But how do Seattle entrepreneurs feel about the capital situation in the Pacific Northwest?
I had the pleasure to serve on a panel discussion this past weekend at the Biz Tech Summit in Bellevue where the money topic was brought up once again. As I’ve stated many times before, I’d like to see the Seattle region boost its market share when it comes to dollars flowing here, just as New York has done over the years.
Ari Steinberg, the CEO of Seattle startup Vamo and former site director of Facebook Seattle, actually said the lack of money isn’t really a bad thing.
“It seems like we are talking about a problem in Seattle. But I actually don’t think it is really a problem,” said Steinberg. “Yes, it is true that it is harder to raise money in Seattle, and that actually might be a healthy thing,” he said. “It is probably too easy to raise money in the Bay Area right now. And, the fact that it is easy to raise money down there, actually means it turns out to be good for Seattle entrepreneurs too.”
Steinberg raised a lot of his cash from Bay Area super angels, certainly helped by his roots at Facebook. But even so, he said that the companies that are able to succeed in Seattle are often rooted in different principles, in part because they have not had piles of cash at their disposal.
One great example of that is Tableau Software which raised a modest amount of venture capital, and never touched it on the path to its IPO. Hear more from Tableau CEO Christian Chabot on that topic from the GeekWire Meetup earlier this year.
“I would say the biggest thing I learned working in venture capital for two years and being exposed to it is — avoid venture capital at all costs,” Chabot said. Interestingly, WhitePages CEO Alex Algard — whose company this week announced that it was cashing out its venture backers to the tune of $80 million — told me that not having VCs involved in the company would provide a “cleaner” focus.
Steinberg wasn’t the only entrepreneur on the Biz Tech Summit panel who shared the contrarian views about venture capital, with Concurix CEO and former AOL CTO Alexander Gounares pointing out that capital constraints actually can be a good thing for early-stage startups.
“While I would like to see more venture capital activity in the region here, I kind of look at it as a constraint. For all of the entrepreneurs out in the audience, constraints are your friends. And, if you don’t have too much money, from investors, think about it: Do you really, really want investor money? Would you rather have $10 million from an investor, or have $10 million from a customer? That’s an easy decision. You want $10 million from a customer…. Constraints are really the mother of invention, and treat that as your inventiveness and innovative drive to figure out how you get money anyway.”
Gounares said at the end of the day “you have to build a real business” — pointing out that in Silicon Valley there is a bit of ephemeral ideas.
“I mean, was Instagram really a $1 billion business? You can have a healthy debate and discussion about that,” he said. Ideas like Tesla or SpaceX may take tens of millions of dollars and Gounares said there is money available to support those ideas. “If you have the right idea and the right team, you can find the investment you need,” he said.
Apptentive CEO Robi Ganguly added that people “talk too much about money.”
“We are not Silicon Valley. We are never going to be Silicon Valley. Silicon Valley is probably 40 years ahead of us. There’s a lot of generational aspects of companies growing and getting funded… We should stop talking so much about capital, and talk about what success looks like and how people are building companies like Zillow and Redfin and Zulily in our backyards.”
Interestingly, Founder’s Co-op general partner Chris DeVore was on KUOW with Steve Scher this week talking about venture capital flow in the region. (Listen in here).
DeVore notes that Seattle has a tremendous pool of “digital creatives,” one of the reasons why Facebook, Google, Twitter and other Silicon Valley giants are setting up branch offices here. But DeVore said that the region is behind when it comes to startup support.
“We have great raw material up here. We punch below our weight on turning that talent into high performing companies,” said DeVore, adding that Silicon Valley is ahead because it simply has history on its side.
DeVore noted a strong on-deck circle of Zillow, Tableau and Zulily, but he said the region just doesn’t have the depth of capacity yet.
“We are not entitled to this. So, as an ecosystem we need to create a culture and a community and an environment where people want to come to build companies and their lives. When we do that, the people who come attract other exceptional people and attract capital and build big companies and ultimately become the employment base and the tax base and frankly the cultural foundation in terms of the people who are hungry to innovate and change the world and have impact in the world. That is the foundational cultural vibe you need to make a city functional going forward.”
Editor’s note: This will certainly be a topic of discussion on Friday at GeekWire’s Startup Day as we host a panel discussion with leading Seattle investors, including Ignition’s Frank Artale; Madrona’s Greg Gottesman and super angels Rudy Gadre and Geoff Entress. More details on Startup Day here.