The document outlines insights on Seattle tech startup trends and opportunities for entrepreneurs in 2010, presented by Chris Devore from Founders' Co-op. It discusses the limited availability of funds for early-stage ventures, highlights three main themes for investment - customer acquisition, mobile web, and business intelligence/workflow - and emphasizes the importance of capital efficiency and community support. Founders' Co-op aims to back innovative entrepreneurs with smaller investments and a strong focus on engineer-led teams.

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