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.

 

I’m thrilled to publicly announce the really poorly kept secret, that after almost 4 years of working alongside Chris DeVore and the rest of the Founders’ Co-op team, I’ve stepped into the partnership with both feet as a General Partner. Going forward the investment team will be myself and Chris, with Rudy Gadre and Andy Sack remaining involved as Venture Partners.

In transitioning from entrepreneur to investor, the lifetime of hard earned lessons from my journey as a founder of Simply Measured won’t be going to waste, and I’ll be working just as hard as ever leveraging those experiences in this new challenge, both the good and the bad. Those eight years of operating, growing from two people in a coffee shop to 150 employees, ruthlessly forged my understanding of my strengths and my weaknesses; my limits and my opportunities for growth. With that, where I can create the most value and grow the most is not as a founder, but as an investor working with founders by supporting and challenging them.

And the timing couldn’t be better.

From the investment world, to the tech world, to well… the entire world itself, it’s abundantly clear that we’re in a time of transition. We’re long past business as usual, but in many ways we’re still pretending, which is all too easy as public markets continue rise seemingly against gravity. Except for Facebook and Twitter this past week…

As early stage investors, you’d imagine that elevated uncertainty makes our jobs harder than ever. So my timing isn’t great, it’s terrible! Right? After all, most companies we work with are only 15% of the way on their journey in terms of time and 1% in terms of execution when we invest. 99% of what makes it a good or a bad investment simply hasn’t happened yet. It follows then, that the less we know about the future and the less trusted the patterns we have to match against, the riskier the proposition.

But it’s in these types of environments that Founders’ Co-op’s strategy thrives, because our success isn’t contingent on us predicting the future. You can look to history to understand what happened in a market and sometimes even why, you can even use it to gauge volatility and the likelihood of disruption, but you’re much smarter than we are if you can use it to decipher exactly how things will evolve in the future and invest around that, especially in today’s climate.

Our conviction at Founders’ Co-op is grounded in our belief in what won’t change. We aren’t a thematically driven fund, we invest in self-aware and intellectually honest, execution focused founders who don’t need the world to change in a specific way for them to be successful. That magical combination is rare, but part of what makes the Pacific Northwest so unique is how much less uncommon it is here than anywhere else, and we’re not this way by accident.

The Pacific Northwest is home to Amazon and Jeff Bezos, who summed up this ethos perfectly when he said, “I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time.” Most of our greatest successes come through this mentality. Sales people will continue to sell, money will continue to be transferred, and development teams will continue to build software… just in new and better ways.

Cryptocurrencies, XR, machine learning, voice assistants, and autonomy will all be significant drivers of change over the next decade, and while individually they’ve all already begun to reshape our everyday lives, their combined potential impact and the specific outsized opportunities that will arise as a result are unclear. At Founders’ Co-op, we don’t chase these technology-driven opportunities in themselves, and instead back founders that leverage these emerging technologies to solve the tangible human problems of both today and tomorrow, the things that won’t change. We love founders that follow the customer and not the technology.

With that, unlike some other venture firms, we don’t expect the majority of our companies to fail. Good execution and meaningful value creation will in almost all cases create real value and outcomes that both investors and founders can celebrate. In this model, we also don’t model for the single outsized success that defines traditional venture, and because of that, we also may never return 10x our fund. But what we do expect, and enjoy, is consistently healthy returns and strong alignment with our founders. I am one of those founders, having raised my first $150k for Simply Measured from Founders’ Co-op’s first fund. Our founders are why we get up in the morning and why I’m taking on this new role.

Our model is not the only model for venture, but we evaluate our own strategy the same way we do our company’s. How will ICOs and other fundraising mechanisms change the seed stage investment world? With more liquidity, how far will the once clear line between investor and trader blur? We don’t know. But we do know that the best founders will continue to build the best companies, many of them in the Pacific Northwest, and we know how to help them.

If you are one of them, let’s talk.

Why did you start Outreach?

At the core, I’m an entrepreneur and have always been interested in building my own business. That’s what led me to enroll in TechStars’ 2011 class, along with my three business partners. We founded a company that was essentially a marketplace to connect teams of developers to the companies looking to hire them. But we were struggling to handle the volume of prospecting required to build both sides of that marketplace, so we built our own platform to help our sales team of one operate like a team of 10. The companies we sold to were much more interested in buying that platform than our recruiting service, so we eventually doubled down on building that out. That was the genesis of what has become Outreach.

Why did you choose to work with Founders’ Co-op?

Founders’ Co-op understands the very early stages of a startup. The days when things don’t scale, when product market fit is a moving target and success is unclear. It takes a special kind of partner to ride alongside of you in the early stages and make sure you make it to the next milestone, even if it means doubling down in support of you when things look more uncertain than ever. That’s Founders’ Co-op!

Why Seattle?

Because a combination of cost of living, outdoors, and Microsoft/Amazon/Google/eBay makes it easy to recruit top notch talent and scale out your team efficiently and quickly.
The bay is a quick 1hour and 15 mins away, so its like being local in the entire west coast!

Nugget for founders?

Don’t run your business by pattern matching. Patterns only work until they don’t. Operate out of first principles.

Why did you start Remity?

I started Remitly after traveling to close to 100 countries around the globe while living in Nairobi, Kenya, where I ran mobile and internet banking for Barclays Bank Kenya. Through that experience I learned how painful it was to send money internationally. I was getting paid in British pounds, living on Kenyan shillings, and eventually had to get money back to US dollars. It was a pain for me, but a much bigger pain for a lot of my Kenyan friends who were getting their income from relatives that lived in Europe and the US. After seeing the sacrifices that those family members made, and then how far that money went for my Kenyan friends back home, it felt like a really meaningful problem to solve. With the pace and the growth of mobile phones, it also felt like the right time to solve it.

Why did you decide to work with Founders’ Co-op?

Founders’ Co-op is not just capital, and that was clear from the conversations we had even before they invested. Chris DeVore had been through the journey before and was incredibly responsive to the crazy needs we had early on. He was hands-on with the company in the early days, and not just in the sense that he would take calls at all times of the day or night to help us work through issues, but he’d lean into the seemingly never-ending blocking and tackling we had in front of us early on. As an example, back when we started, getting a new state money transmission license meant our directors needed to sign off personally. Chris dropped in on short notice, literally 49 times, to get his fingerprints taken and sign the paperwork. To me, this was the perfect example of who he is as an investor, he’d always roll up his sleeves and do what was needed. He was also the one who pushed us the most, but also was at the same time the most supportive of everyone because of the way he did it. He’d been in our shoes and his empathy for our challenges was real. I would work with Chris and Founders’ Co-op again and again. He’s such such a phenomenal guy.

Words of Wisdom

This sounds sounds cliche, but surround yourself with phenomenal people, it makes or breaks a company. People oftentimes take this to just mean focus on team, but I think that it’s equally important to surround yourself with phenomenal investors. I think that a lot of entrepreneurs just say to that “beggars can’t be choosers, I can’t really decide who I take capital from”, but I think the more confidence you have around it being a two-way interview the more likely you’ll be successful raising capital.

It’s important to really push on investors to understand how they add value and find out what kind of partner they’ll be once they’ve got a seat at the table. When you push on Founders’ Co-op and do your references, you find nothing but glowing reviews. But then you actually take capital from them and it’s exponentially better than the reputation you found them to have in the community.

Why are you building Remitly in the Pacific Northwest?

When I moved back in Kenya I moved to Boise initially, but knew that I wanted to be on the west coast. I saw only two choices and very intentionally picked Seattle over San Francisco because I thought that the talent here was world class, and that’s not only still true today but it continues to get better and better. When you look at talent to funding as a ratio, there’s just less capital in Seattle and so for those that want to come out of an Amazon or Microsoft there are fewer startup opportunities, which is a huge advantage for anyone building their team here. I think it’s a legitimate competitive advantage to start a company in Seattle over San Francisco.