CFO Roundtable Public
14 September 2012
Categories of Growth
Scott Jacobson, Madrona Venture Group
Madrona Capital
· Invest at an early stage, but across the lifecycle
· Seed, Creation, Series A Funding
· Pre-revenue
· Geographic focus on PNW, largely Puget Sound
Questions:
· Social Ventures
o Big Challenge: the best people to allocate capital, build companies would be better off financially to go elsewhere?
o Nonprofit folks need some help
o Can be a good later career option for investors & successful people
o New wave in social enterprises? People care about a mission-oriented business, but care about the profits
o There can be money to be made in social ventures – can you take it out?
o If it is ultimately good for the business, then it can be a good thing – add value to the brand, can be profit maximizing
§ Warby Parker
§ Toms Shoes
§ How long can it be differentiated?
· Regionality: Seattle vs. Other Areas
o Answer: What grows well here? The Valley is self-sustaining
o 10 years ago, that opportunity didn’t seem as real for Seattle
o Seattle has developed some “anchor tenants”
o Use UW Engineers, attract others
o People get trained well in tech companies and get bored
o Cloud infrastructure à huge for Seattle
§ Microsoft, Amazon
o Zulily – ecommerce, should grow better
o Amazon can intimidate folks
o University of Washington
§ Research: Imaging
§ Have funded 13 companies out of UW
o Mobile: Early mobile development in the PNW: McCaw,
§ How to make devices work well on mobile platforms
§ Connecting devices to mobile networks
· Thermostats, etc
§ Building applications has grown
o Machine to Machine communication is growing
o Startups are focusing on how to add value on top of the commodity hardware that already exists
o Opportunities for startups:
§ Building applications rather than lots of infrastructure
§ Bring applications into the cloud à more insights, more power
§ Make it easy for companies whose focus is not technology – making it easy to access technology, etc.
o Companies are using the cloud as an easy way to get started
§ Build applications that build on cloud infrastructure, making it easy for others to build on cloud infrastructure/use the power of the cloud
o Entrepreneurial activity in Seattle
§ Established ecosystem in Bay Area that doesn’t exist as strongly in Seattle
§ Infrastructure, Capital
§ Build a prototype, ideas are worthless, as cost is close to zero à same access to infrastructure as in the Valley
§ Smaller number of people comfortable with writing seed checks
· Part of the culture of the Valley
§ Network of Angels is small in Seattle, small, given wealth of the area and of individuals
§ Are we showy enough?
§ Are companies successful enough in Seattle?
§ Don’t have the same seed funding culture – get people excited about investing?
· Mining VC For seed investment opportunities
o Staying connected
o There are Angel Netowrks: Serif, Alliance of Angels
§ Can act as a fliter
o Angel List
o TechStars – accelerator
o Startup Weekend – they want to start up a company, want to meet other people. Show up – have idea, pitch, people aggregate – you start building
o ½ dozen venture firms in seattle, fairly easy to network
o Just Call Them
o Keeping ear to the ground:
§ Creating a seed division? OK for larger companies
· Want to get involved, seed money, strategic partner, perhaps an exit strategy
· Do these gestate anything?
§ Talk about priorities
§ What is your strategy?
§ What is going on? What can support/disrupt our strategy?
§ Talk to people about strategy – share ideas!
· Corp. attention for “small” transaction
o How do you get on the radar for smaller deals?
o Successful acquisitions – incorporate your infrastructure
o Buying a competency: team & technology
§ Fix a mess --> Google Wallet
· Trends à What are the new ideas hitting his desk?
o Big Data à new tech that make it easy to process data in a way that has not happened before
§ Ad targeting
o As connectivity grows there are new considerations
§ Security:
· Devices that connect to your network, taking sensitive data, etc – iPads – how do you manage this risk? Employees are using these for work and personal
§ Productivity software reimagined for mobile devices
· Smaller screens, etc. How is this content created?
o China: ownership structure, culture issues, but large base of brand-focused people with money to spend, who want to consume
§ Chinese are putting money in the US for security
· More safe than bank and/or mattress in China
§ Selling vs. owning
· Impact of new tech in media and broadcasting
o TV Viewing is not decreasing, despite media moves
o Viewership of video on web is skyrocketing
o Kids are watching iPads rather than TVs
o Consuming live events on TV, but otherwise playing games or watching short form content
o Web Targeting is great, but ads for tv are lagging à why are they so much less focused? Make it relevant!
o What is your digital strategy?
o There is a lot of old thinking in tv business
o “TV” will decline over a much longer timeframe
· Exit strategies for VCs
o Given FB, Groupon, etc
o Liquidity through M&A
o IPO Market is come and go
o Bezos: Mazimize FCF Dollars à long-term views
o What is Zuckerberg trying to optimize for à Shareholders? Social mission? What is his motivation?