startup boudoir.
We are blessed to live in a magical world filled with some of the most talented people on Earth. Hopefully together we can help to illuminate the heart of the start.
Yesterday Yesware announced that Battery Ventures led a $13.5m round that we participated in. A few days ago Xconomy wrote a great article about the very first Yesware board meeting on April Fools Day, 2011. When I reflect on the journey of Yesware over the past 2.5 years it’s a pretty awesome example of a company going from a seed investment with three founders (Matthew Bellows, Cashman Andrus, and Raj Bhargava) to a rapidly growing 40 person company.
On 4/1/11 Yesware had a vision, a crappy prototype (that we threw away immediately after the financing), and a huge obsession around a vexing problem that no one was addressing effectively. Today they have over 300,000 users, a broad product set that includes a recently released deep integration with and between Gmail and Salesforce, and a leadership team and culture that is clear about what it is trying to accomplish and is true to itself.
In March, I wrote a blog post about Shifting My Focus To Scaling Up. When I look at our Foundry Group portfolio of over 60 companies, I see many of them in two distinct scaling up phases. The first are companies like Yesware that are rapidly growing revenue and customers, are in the 30 to 100 employee range, are dealing with balancing resources to accomplish their goals, but have an incredible amount of open ground in front of them. The second are companies like Fitbit that are clear leaders in their market, are on the 100 to 500 person ramp, and pacing the innovation in their market segment. Many of them are companies that aren’t overhyped because they are Silent Killers, a particular type of company we love to fund and work with.
Yesware has now shifted from the startup phase to the scaling up phase. There’s an entirely new level of organizational development, different set of challenges, leveling up of leadership and management skill sets, and massive opening of new opportunities given the resources that the company now has.
I find this a particularly exciting time in the life of a company. And a very challenging one. Fortunately, Matthew continues to surround himself with amazing people, such as his first outside board member, Dave Girouard, who recently ran the entire Google Apps business and is now CEO/founder of Upstart and his newest board member Neeraj Agrawal from Battery Ventures.
Plus, Matthew has a bunch of peers in our portfolio to talk to. We are together with many of them today in another Foundry Group summit – this time for full executive teams across our portfolio right in the middle of Denver Startup Week. Like all of our internal events, our goal is an extremely high signal to noise ratio. We leave the pomp and circumstance to others.
The enormous and powerful conversation around “startups” will continue. But as I turn more of my attention to “scaleups” I believe the next phase is even more powerful.
I’ve spent the past two days at the Global Entrepreneurs Congress in Rio. It’s been really powerful for me as it’s shown how broadly the message of Startup Communities has taken hold across the world. At the point I can see that the Startup Communities movement is in full swing, the language and principles that I introduced in the book are being talked about, dissected, and improved on, and many entrepreneurs around the world are leading the development of the startup community in their city.
In a discussion with my long time friend Paul Kedrosky, we talked about a paper he’s writing about the number of “important companies” that get to $100 million in revenue. Our discussion shifted to the magic number – was $100m the right number for “important”, or was it $50m, or $25m, or even $10m. At some point we both realized it wasn’t about a magic number, but about the concept of “scaling up” a business once it had started up.
I’ve been hearing the phrase “scale up” a lot lately. The first time I noticed it being used was in Daniel Isenberg’s post Focus Entrepreneurship Policy on Scale-Up, Not Start-Up. While I didn’t agree with the tone of Daniel’s article, the meta-point, that we need to put more attention into focusing on scaling up businesses, range true with me.
I view the concept of startup and scale up as linked. You have to have a vibrant “startup community” to get to the point where you have enough interesting companies to “scale up.” Many geographies haven’t had enough focus on “startup.” That has dramatically shifted and entrepreneurs around the world understand what “startup” is, are learning and doing it, and a phenomenal amount of activity is happening around it.
So, I’m shifting my focus for the balance of 2013 on “scaling up.” Fortunately, I’ve got a great laboratory for this – the Foundry Group portfolio. Of the 55 active companies we’ve got in our portfolio, more than half are solidly in the “scale up” zone – some scaling very rapidly. In the same way that I used Boulder to form my thesis on Startup Communities, I’ll use our portfolio, and my activity with it, to form my thesis around scaling up. That’s where I’m going to turn my intellectual attention over the balance of the year.
This is consistent with the next three books in the Startup Revolution series – Startup CEO (written by Matt Blumberg, CEO of Return Path), Startup Boards (written by me and Mahendra Ramsinghani), and Startup Metrics (written by me and Seth Levine). Each of these are a lot more about “scaling up” than “starting up.”
As part of this, I’ve shut down all my travel for the rest of the year (starting in May, as I’ve got some commitments for the next six weeks that are too close in to cancel.) But I’m going to spending a lot more time in one physical place (Boulder), going deep on the notion of scaling up, while continuing to support the incredible energy around startups that has a wonderful and amazing life of its own.
When I created Startup Revolution and began writing Startup Communities, I insisted with Wiley (my publisher) that the word be “startup” and not “start-up” or “start up” or even “StartUp”. It took a while to (a) get everyone to agree to that and (b) expunge the efforts of the copy-editor to reintroduce some gross variant of “startup” but I finally got it done.
Today I noticed a post from Andrew Hyde titled Washington Post Style Guide Now Includes “Startup” as A Word. Awesome.
We had a similar conversation when Startup America Partnership was formed in 2011. After some back and forth we all got it right.
I’m glad that “Startup” is making its way into the style guides of the old media world.