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Founders' Co-op - Seattle Tech Startups 2010

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  • 1. Seattle Tech Startups Trends + opportunities for tech entrepreneurs in 2010 January 13, 2010 Chris DeVore General Partner, Founders’ Co-op [email_address]
  • 2. Agenda
    • Who am I?
    • What is Founders’ Co-op?
    • Fund Thesis
    • Portfolio Examples
    • Three Themes for 2010
    • Q&A
  • 3. Chris DeVore
    • Serial entrepreneur with enterprise product management / marketing background
    • Enterprise
      • AT&T, McCaw Cellular, Patagonia
    • Entrepreneur
      • Bootstrap : Adjacency (acquired by Sapient)
      • VC-backed : Judy’s Book (asset sale)
      • Founder-funded : Cooler Planet (profitable)
    • Early-stage investor
      • Co-founder / General Partner – Founders’ Co-op
      • TechStars Seattle
  • 4. Founders’ Co-op
    • $2.5MM Committed Fund
    • Seed + Early-Stage (100K-500K)
    • Web software companies in the Pacific Northwest
    • General Partners (2)
      • Andy Sack
      • Chris DeVore
    • Limited Partners (22)
      • Seattle-area software entrepreneurs + angel investors, e.g., Andy Liu, Geoff Entress, Alex Algard, Ben Elowitz, Jay Westerdal, Edward Yim
  • 5. Fund Thesis (I)
    • “ [T]here is plenty of investment capital available for Consumer Internet companies that have demonstrated significant market traction in terms of traffic or revenues, but there’s almost none available for what, up until recently, would be considered the sweet spot of true VCs: Seed or Series A startups."
      • Bill Burnham, The Great Abdication: Consumer Internet, Venture Capital, and Angels
    • "So what do I think is wrong with funds today? Many of them are too big. They need to make big investments to justify fund size and the associated management fees. But companies can create a lot with much less in the way of resources compared to a few years ago. They don’t need as much money. But they take it anyway…”
      • Mike Arrington, On Venture Capital
    “ Hard” web startup costs  zero + VC fund sizes  $Billions = Terminal misalignment of goals/incentives
  • 6. Fund Thesis (II)
    • Opportunity
      • Traditional VC’s “can’t afford” to do early-stage deals
      • Weak / fragmented angel ecosystem in Seattle/PNW
    • FC Thesis
      • By entrepreneurs, for entrepreneurs (GP + LP)
      • Willing to make smaller bets (100-500K)
      • Web + mobile software
      • Strong focus on capital efficiency + speed to breakeven
      • Bias toward engineer-led founding teams
      • Actively foster + support the entrepreneur community (e.g. Open Coffee)
      • Think different (e.g., RBF, TechStars)
  • 7. Portfolio Examples
  • 8.
    • Founders’ Co-op isn’t strongly theme-driven – we assume most entrepreneurs are smarter + more creative than we are, and screen more on thesis/DNA than theme.
    • That said, a few areas we’re excited about for 2010…
        • Online Customer Acquisition / Lead Generation
        • Mobile Web
        • Business Intelligence + Workflow
    • If you want to dig in on how we evaluate companies / opportunities, there’s more here:
    • http://crashdev.blogspot.com/2008/03/investment-thesis-ideas-drill-down.html
    Three Themes for 2010
  • 9.
    • Assumptions
      • Most of the U.S. (& global) economy is offline
      • Most of these businesses are terrible at online marketing
      • Acquiring customers creates value that’s easy to quantify & monetize
    • Opportunity
      • Lead gen is an old playbook, but still a good one
      • Most big verticals (e.g., mortgage, real estate) are “taken”, but there are literally hundreds of niche verticals that aren’t
      • Lots of flavors / approaches, e.g.,
        • Q&A
        • Community / user-generated content
        • Directory
      • Strategic exits are few, but lots of profitable businesses still to be built
    Theme: Customer Acquisition
  • 10.
    • Assumptions
      • iPhone / iTunes / App Store has created an exciting new model for software development, distribution and monetization
      • Widespread adoption of Android by device makers, carriers & consumers will only accelerate this trend
      • Ecosystem is growing fast + still very fragmented
    • Opportunity
      • Avoid app-centric businesses – high risk / low yield
      • Focus on “horizontal” / picks + shovels opportunities
      • Examples:
        • Make it easier for developers to create, distribute and monetize their apps
        • Facilitate access to mobile computing for incumbent brands / vertical markets
        • Increase transparency / make connections among those seeking smartphone distribution and those enabling it
    Theme: Mobile Web
  • 11.
    • Assumptions
      • Most businesses still rely on manual tools to aggregate business data, perform analysis and manage workflows
      • Replacing these processes with smart web software can improve business performance in clear & measurable ways
    • Opportunity
      • Hard to generalize about opportunities – requires insider knowledge of common practice + workflow within a business segment
      • Best candidates are traditional firms / industries that do some business online but aren’t “tech” firms at their core, e.g.
        • Advertising / Marketing / PR
        • B2B manufacturing / wholesale distribution
        • Medical devices / medical services
    Theme: BI + Workflow
  • 12. Questions?
    • When asking, please remind me of:
      • Your name
      • Your perspective / role
        • e.g., VC, angel investor , entrepreneur, service provider, other
  • 13. Where to Find Me
    • Fund: http://founderscoop.com
    • Blog: http://crashdev.blogspot.com
    • Twitter: http://twitter.com/crashdev
    • LinkedIn: http://www.linkedin.com/in/devore
    • GV: 206.801.1080
    • Skype: chdevore