Can Portland cultivate new seedlings (Photo: Rev Stan)

On the GeekWire podcast last week, we chatted with Rick Turoczy of Portland’s Silicon Florist blog about the differences between the Seattle and Portland startup communities. One of the big ones, which we didn’t get a chance to discuss, is the Portland Seed Fund. A unique public-private partnership, the fund is designed to funnel seed-stage capital to entrepreneurial upstarts.

At a time when some in the Seattle tech community believe that more needs to be done to spark early-stage investment — see Marcelo Calbucci’s guest post A Challenge to Seattle VCs: Back 100 seed-stage startups in 24 months — the Portland Seed Fund represents one such path.

Of course, arrangements between government entities, venture capitalists and entrepreneurial organizations don’t always work. Washington’s Life Sciences Discovery Fund — supported with tobacco settlement money — has yet to produce any big hits and has suffered from a lack of focus. And Jay Inslee — who is running for governor of Washington state — has been attacked over his plan to funnel state pension money to entrepreneurial ventures.

There’s nothing quite like the Portland Seed Fund in Seattle. And while some may say that’s a good thing, if there’s really a lack of seed-stage capital in the region, perhaps alternative models are worth checking out.

Andy Sack (Randy Stewart photo)

Could TechStars or another startup incubator establish deeper ties with the City of Seattle; City of Redmond or an economic development organization like EnterpriseSeattle?

In a comment on GeekWire this week, Andy Sack of TechStars Seattle — which incubates about a dozen companies per year — suggested that government agencies should get more involved in supporting the startup ecosystem in the region.

But not everybody agrees. Venture capitalist Greg Gottesman, an active backer of TechStars, recently told The Seattle Times that the state would be better off putting money into research institutions than a new fund for startups.

The Portland Seed Fund’s goal is to invest $25,000 in 10 to 15 companies each year — not quite the 50 per year that Calbucci suggested for Seattle.

Backers of the fund include the Portland Development Commission; Oregon Growth Account; City of Hillsboro; OEN Catalyst Fund; and individual angel investors.

The fund just announced its inaugural group of investments, eight companies which were chosen from a pool of 128 applicants. Take a look at the descriptions of each:

4-Tell: Increases sales for retailers with personalized recommendations. Web: 4-Tell.com.

Audio Name: Allows you to create an audio avatar in your email signature to help people pronounce and learn about your name. Web: Audio Name.

Geoloqi: A mobile app and web platform that makes it easy for companies to build powerful location-based applications Web: geoloqi.com.

Hively: A simple way to gather customer feedback and measure support team performance. Web: Hively.

Homeschool Snowboarding: Creates highly breathable snowboarding outerwear featuring Cocona Xcellerator technology. Web: Homeschool Snowboarding.

InvestorInMe: Helps people easily find stocks to match their personal values, opinions, and personality. Web:  InvestorInMe.com.

Vizify: Visualize, share, and track your professional life with Vizify. Web: vizify.com

Zinofile: Online media company in the comics space.

Comments

  • Casual Investor

    I’ve been watching the Portland Seed Fund carefully to consider how there may be a workable model, or if it’s a conflicting model, when you merge public and private monies.

    My take-away at this point is that it’s a bad mix.

    The analysis two-days ago about seed fund success rates plays into this.

    “The fact is that the success rate for early stage investments is
    abysmal. The general rule of thumb is that only 10% of venture-backed
    startups are successful. The record for seed stage companies is even
    worse, since companies rarely make it to exit with just a seed round.
    Even if we’re generous and assume that half of seed stage companies
    manage to raise a Series A, that’s still only a 5% chance of success.”

    http://summify.com/story/Tid4fPk25kIpAA2Q/mashable.com/2011/07/20/seed-stage-valuation/?utm_campaign=share&utm_medium=general&utm_source=share

    Look at the Portland Seed Fund.  It was formed a year ago.  After a year it only takes on eight companies at 25K each.  It has over 2M in the bank (unless the overhead ate that up?) and has more public commitments for next year.

    Now look at the projected success rates.  Less than one successful company should be expected to emerge from this effort this year.

    Government funded anything is not agile and is risk adverse.  It’s the opposite of what a seed fund needs to be at this point in time.  That 2M dollars should have been spent, as public funds, last year.  It should not be sitting in the bank.  It could have gone toward education or employment or training.  Not the chance of launching less than one successful exit based on ratios.  Seriously, the Portland public schools can’t even afford postage to send college transcripts out, they require the kids to bring in stamps.  Pouring money into a slow moving seed fund should have been way down on the list of priorities. 

    Seed funds need passionate management who take extraordinary risks.  They also need volume (the “50” number, per year, is probably a minimum). Try reporting back to City Hall based on those criteria.  Perhaps Seattle will learn from the mistakes of the Portland experiment.  I’m not saying it’s impossible to create a workable model.  But Portland doesn’t seem to be on that track.

  • Lew McMurran

    It is certainly understandable why those promoting startup investing would want to find as many sources as possible.  But once you go down the road with any governmental entity as a partner, you will likely regret it.  Plus, where is the budget for this?  City of Seattle, King County, State of WA–all are essentially broke and cannot keep the commitments they already have in terms of transportation, public safety, education, etc.

    What kind of condtions would gov’t agencies put on the use of funds?  Especially in a place like Seattle, I can almost guarantee they will require certain number of jobs to be produced and many other conditions that may or may not be possible.  Gov’ts are just as short-sighted as any investor–they won’t be thinking long term–the pressure will come to produce sooner rather than later.  Does the gov’t entity become an “owner” or shareholder?  Do you really want the mayor to be providing input and guidance to the management team?

    If we are talking about a small percentage of pension funds dedicated to “economically targeted investments” then there may be a case.  But we know that is not universally agreed to either.

  • http://www.benjaminbernsteinamerican.com Rita Ashley

    Seed funding is important. But proper guidance and mentoring resources make the difference between success and failure. As a confidential Executive Coach, I assist senior executives and CEOs with problem solving and leadership issues. Most of what I know I have learned from successful business people whom I have observed and interacted with over decades and those who are generous sharing their plights/solutions/outcomes. 

    Much of what I see are reproducible issues. Last year I worked with FOUR executives caught in the same loop.  i.e. New VP Dev or CEO of small company takes on low morale, underperforming dev team. The dev team holds the CEO and VP hostage with threats of leaving so the Management abides by the dev teams wishes not to hire senior, more experienced developers. That I saw this problem in four disparate organizations proves to me the importance of general purpose mentoring. Even if I propose myself out of contracts, it is the right solution.In the U.S., do we feel that by default, the founders of a startup are business geniuses? History of startup failure shows us It is rare that the founders are those who bring the company into that special circle. There are few Jeff Bezos’s’ starting companies today. And for every Jeff/Amazon there is a boneyard filled with skeletons of companies with great vision and products and very poor business decision making.SOLUTION: We need a cadre of proven successful business professionals to take on the mantle of coaching and playing devil’s advocate to startups. We need expertise for these ventures as much as they need money. Investors who sit on boards are not always the best advisors. They have a conflict of interest and in many cases, no track record to advise a small company on personnel, team building, strategic alliance and/or financial decisions. In fact, one of my clients gets so much conflicting advice from his board of advisors and board he is serving three masters. In the end, he has selected a few CEOs in similar companies but who are further along the success trail [and me] for  important input. I suggest, each fund needs an ancillary group of experts whose role it is to see their charges succeed. For example: Amazon, Zillow and Microsoft, to name  a few, empower their VPs and EVPs to run their organizations as though they are independent companies. Those VPs face the same challenges any startup might. And those VPs would be excellent resources to a certain subset of startups. Each successful corporation has people at the Director level on up who can marshal startups to success. CEOs and investors as resources are too often too far from the action to have excellent solutions to the daily challenges and frequent crisis startups face. I propose a system that taps into that incredible resource within successful companies to add to our state’s efforts to create new companies that succeed and hire. That’s where our economic recovery will come from. In fact, it takes a village in business, too.Rita Ashley, Executive Career Coach

  • Tom

    The best model for government investments in start ups I’ve come across is the structure in Chile.

    http://www.startupchile.org/

    It’s using a high volume approach with a deal structure that is exceptionally entrepreneur friendly.

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