Ignition’s Cam Myhrvold: The problem in Seattle isn’t money, it’s the entrepreneurial talent

Cam Myhrvold

What’s the missing ingredient in Seattle’s startup community?  Is it a lack of smart money? Or a lack of solid entrepreneurs?

Well, for one of Seattle’s top venture capital firms the answer is pretty clear: It’s the entrepreneurs. 

Cam Myhrvold of Ignition Partners delivered some bitter medicine about the Seattle startup community in remarks Wednesday afternoon at the World Financial Symposium growth and exit strategies conference.

In his view, the quality of entrepreneurial talent in Seattle just isn’t up to snuff when compared to the Bay Area.

“…The sort of head-scratching that goes on about entrepreneurship up here, it’s all about the entrepreneurs,” he said. “The Bay Area is not interesting because it is slightly better weather. The Bay Area is interesting because they have a tremendous culture of entrepreneurship.”

Furthermore, Myhrvold added that Seattle ”has not been as good of a market as we expected.”

Here are his full remarks, which were prompted by a comment by venture capitalist Tom Huseby that he’d like to see more homegrown money put to work in Seattle:

“Yeah, I think we’d all rather have it in Seattle. I just don’t know how realistic that is. Over the past 10 years, we started our firm on a thesis that Seattle was underserved, and you know, yet the net effect over the past 10 years, I think probably everywhere in the world is, the Bay Area stands taller today than it did in 2000.

We have funded Danish teams. Do we fund them in Copenhagen? No, of course not. They move to San Francisco, they are in South of Mission. We talk to Turkish teams. They came from Ankara. Are they living in Ankara? Of course, not. They live in San Francisco. So, you know, it has been too easy. And the Bay Area has become such a Mecca for entrepreneurship. Things like Y Combinator, and stuff like that just further enhance that.

I think Seattle, frankly, from our own perspective has not been as good of a market as we expected. We are hoping that that will change. But if it changes. It is going to change on the basis of entrepreneurship. Not on the basis of venture capital. I mean, come on. If you are an entrepreneur, do you really deeply care about the zip code of your venture investors? I don’t know why you would.

I think what matters is having great entrepreneurs here. Microsoft has not thrown off lots and lots and lots of great entrepreneurs. Certainly not companies like Intel and Sun and folks like that did in the Valley. Maybe Amazon will, and certainly if you look to cloud computing in the future, between what Microsoft is doing with Azure and the tremendous leadership that Amazon already has, I think that we are looking at happier times.

But, the sort of head-scratching that goes on about entrepreneurship up here, it’s all about the entrepreneurs. The Bay Area is not interesting because it is slightly better weather. The Bay Area is interesting because they have a tremendous culture of entrepreneurship. There is not anyone in the tech industry who hasn’t been in a startup, or have a friend or relative that has been in a startup. And that just isn’t true up here. There are just a huge number of insanely talented people down there. There is up here too. But when it comes to entrepreneurship — versus engineering — the Bay Area has a real edge. And that’s what I’d like to see reversed. Or improved upon. Until that happens, I think the availability of more money sources is orthogonal  to the problem.”

Cam Myhrvold of Ignition, Tom Huseby of SeaPoint and Len Jordan of Madrona.

That might be a tough pill for some in Seattle to swallow, especially since the words come from the partner at one of the region’s largest VC firms. (Ignition itself is going through its own reorganization, with word out earlier this month that it is scaling back operations as it targets a new $150 million to $200 million fund). But it shouldn’t be that much of a surprise, since Ignition has been making a ton of investments in California over the past two years, essentially letting its pocketbook do the talking.

Myhrvold is correct in saying that Microsoft hasn’t spun off a ton of entrepreneurial talent in the region, and he’s probably on the right path about Amazon too. I also wouldn’t dispute the notion that Silicon Valley is the Mecca of startups now, and probably always will be.

But the real question, which is open to debate, is whether there are enough high-quality entrepreneurs hanging around Seattle to make it worthwhile for a VC to invest time and money here?

Myhrvold doesn’t think so, obviously.

But others don’t quite buy that line.  Madrona Venture Group’s Len Jordan countered with a more upbeat message, touting a new crop of entrepreneurs and a strengthening angel scene in the region. He also pointed out continued interest among Bay Area firms in the region’s startup companies — highlighted by some big rounds that were completed last year.

“We are seeing a lot of strong companies in Seattle. We are homers,” said Jordan, adding that about 80 percent of the firm’s investments are based in the Northwest.

Madrona was able to raise a $300 million venture fund last year — the largest in its history — on a business model that primarily centers around investing in early-stage startups in the Pacific Northwest. All of that said, echoing some of Myhrvold’s thoughts, Jordan doesn’t think money is an issue in Seattle. It’s more about Seattle being a younger tech market.

Len Jordan

“The cycle that created Silicon Valley isn’t something that happened over 10 years. It happened over 70 or 80 years,” he said.

Longtime Seattle venture capitalist Tom Huseby also said he was bullish on the region, pointing to the success of Seattle’s nFluence Media raising $4.6 million, largely from local angels.

“I was really encouraged by that,” he said. “I am very hopeful that there is a whole layer of funding that is beginning to develop here in town and there are really good mechanisms to access that right now that are being institutionalized.”

But the veteran VC also said he was “discouraged” — largely because of what he sees as a lack of mid-stage funding in Seattle, the kind of money that historically could have been provided by a firm of Ignition’s size.

“I don’t think we have enough people in the market. If you go to the relatively few funds that are active here, and you get turned down, you may be getting turned down just because they are too busy on something else. And we need more people here to appeal to the middle stages, not fewer,” he said. “There is nothing wrong with going down to the Bay Area, but I’d rather have it be all in Seattle, personally.”

Tom Huseby

There is certainly no question that the Bay Area is a much bigger and more mature startup ecosystem — with California accounting for about half of all venture capital dollars in the U.S. There’s simply more of everything in Silicon Valley.

All of that said, there’s certainly a crop of important and interesting entrepreneurial companies emerging in the Northwest, even if some are flying under the radar or raising money from Bay Area firms. And people have made some good money in the past five years through companies like Zillow, PopCap, DoubleDown, Swype, SnapIn and Isilon, though the total number of big exits does need to go up significantly for anything to really change.

In order for an ecosystem to thrive, whether a smaller one like Seattle or a large one like Silicon Valley, there needs to be the right balance between capital and entrepreneurs. The two sides of the equation — money and entrepreneurs — need to be working in harmony. With OVP Venture Partners and Frazier Technology Ventures winding down operations, and bigger firms like Ignition and Polaris Venture Partners scaling back and investing elsewhere, it does appear that the capital piece of the equation is getting out of whack, at least when it comes to local money.

Maybe Seattle’s crop of entrepreneurial talent is really only deep enough to support one or two home-grown venture firms. Or maybe new investors — which we are starting to in the form of angels like Rudy Gadre; new venture firms like Naya Ventures and accelerators like 9Mile Labs — will emerge on the scene to take advantage of opportunity.

The only certain thing is that things are going to change. It has to.

Previous coverage from the World Financial Symposium eventThe wisdom of Tom Huseby: Advice and zingers from Seattle’s most quotable VCSeattle angels on what they look for in entrepreneurs, and why startups fail

Previous discussion on GeekWireWhy this entrepreneur is moving to Vegas, and what it means for the Seattle scene

  • Ignition_Is_Not_Awesome

    Maybe the problem isn’t with Seattle, but Ignition.

    • winner winner chicken dinner

      ding ding ding

      Not only do they invest in crap, I have seen them be a huge drag on viable companies.

      A firm full of partners that rode Bill Gates coat tales to riches telling you to pursue some gimicky pivot every quarter.

    • Thomas R.

      I can’t speak about the rest of the firm, but Michelle Goldberg at Ignition has been stellar. I’ve seen her out and about at both entrepreneur events and
      investor only events, engaging the community, helping startups and
      getting deals done. The rest of the firm has not been as approachable or engaging. I have never seen Mr. Myhrvold, nor any other members of the panel, at community events trying to engage with entrepreneurs.

      I think it’s one of the problems with the investors in Seattle, they treat entrepreneurs like employees rather than partners. The walls between an investor and entrepreneur are high here. As investors, we need to make sure we reach out to all entrepreneurs, no matter what stage, no matter what amount of funding. You never know where a startup will be in a year or two…

  • http://blog.calbucci.com/ Marcelo Calbucci

    I think this is a reasonable exchange of ideas. Cam looks from the lenses of $1B+ fund who needs to invest $3-10M in Series A deals, so for the Ignition math to work there isn’t enough of that kind of startup here, although — I’m surprised they didn’t double down on SEOmoz.

    That said, most of the wealth in the region comes from a few large successful companies, like Amazon and Microsoft, and with all the millionaires and billionaires in town, it has been hard to convert them into angel investors to foment more entrepreneurship here. In SV you can’t go to a bar and the person to your left tell you she’s an entrepreneur and the person to your right tell he’s an Angel Investor.

    The fact is that the Bay Area has a huge funnel and that funnel is very large at the top. Everyone has a startup idea. There are thousands of seed deals being done every year, and that trickles down to tens of incredible successful startups a year which IPO or are $100+ acquisition deals. In Seattle, we have 1 or 2 of those a year.

    I’m strong believer that we need to wide our funnel if we want to change the landscape of Seattle in 5 years.

    • http://twitter.com/chrisamccoy Chris McCoy

      yup.

  • Guest

    I was in there (Ignition) pitching our enterprise software play. They gave us some junior analyst who was only looking for social media companies to invest it. It was a total joke to explain to this guy what an enterprise company is…

    Now I have 20 large VC’s wanting to give us money and we don’t need it because the motivation was to do it ourselves after meeting with Ignition.

    Good luck Ignition

    • http://twitter.com/fijiaaron Aaron Evans

      What’s your company and are you hiring?

  • http://giftguy.co/ Stephen Medawar

    It’s easy to anonymously bash Ignition or Mr. Myhrvold on this page. It’s much more difficult to go out there and prove him wrong.
    Do the latter.

  • Cameron Myhrvold

    The high order bit in venture investing is the entrepreneur. Great businesses are not built from money, they are built from ideas and passion and even single-minded obsession. No part of the startup value chain embodies that more than the individual entrepreneur (or founding group). It is the quality of the idea and the passion and execution behind it that builds value. This is what my comments yesterday tried to convey.

    What does Seattle need to have a more successful startup community? I stand by my answer, more entrepreneurs. Not because we don’t have great entrepreneurs here – we have great entrepreneurs here in Seattle. Great businesses are being built here in Seattle and Tableau, Inrix, Apptio, Zulily, WildTangent and Datasphere are only some of the great examples.

    What do we need to do better? We need more Rich Bartons and more Christian
    Chabots and Sunny Guptas, Brian Misteles, and Lloyd Frinks. The entrepreneur is the critical element so if you want to be better and more successful of course you add more of the critical element. Local VC funding I am afraid is only ancillary to the problem. The source of the money, like say the source of the legal advice, or audit advice is not the critical thing.

    I hope it’s obvious this is not intended as some kind of dig on Seattle but from the way the article is written I guess it is not. No one wants Seattle to succeed more than I do. No one wants to see more world class entrepreneurs in Seattle than me.
    Cameron Myhrvold

    • johnhcook

      Thanks for the thoughtful comment Cam. I agree that the high-order bit is the entrepreneur, and agree that there are some great ones here in Seattle. There is another part of the equation, though, which is that entrepreneurs need a certain place/environment where there is not only a high-quality of life, but the bare-bones infrastructure (including access to capital among other things) that make a business successful.

      The post was not designed to portray your comments as some sort of dig, but reflect what you said, which I think we captured given the lengthy quote above. In fact, that’s why I quoted you in full — rather than chunk it up.

      I realized that some of the remarks may stir things up, but as Chris DeVore notes below that is not necessarily a bad thing, and I do think it is newsworthy when one of the largest VC firms in the state says that Seattle has not been as good of a market as you had hoped.

      That raises all sorts of questions — questions we have been debating and discussing here on GeekWire in recent weeks. I think it is a good dialogue to have, and believe you have some good points to make. (I too am perplexed by the MSFT impact, and your comments about Seattle being more of an engineering center than an entrepreneurial center are very intersting).

      Your comments should be taken seriously, not as a dig, but as a real analysis of what you see here. I hope the story achieved that.

      My only commentary is this, and it is something I mentioned on the earlier panel yesterday morning.

      Seattle’s venture community is changing, and there are some warning signs out there.

      I am just wondering where the capital is going to come from to bankroll the Apptios and Zillows of tomorrow. It does appear to me that some of the traditional pools are drying up in Seattle, or evolving. Entrepreneurs can always hop on planes to go find their capital, and this is something that has always occurred. I guess more of that can be encouraged.

      Just as you say we need more Bryan Misteles and Sunny Guptas, my only argument (which I’ve made in previous posts) is we need more super angels such as Geoff Entress and Rudy Gadre too. If not, I do fear that there will be a funding gap, with a class of entrepreneurs in Seattle having few choices to get ideas off the ground. (This also plays into my theory that angel/early-stage investing remains a local business, which some could argue against given the rise of crowdfunding mechanisms like AngelList, etc. But that’s for another topic).

      At some point, investors do have to take a leap with the wild-and-crazy entrepreneurs, no matter how wacky the idea or the disruption in the market. Angel investor Andy Liu and Geoff Entress, said yesterday on their panels part of an early-stage deal is an “emotional sale.” If there are fewer bodies in the Seattle angel/VC arena to make those emotional connections, I do think the region will suffer.

      And that may be a natural thing that occurs, and some new entrants may arrive to shake up the market. It’s unclear, but it does seem like the discussion very much needs to take place.

      Thanks again for the comment and feedback.

      • http://twitter.com/fijiaaron Aaron Evans

        Well, Zillow is a Microsoft product, funded and owned by MSFT. Same with Expedia. There are a lot of other Microsoft spinoffs and acquisitions, though I’d agree that that sort of funding environment isn’t as healthy as a diverse and independent investor pool.

        • guest

          How was Zillow a Microsoft product again?

      • Mark Monroe

        I think there is a missing linkage here between the new entrepreneurs of Seattle like me and the current statement that linked to talent. There is tons of great entrepreneurs here in Seattle. We have them by the crap load. I think we need to be clear to here to recognize that as Cam just mentioned that they invested in companies outside of SIlicon Valley. I guarantee you its not just because of the other startups but more so because of capital that’s available. I have to admit it there is more capital in Silicon Valley to which cause many entrepreneurs to salivate and move to SV. But here, in my City we want support. The reason why you can go to SOMA and sit down at the Creamery and meet an investor and hit it off because they are actively seeking and looking for great ideas.

        We say that we have investors here in Seattle, are they actively seeking, are they randomly looking for ideas to invest in? Its not that kind of party here in Seattle, that not our vibe. Its not apart of the Seattle Freeze culture. So to compare Seattle to Silicon Valley its impossible. Because if we were we’d look at Silicon Valley and all the startups to which receive capital get their little 5 mins of fame and yet your never hear about them again. Many times closed up shop. We here in Seattle, entrepreneurs like to build companies (support me here) that not only influence the region around us but make waves around the world or here in the US. When we launch companies our companies go off to IPO or Successful M&A’s to which you can see the impact to the companies that acquire.

        All in all to say, I feel that Cam’s opinions are a little misguided and like this is my opinion its just one person’s. The day that I see investors stroll around our Belltown, University District, Ballard, Fremont areas to check our startups and just sit and have coffee with us. Maybe we can make a measure as to cultures. But you can’t make changes from behind the walls of your offices and board rooms or carry this attitude of being untouchable and unreachable. It just won’t work and we’ll be debating this over and over.

    • Bill Bryant

      Total agreement with Cam here. Entrepreneurs are the tail that wags the venture capital dog. It wasn’t like Silicon Valley spawned a bunch of VC firms which led to the Bay Area’s dominance as a startup capital. Read the history of Silicon Valley sometime – there was no immaculate conception of venture capital. Silicon Valley started because of the likes of HP, Intel, Raytheon, Fairchild and later Apple, Cisco and Oracle were founded by amazing entrepreneurs who managed to build these companies (in a very different era) on very little backing.

      Here’s to entrepreneurs and their breakthrough ideas which is what causes the flywheel to be set in motion.

    • Stephen Purpura, local CEO

      Seattle has a lot of great people and startup location does matter because of the network effects. Having local VC (Madrona, Ignition, Voyager, Founder’s Coop, etc.) all matter because founders aren’t born knowing swimming. Tim Porter, Matt McIlwain, Frank Artale, Cameron Myhrvold, Bill Bryant, Kristina Kerr Bergman, Len Jordan, Geoff Entress, Bill McAleer, Len Jordan, Sujal Patel and many others in the Seattle VC community took the time to help push Context Relevant in the right direction. Those interactions are priceless because they add true value. And they prepped me for my interactions on Sand Hill Road.

      You’re doing more than you may believe to help, Cam. I hope you stay positive and engaged.

  • guest

    Please! Myhrvold’s comments sound like sour grapes from an under-performing mutual fund manager who blames his own lackluster returns on a lack of management talent. I am a New Yorker so I have no special love for Seattle entrepreneurs over Bay Area entrepreneurs. Great people/ideas (and bad ones) exist everywhere.

  • http://twitter.com/Marguehf Margue Hunt

    The Puget Sound area is packed with very intelligent, technical visionaries with some very innovative ideas they would like to bring to the world; many of these individuals professionally matured in an environment where they incubated and built out the technology without the responsibiity for finance or market or even the business plan to secure budget. So I can understand where the perception might be that we lack true entreprenurial talent in the startup segment.

    It is correct to say that there may be a large amount of the population that lacks the depth in business capability to evolve their start-up plan to a state where it is ready for the eyes of the investor.Over the past few months I have had some time on my hands (thank you MS for the generous severance) and as a favor to friends/friends-of-friends I have assisted a few of these potential start-ups with building business models, market research, product pricing,operating process, sales & business plan and even “the pitch” (thank you Guy K. for the pointers). The results of my ablity to helicopter in has moved these businesses to a new level confirmed by investors, clients and business partners.
    What is needed is enabling those ideas with augmentation of skills in business planning & operations, relationship building and evangelizing. Perhaps the greater seattle area needs a matchmaking of sorts that pair up those great engineering minds with a business management partner …

    • guest

      Oh, thanks for reminding me. Please, don’t anyone confuse the fact that MS is here with a reason why there should be more entreprenuers. MS is a soulless pit of the same people, with the same degree, with the same qualifications “researching” the same thing. I found your “research” comment funny as that is all people at MS do is study things. Just a few have a mind of their own. When we advertise for a job, we chuck any resume with more than 6 months of MS experience. The post is comical. I’m from MS. Let me help you fix your start up. Yes, we can’t launch a bug of a windshield at 90 mph with the wipers on, but I can fix your start up and take it to the next level. I mean, amazon (a book etailer) is kicking you can in the cloud. Go figure, you want one of those MS moron’s “helping” you out.

      Now you know why start ups don’t hire MS employees. Seriously, a lot of my post rev friends and I as well won’t hire them. Do yourself a favor, say you worked somewhere else on your resume.

  • http://twitter.com/crashdev Chris DeVore

    The spin on the article makes Cam’s comments sound more like a slam than a realistic observation about what it takes to build a sustainable innovation ecosystem. We’re lucky to have had some huge tech successes here since the ’80′s that have laid the foundation for a very bright future, but Silicon Valley has had 50 more years than we have for their early wins to spawn successive – and increasingly diverse — generations of wealth, talent and culture.

    We’re on an accelerating path toward that same kind of culture of risk-taking and ambition here — and Cam’s absolutely right that it will require bigger swings from both our local founder community and from the investors who back them. Claiming otherwise — or worse, looking for someone to blame — is just a waste of energy.

    Is our startup culture as big, rich and diverse as Silicon Valley’s? Of course not. Should we use our underdog status to motivate us to be bigger and better, and get there faster? Absolutely yes.

    Believe it or not, we will get there, and from where I sit I can see that we’re already well on our way. Thanks to Cam for stirring the pot, and to John for shining a light on a conversation we need to be having.

    • http://twitter.com/chrisamccoy Chris McCoy

      agree 100%

      • johnhcook

        Thanks for the comment Chris. Len Jordan of Madrona made a similar comment during the panel:

        “The cycle that created Silicon Valley isn’t something that happened over 10 years. It happened over 70 or 80 years.”

    • http://twitter.com/bcrimmins Bob Crimmins

      Well said, Chris. I think I used to spend way too much time wondering how to measure the Seattle ecosystem relative to the Valley. Competing felt like the right thing to do. But after years of that non-sense I finally realized that competing is both futile and counterproductive. We’re not the Valley, never will be. But we are Seattle, we have some unique strengths and we are “up and to the right” on virtually every measure. I came to believe that we are much better served to look toward Silicon Valley as a source of leverage and inspiration… not as a competitor. Give us 35 more years and let’s see where we’re at.

      That said, it bums me out a lot when talented entrepreneurs leave Seattle for the Valley solely because they can’t raise capital in SEA. But given the state of our ecosystem that is just going to make good business sense for some startups. As Seattle scales and matures and more and more folks like Chris and Andy and Geoff and Andy and Rudy and Greg and the rest of stalwart venture supporters come on the scene I expect that ex-patriot trend to reverse.

    • Guest

      I think we have a more diverse startup community in this state. Boeing, Nordstrom, Weyerhaeuser, those are the backbone to what everyone else has built on here, including Microsoft. Now we have a ton of game companies, biotech, a competitor to Ferrari and Bugatti (Shelby SuperCars), Griot’s Garage has set a new standard for car care, etc. I’d say we’re more diverse in this state for innovation.

  • http://twitter.com/chrisamccoy Chris McCoy

    While I don’t advise shitting on the talent level of entrepreneurs, I do think much of the would-be talent in Startupland: Seattle is locked up at motherships AMZ and MS.

    They take incredibly good care of their talent and have very little incentives for it to walk away into the jungle that is building a startup.

    Also, culturally risk isn’t celebrated. In some cases even, if you work for a startup nobody has heard of and you tell someone about it, the implicit belief is “you’re not good enough to work at AMZ like everyone else”. So life as a no-name entrepreneur is quite an uphill battle, when in reality you need the wind behind you to push through the jungle that is building a startup.

    From my lense, the only way to solve the massive risk aversion problem for the most talented is to de-risk it with more TechStars-like programs of $150k+ guarantees. And focus on CS students out of Univ of Washington–and new hires from out-of-state at the motherships. Get the talent into the game young, teach them how to ship product, and iterate. So the YComb model, but for Seattle.

    Seattle definitely has the talent. I think the concept of startups needs to continually be de-risked though.

    Yes, counter intuitive to startups, risk, etc. but there’s a reason the YComb model works.

    There is a recipe to this.

    • http://twitter.com/chrisamccoy Chris McCoy

      Also, cap gains should be reformed to support productive assets like startups (and real estate) to the tune of something like this: http://www.2pctsolution.com/?p=719

      • johnhcook

        I think that is right on Chris, and that is part of what Cam is saying in his remarks. There’s more a cultural ethos that accepts startups in the Bay Area, as opposed to Seattle.

        And i do think there is a lot of talent locked up in Amazon — and they’ve been buying and doing mass hires of entrepreneurial folks in the Seattle area.

        I’ve often said that Amazon having a setback or blip actually could do some really interesting things to the market in Seattle. The company now has nearly 90,000 employees (granted many of them in warehouses throughout the world). But there are a heck of a lot of smart people right in the middle of the city.

        More could be done to draw out that talent, encouraging the startup lifestyle. Of course, the best way for that to happen is for someone to leave, raise a little bit of money and then create a kick-ass service that gets sold for a ton of money.

        That could change things almost immediately.

        • http://twitter.com/chrisamccoy Chris McCoy

          Geekwire and its community of dreamers vs. Amazon and its drones. I like the sound of this!

          I’m perplexed as to the low levels of entrepreneurial activity by folks of Amazonian-descent. It exists but the % of wealthy folks created from the Amazon machine turned investors and/or entrepreneurs (back in to Seattle) seems to be much lower than MS. I wonder why.

          • johnhcook

            Ha! I actually asked former Amazon exec and now angel investor Rudy Gadre about this in a profile I did on him a few weeks ago. Here’s his interesting take:

            http://www.geekwire.com/2012/meet-rudy-gadre-facebook-amazon-general-counsel-lighting-seattles-angel-market-fire/

            Do you think an entrepreneurial wave can come out of Amazon that can impact this community? “I think we missed the boat to some extent. The dot-com crash sort of derailed the people who would have been the (angels and entrepreneurs). At Microsoft, with Rich Barton and Rob Glaser, you got some people who came out of the earlier days. But now anyone who is at Amazon or Microsoft is there presumably because they like being in a big company. And so the people who would have left Amazon to found those things, their opportunity was sort of derailed by the dot-com crash because of the time they would have been leaving Amazon to found new companies, there wasn’t funding available … and then by the time the thing recovered, that early-generation of people who were pioneering at Amazon probably missed the window to some extent. They have family responsibilities. That’s my working theory. You’ve seen a few people out there … but it wasn’t as much as it should have been…. My hope is that Ari (Steinberg) and people at Facebook will go do things…. And whether it is Google or firms that came up from the Bay Area, I am hoping that people will march out of those places and start founding companies up here.”

          • http://twitter.com/chrisamccoy Chris McCoy

            Big fan of Rudy. He’s the right type of early-stage “angel” investor. I hope he has some big wins (early ones even) to convince more wealthy folks in Sea that funding the creation of new companies is the type of asset class that capitalism was designed for.

            Risk should be celebrated. Failure not penalized. Winners the generals of the next entrepreneurial revolution.

          • Bryan Mistele

            John – I think the real reason you don’t see more entrepreneurs coming out of Microsoft is the strategic decision SteveB made in the late ’90s to eliminate all the individual group P&L’s and focus on 7 core businesses and functionalize the organization around those.

            You can argue whether this was good or bad for Microsoft, but the net effect was the opportunity to run a real, cross-functional business was eliminated. Gone were the days of General Managers who ran prod dev, biz ev, marketing, etc. who were held accountable for growing a new business. With the exception of the 7 presidents, those jobs disappeared and everything else got functionalized around PM, Dev and Test with an entirely seperate organization that most Microsofties never interact with in sales. This pretty much eliminated the ability for entrepreneurs to rise up in the Company and build new businesses.

            If you contrast that with GE, you see the opposite. Why do so many GE managers go off and become CEO’s? The answer is GE has hundreds of P&L’s where GM’s are held accountable for conceiving, building, selling and executing on a business idea. This becomes a training ground for people wanting to run businesses. That opportunity just doesn’t exist at Microsoft anymore to any real degree. The net result is you end up with a lot of technical talent, a lot of marketing talent, etc. but very few folks who have real experience who can go off, raise money, read a P&L, manage a cross functional team and grow a business.

            My two cents…

          • johnhcook

            That’s a really interesting analysis, Bryan. Thanks for sharing that.

        • http://twitter.com/fijiaaron Aaron Evans

          The point that Cam misses is that startups aren’t happening in Silicon Valley anymore. They’re moving there after getting funding. Or to get funding (and then going home frustrated.)

          A large part of that is the cost of living. It’s also an obstacle in Seattle. You can’t live on Paul Graham’s ramen budget in Seattle or the Bay Area.

        • Guest

          Sadly, very few at Amazon realize how little risk there is in leaving for a startup. I personally know several great people who left the mothership, did startups, and 2-3 years later were welcomed back with open arms. The kicker is every single one of them was hired back into more senior position than they ever would have been promoted to in the same time frame had they stayed.

  • I am just saying…

    Spent a decade in Seattle and despite having so many great devs, most are non-social and just want to go home and play video games. No real entrepreneurial drive.

    • http://twitter.com/fijiaaron Aaron Evans

      That’s a reflection of the weather. If you can stand it, you prefer to stay indoors. And that’s no way to sell a business.

  • Seattle_is_building_its_lore

    Wow… I didn’t think Ignition could make themselves any more irrelevant in the continued evolution of Seattle’s burgeoning entrepreneurial ecosystem. I was wrong. And it’s a shame because a large VC like Ignition could be a significant contributor to the long-term growth of the Seattle ecosystem. But instead Myhrvold chooses to bad mouth the region that grew his fortune in the first place. It’s kind of sad, actually. I’m all for healthy doses of honest reality and Seattle needs that… but geez… how about being constructive about of it.

    Prediction: Seattle’s entrepreneurial ecosystem, culture and success will continue to grow and mature in the coming years and when folks look back at what made it possible, the name Myhrvold will not be spoken of as relevant. The early VCs of the time made the last 45 years of Silicon Valley possible. Without the Arthur Rocks, the Bill Drapers, the Tom Perkins, the Pitch Johnsons, and other Silicon Valley would not have happened. Clearly the name Cam Myhrvold will not be seen in a similar light 20 years from now. But what we do have are the Len Jordans, the Greg Gottesmans, the Tom Albergs, the Paul Goodrichs. And we have the Andy Sacks, Chris Devores, Andy Lieus, Geoff Entresss and a lot of others who actually make a positive difference in Seattle. When entrepreneurs read the history of Seattle’s startup journey in 20 years, those are some of the names that will be cited as integral to it’s success. Cam’s name will be no where in cite.

  • Guest

    I think entrepreneurs pointing fingers at investors or vice-versa is at best useless and at worse counterproductive. How hard is it to realize that it’s a two-sided market and that the market grows only when both sides actively engage the other?

    Seven years ago, I was an inexperienced entrepreneur, though I had a solid big-company record. I pitched Ignition, and rather than helping me fill in the holes in my experience, they simply tossed me aside, essentially telling me they had a lot more experience and smarts than I did and my idea was doomed to fail. I ended up going to the valley and got multiple term sheets on Sandhill Road. They came not only with money, but with connections and coaching that made me a better entrepreneur than I ever would have been otherwise. I benefit from that nurturing even to this day.

    I was willing to become a better entrepreneur, and the valley was willing to make a bet on me. It has worked out for both sides. That’s what is missing in Seattle. A little bit of rolling up the sleeves on both sides. I’m sure there are many young entrepreneurs in Seattle who are where I was seven years ago, that would like nothing more than to find the kind of supportive investors I found in the valley.

    If Cam wants to take any advice from me, I’d say bet on up-and-comers with some rough edges, and commit to helping them not just with cash, but with personal growth. Don’t complain that everyone who knocks on your door isn’t already Rich Barton.

    • RunTheNumbers

      Very graceful way of making a good point. I think it’s worthy of being more blunt, though:
      - Seattle needs better investors (not necessarily more, just more talented)
      - Seattle investors need to show value beyond capital
      - The well-heeled Rich Barton club is well taken care of. Not every great entrepreneur has taken the same path. Try getting out of your comfort zone once in a while.

  • Mark Lipsky

    I’ve been seeking funding in Seattle for nearly 2 years. I’m not an engineer. I’m not a developer. I’m a business professional with 30 years of hands-on experience – expert experience, in fact – in the exact areas of focus for the company I hope to create and that I’m certain will thrive here. My vision is fairly revolutionary yet not at all obtuse. Instead it’s very straightforward. I’ve met with a series of so-called ‘Angel’ investors and the take-away is this: without an existing team, an existing product that’s been launched, demonstrable traction and a revenue stream to point at, you may as well be talking to a wall. The degree of allowable risk is virtually zero. Bitter? By now, maybe just a bit. Exaggeration? Slightly, perhaps, but I don’t think so. In any case, here’s what I know to be 100% true: Not only is an idea, however compelling it may or may not be, valueless to the Angel class, so too is one’s career, experience, expertise and passion unless the risk can be as definitively as possible proven to be non-existent. I don’t know whether that’s the case in the Valley, but it is painfully, heartrendingly true here. I’m not saying local Angels are bad people, they simply have no stomach for the world outside their virtual panic rooms where there’s only one way to look at the world and that’s from inside a bubble made from bullet-proof glass. Yet I soldier on with faith and confidence. Go figure.

  • Anonymous :-)

    Completely agree with this: “If you are an [investor], do you really deeply care about the zip code of your [entrepreneurs]? I don’t know why you would.”

    Your comments that msft and amzn aren’t spinning off talent may be valid. But painting all Seattle entrepreneurs with the same brush is the sign of a narrow mind. And you betray your bias when you talk about Danish and Turkish teams needing to move to San Francisco to be successful. “Of course” they don’t stay in Copenhagen or Ankara. What a load of crap.

  • CEO, middle stage company

    There are plenty of entrepreneurs in the Seattle area of just the type that Cam is arguing we need. Where do they go for funding? Silicon Valley, where the investors aren’t timid. Here, places like Ignition & Madrona only want the swing for the fences opportunities while everybody else wants to invest insignificant amounts for huge stakes. Anybody in the middle (which is 99% of entrepreneurs) are left out.

    To respond to Chris Devore, the local entrepreneurs are doing their part to build a sustainable innovation ecosystem, but the investors aren’t. Without investors and investment firms willing to look at every stage, we’re going to get further behind. And more future success stories either won’t happen or they’ll move to Silicon Valley.

  • Guest

    I think this might be a good time to go pitch Seattle VCs.
    Thnx John

  • thedudeabides

    Seriously? Someone from ignition complaining about entrepreneurs? That’s hysterical. They earned a reputation as being the biggest pains you could have as investors. Lots of super corporate management types. Big time sink. They were a great example why raising money in the valley made more sense.

  • Bill Bryant

    Let’s see now,. Ignition is an arrogant, out of touch, dismissive, crap investor who are pain in the asses when they do invest, and are somehow responsible for Microsoft and Amazon not churning out more entrepreneurs. Did I miss any of the pejoratives?

    They also are backers of Opscode, Glympse, SEOmoz, Docusign, Datasphere, Visible Technologies, Spoken, Likewise, Korrio, Appature, Avvo, Talyst, Tier3 and previously Swype, Pure Networks, Azeleos, Sourcelabs and AdXpose.

    Not bad for a bunch of arrogant do nothings.

    • Paul Johnston

      Also Entellium, Sotto Wireless, Blowtorch Entertainment and a few others. I suggest reading a random walk down wall street. I think a cat could do just as well…

      And just making investments does not make an investor successful. One should also ask: How are the companies doing? How much revenue are they generating? Who led the round? What’s the firm’s carry? What’s the firm’s ROI for each fund?

  • http://twitter.com/curiousoffice curiousoffice

    This whole conversation is one I never really understood. I haven’t ever felt raising money was anywhere near the most difficult thing you’ll encounter when trying to an idea into a viable company. Entrepreneurs have a lot more control over “yes” vs a “no” than they realize. That control takes shape in the form of adjusting your pitch, being honest with yourself about what you’re pitching, working on your story/presentation skills, filling in any gaps that could increase odds of a “no” etc etc etc. I’m just not convinced that moving to another city would be in my top 20 list of things to adjust such that I could engineer that “yes” that I was looking for.

  • The Truth

    At least Martin Tobias is no longer involved with Ignition. He’s anothe one of those that rode Bill Gates coat tail than acts like he’s gods gift to entrepreneurship and being a VC…small print should read “lucky”. Ou, Martin how’s the world of adultery?

  • Mike

    I like the Martin Tobias bashing…he’s terrible.

    • Derek

      Agree.
      Martin Tobias was (is) an arrogant pri€k. He got lucky and thinks that luck somehow translates to skill. I love seeing him being bashed on forums. Also enjoy the adulterer comments…dudes a jerk.

  • http://twitter.com/enriquegodreau Enrique Godreau III

    I had the privilege to serve as moderator for this VC panel at the WFS
    conference. The title was “How VC’s Make Investment Decisions.” All panelists
    were generous, insightful, and transparent with their comments—well done
    panelists, thank you. John’s article summarizes the discussion around this
    question: “You all live and work in the greater Seattle area. What is your
    perspective on the future of VC and other funding sources in the region?” A
    question about the future of Funder’s cannot meaningfully occur without also
    addressing the future of Fundee’s. But a comprehensive conversation about entrepreneurism in the region cannot stop there.

    Here are two Wordle’s made from John’s article and the comments:

    Article: http://www.wordle.net/show/wrdl/6318563/WFS_VC_Panel_2013

    Comments:
    http://www.wordle.net/show/wrdl/6318569/WFS_VC_Panel_Comments_2013

    In a discussion of regional entrepreneurism, some missing words include Accelerators, Incubators, Universities, Government, more Angels, more anchor companies (Boeing, Concur, Expedia, Starbucks, etc.), and companies based elsewhere with a regional presence (Adobe, EMC, Facebook, Google, etc.) In my opinion, the most important word that’s missing is Leadership. We have incredible
    intellectual, economic, corporate, academic, technical, cultural, physical, natural, and philanthropic resources that make much of the world envious. My question is, who will focus and galvanize these resources to help us realize the full innovation and entrepreneurial potential of our region?

    I lived in Silicon Valley for 7 years during a great time. Friends and colleagues
    invented things like windows-based Xerox Star, solid state lasers, and the
    electronic whiteboard. Seattle can’t be the next Silicon Valley. No place on
    earth can be the next Silicon Valley. The confluence of time, economics,
    national/global dynamics, market demands and other factors aligned perfectly to
    create that incredible ecosystem. Besides, the next growth phase of tech
    innovation is not simply about tech. What we do with tech is as important as
    tech itself. Trying to be the next Silicon Valley is the wrong goal. We should
    look to be who we can be, and this can be something very, *very* valuable and
    unique given our rich, diverse ecosystem, how we think, and what we care about.

    There is a lot of passion in the comments. But no one seems happy with the status quo. This lack of satisfaction is our common ground. February 15, 1852 is widely recognized as the founding day of Seattle when William Bell, Carson
    Boren, and Arthur Denny each staked out 320 acre parcels on the shores of
    Elliott Bay. Many years later, here we are. Realizing our full potential will
    not happen overnight, but with capable leadership, it can happen. It will
    happen. We need a broader dialogue on what each of us can do collectively and
    individually to make it happen. On February 15, 2027, Seattle will be 175 years
    old. That’s 14 short years from now. What do we want Seattle—and Washington
    State—to be then? At Xerox PARC, Alan Kay famously said, “The best way to
    predict the future is to invent it.” So, why not change Seattle? Look to New
    York for proof it can happen.

  • Guest

    ah, the only thing worse than “dumb” money, it dumb money who thinks they are smart money.

    Let me tell you why you don’t have any business. Because people are funding their own companies after the first one was sucked into a black hole by a VC. The valley doesn’t care because as we all know. it’s a job for most in the valley to start a company, get funding, tank it, and start all over again.

    But, for some of who are self funding and now starting to see the money come it, we are more interested in building something and employing people in the community. Sure, it is about the money, but managing your own destiny is so much better.

  • Ryan Dancey

    I think the biggest problem with startups in Seattle is that there is little opportunity to make a company with a $25-$100 million valuation target within the horizon of the local investors. It seems like the VCs only want to play with companies with potential billion dollar valuations and the Angels really want to do the same, they just want to get in earlier than the VCs.

    If you limit yourself to the 1% shots then complain there’s not enough opportunities to invest, you have only yourself to blame. If you wonder where the startup culture is, you have to ask how many people have been able to experience it if only the 1% shots are getting funded.

    If we had 50 deals a year being done for $1 million investment at a $5 million pre, that expected to exit between $50 and $100 million in 5 years, there would be a vibrant startup culture in Seattle, lots of people would see the opportunity and take the risk on running one, and a lot of wealth would be created.

    We need a lot more “successes” – startups funded, and investors cashed out with a meaningful and positive return, at lower valuations and more reasonable growth expectations. We need to walk before we run.

    I think it’s funny that Cam Myhrvold complains that the problem in Seattle is a lack of quality entrepreneurs, after having picked “market” over “idea” or “team” as the necessary ingredient for a successful VC deal.

  • GS

    You can’t swing a dead cat by the tail without hitting a brilliant-but-undercapitalized idea in Seattle.

    In my experience, it’s tough to find an investor with any imagination or realistic expectations—either for timeframe or costs—let alone vision. They seem to like superficial, gimmicky businesses that’ll look sexy for a few years, but are nearly irrelevant before any chance at acquisition, or which are just mediocre at their roots.

    It makes me think that the allegedly financially erudite investors have little talent for anything but being wowed by a flashy pitch about something they don’t really understand, but looks good on paper.

    I may be painting the VCs with a wide brush, but this is my experience. How many of these people how to recognize a great idea, and know how to nurture it?

  • Rahul Pathak

    If ‘it’s all about the entrepreneurs’, why is it that the same company can go to a Bay Area and get more termsheets, more capital, friendlier terms, and a higher valuation? Surely that alone suggests there is more at play. That’s not a long flight…

  • http://chris.pirillo.com/ Chris Pirillo

    Wait a second.

    Are you telling me that I’m the only entrepreneur in Seattle who has never cared to pursue funding?