The U.S. spends about twice what other high-income nations do on health care, but with results that are often worse than those countries achieve at much lower cost.

In 2009, in a national effort to improve quality and lower costs, the Federal government launched a huge incentive program to drive the adoption of Electronic Medical Records (EMRs), spending an estimated $40 billion over the past decade to implement this data-gathering technology in hospitals across the country.

This massive national investment in data infrastructure laid the tracks for system-wide breakthroughs in data-driven healthcare, but the benefits of that investment have been tantalizingly slow to appear; growth in US healthcare costs continues to outpace inflation, and the category now accounts for more than 18% of GDP

Today we’re proud to announce our investment in MDmetrix, a company that harvests the massive, minute-by-minute data flows generated by EMR systems and applies recent advances in machine learning and data science to help bend the cost curve and improve patient outcomes at the same time.

Those are bold claims, but they’re backed up by hard evidence generated by the company’s pioneering efforts at local healthcare leader Seattle Children’s Hospital (SCH). With support from Seattle Children’s Research Foundation, MDmetrix was originally developed to address physicians’ frustration with the lack of visibility into health outcomes. Once the system was deployed, it quickly became clear that both medical leaders and frontline physicians could use MDmetrix to assess and improve all aspects of clinical operations. The results were dramatic: MDmetrix has enabled its customers to improve care for thousands of patients, while also surfacing millions of dollars of cost savings and revenue enhancement opportunities.

MDmetrix is a commercial spinout from the non-profit Seattle Children’s, and the founding team includes the key technologists and medical leaders that helped develop and prove out the solution for SCH. They’re joined by a seasoned healthcare software leader, CEO Warren Ratliff, who previously played key roles at healthcare giants like McKesson and GE Healthcare, and at successful high-growth healthcare startups like Caradigm (a joint GE and Microsoft spinout).

We’re pleased to be joined in this fundraise by the Washington Research Foundation and Arnold Ventures, co-investors with a long track record of supporting health care innovation and commercialization efforts here in the Pacific Northwest. There’s a long road ahead to prove that the results achieved at Seattle Children’s can be replicated at scale across the industry, but the prize — better care at lower cost for millions of Americans — is well worth the effort.

Where does the time go?

In early 2008 we announced the formation of Founders’ Co-op. We called it a fund, but at $2.7 million it wasn’t much of one, just some of our own money and some from a few local friends who knew how hard it was to be a founder up in this remote corner of the world.

Seattle then was famous for its coffee, for airplanes, and as the home of Microsoft, a once-feared tech monopoly whose valuation had peaked back in 1999, brought low by the one-two punch of the internet bust and the Justice Department’s antitrust ruling. The long-running property bubble had popped in late 2007 and global markets were unraveling, eventually turning into what would become known as the Great Recession.

In retrospect, it’s hard to imagine what we were thinking.

But starting a new fund in a downturn has its benefits. The only kinds of founders who start companies in the teeth of a recession are the ones who can’t imagine doing anything else. They don’t expect it to be easy, and when that turns out to be right they don’t quit. We met some amazing founders through that first fund, like Kabir Shahani and Chris Hahn at Appature, Aviel Ginzburg, Damon Cortesi, and Adam Schoenfeld at Simply Measured, and Scott Kveton and Steven Osborn at Urban Airship down in Portland.

As we learned from our early mistakes (and occasional good luck), we realized we needed to do even more to help local founders avoid the many traps and pitfalls that derail promising companies before they even get started. Some friends in Boulder were experimenting with an idea for a “startup accelerator” they called Techstars. We asked if they’d be willing to let us try a version of it here in Seattle and they agreed, so we launched the first Techstars Seattle class in the summer of 2010. We raised our second fund around the same time, a whopping $7.7 million, to lean into our strategy of being first to support the most promising founders here in the Pacific Northwest.

Somehow, all of a sudden, it’s ten years later. We’re still doing the same thing we’ve always done, but the world has changed around us.

Seattle is now one of the world’s top markets for software engineering talent. Microsoft is resurgent under Satya Nadella’s leadership, and local upstart Amazon has taken its place as the most feared company in tech. Bay Area leaders like Google, Facebook and Apple (plus dozens more) have scaled their Seattle offices to thousands of employees, taking advantage of our deep bench of talent, and drawing in more.

Over the past 10 years, through three successively larger funds, we’ve made over 90 first-check investments in Pacific Northwest companies, including some well-known local names like Remitly, Outreach, Auth0 and The Riveter. In aggregate, those 90+ companies have gone on to raise over $1.5 billion in follow-on capital, and now employ thousands of talented people here in the Pacific Northwest, and around the world.

One of those amazing founders from our first fund, Aviel Ginzburg, is now my investing partner at Founders’ Co-op, and we just closed our fourth fund, our largest ever at $25 million. In a few weeks we’ll celebrate Demo Day for our 10th Techstars Seattle class, bringing us to 100 total new companies that have been supported by that program.

Venture funds have a ten-year life, so every time we close a new fund it means we’re signing up for another decade of investing. Ten years ago we knew we wanted to help the best founders in the Northwest stay and build their companies here instead of leaving for the Bay Area. We just weren’t sure exactly how.

This time it’s different.

We’ve spent the last ten years honing our craft and building a community of founders, investors and mentors dedicated to our shared mission of making the Pacific Northwest the best place in the world to start a software company. Over the same period, our regional startup ecosystem has grown and changed in ways we never imagined, offering a more diverse and talented pool of potential founders than we’ve ever seen.

As with our first fund back in 2008, it looks like we’re heading into another cycle of uncertainty in the global economy. We expect markets to slow, or even contract, over the next few years. We expect the last several years’ run of easy money for startups to end along with it. Putting that all together, we know for sure that the founders we back in this next cycle will be some of the best we’ve ever seen.

We can’t wait.

We’ve written a lot about how our investing work at Founders’ Co-op connects to the broader global market for innovation finance (see The Venture Capital Stack or Regional Seed Investing), but we’ve never said much about where our own fund’s capital comes from.

Recent events have shined a bright, and ugly, light on the source of much of the money driving the current Venture Capital boom, and fellow investors and industry journalists are now advocating for greater transparency about whose money you’re actually taking when you accept a VC check (see this post from USV’s Fred Wilson, or this Techcrunch piece from Jon Evans).

As our earlier posts have described, global allocators of capital like Saudi Arabia aren’t much interested in regional or seed-stage investing; they have to deploy money in such huge volumes and with such frequency that only the biggest and most global platforms (like Softbank) are a fit. So if you’re curious, we never asked, and they certainly didn’t come calling.

But we do care, a lot, about where our money comes from. And while it’s not something we talk about publicly, at Founders’ Co-op we’re as proud of our investor base as we are of our investment portfolio.

Our work is intensely local, and intensely personal. We invest in exceptional people who have chosen to build their companies here in the Pacific Northwest. When they succeed, companies like Remitly, Outreach and The Riveter provide exciting, well-paying jobs for hundreds or even thousands of people who live and work here in the region. The leaders of those companies also become civic leaders who give back to our community, and they model the kind of pioneering courage that put our region on the map in the first place.

Our investors trust us to produce a compelling financial return, but they choose us over the thousands of competing alternatives because they believe what we believe: that building great companies in the place where you live produces returns that go way beyond a check in the mail. Well-paying jobs. Engaged citizens. A leadership role in the global economy. Thriving cities that are magnetic to talent from around the globe.

Given the values we practice as a firm, it should come as no surprise that our money is almost entirely local: founders and early leaders from our region’s most successful companies (including many of our own portfolio companies); families and family foundations with a long history in the region, who want to leave it a better place for their children and grandchildren; and even state governments with a voter-endorsed commitment to reinvesting in the next generation of local jobs and growth.

We know our investors and they know us. Our work is personal, and we take it personally.

With Aviel’s announcement last week, and a new website up at Founder’s Co-op reflecting our new partnership, I thought it was a good time to revisit the themes from my 2013 keynote at the Geekwire Awards: Turtles and Flywheels. Back then I said:

“The truth is, it takes time to build anything of lasting value…[t]he better something is — the more powerful and lasting — the longer it takes to build”

It has been 10 years since we created Founders’ Co-op to provide first-check support to the best founding teams in the Pacific Northwest, and this month I started recruiting for the 10th Techstars Seattle class (that program will kick off in 1Q19). It’s incredible to look back at how far our startup ecosystem has come in that time.

Seattle in 2013 was a different place. It wasn’t until five days after that 2013 Geekwire event that Tableau held its IPO, and only six months prior that Amazon surprised many by paying $200 million to purchase three blocks in the Denny Triangle just north of downtown. As I mentioned in my talk, we had made just 40 investments at Founders’ Co-op then, and those companies had raised a relatively modest $140 million in follow-on capital.

Fast forward five years. Amazon has added more than 20,000 new hires here in Seattle, bringing their total local headcount to more than 40,000, and has transformed Seattle’s downtown with a new headquarters campus coming to life on on those Denny Triangle blocks. With three tech IPOs in 2018 alone, our market is adding new anchor tenants at an accelerating rate. And a resurgent – and acquisitive – Microsoft is giving AWS a run for its money and cementing Seattle’s reputation as the center of the global cloud infrastructure business.

Founders’ Co-op has grown along with Seattle. In 2015 we closed our third and largest fund to date, allowing us to double-down on our strategy of filling the seed-stage financing gap in the Pacific Northwest. We also raised a new Techstars Seattle fund, allowing us to cast an even wider net for great Pacific Northwest founders, and to deliver even better results for those founders, and the region.

Ten years of steady effort investing in our community has snowballed into something bigger than we ever imagined. Since 2013, Founders’ Co-op has more than doubled the number of companies we’ve helped to start here in the region (from 40 to 91) and those companies have gone on to raise TEN TIMES the follow-on capital they’d closed in 2013 (from $140 million to $1.4 BILLION).

On the Techstars side, the 2019 class we’re recruiting for now will lift the total number of Techstars Seattle alumni to over 100. With the addition of The Alexa Accelerator, Powered by Techstars, a second local accelerator program which we created with Amazon’s Alexa Fund in 2017 and which is run by my Founders’ Co-op partner, Aviel, we’ve doubled our capacity for impact via the accelerator model.

But while breadth of impact is important, the long-term health of our ecosystem depends on our ability to create new category leaders here in Seattle, delivering the same scale and long-term contribution as our most important platform companies. That’s why our new site showcases a few of the companies in our portfolio that are most clearly on a path to massive impact, both here and around the world. We were lucky to meet the founders of Remitly and Outreach when they were just getting started, and by leading their seed rounds and serving on their boards in their early years were able to play a small role in the success of two of our region’s most important high-growth companies.

I’m thrilled to have Aviel – a founder from our first Founders’ Co-op portfolio – joining me as an investment partner for our next decade, and beyond. We are doing work we love, in a community to which we’re deeply committed, on behalf of the most incredible founders we’ve ever known. Thanks to all of you who have been a part of our journey to date, and looking forward to the next ten years.

The flywheel is picking up speed.