Gary Rubens may not be running his own startup anymore, but the man is certainly keeping busy.
The veteran Seattle entrepreneur has been on an investing mission as of late, making 50 early stage deals in just the past 18 months through his investment arm, Start It Labs.
Rubens is a longtime Seattleite, first starting a manufacturing company in the hospitality industry and later launching a home furnishing and fixtures e-commerce site that was acquired by Lowe’s in December 2011.
Rubens stayed on with Lowe’s for two years after the acquisition, but departed this past January. Since then, he started his own private family foundation and has dabbled in real estate investing.
He’s also become one of the region’s most active angel investors, with a majority of his money going toward Seattle-based startups that are just getting off the ground like Fanzo, Reveal, IdealSeat, and Farmstr.
We caught up with Rubens to learn more about his investing philosophies and his opinions about the Seattle startup scene in general. Read on for an edited excerpt from our chat.
GeekWire: Thanks for taking the time to speak with us, Gary. Let’s start with the obvious questions: Why are you making so many deals right now, and how did this happen?
Gary Rubens: “One of the first things I did was go and figure out who I needed to know in the Seattle area angel scene. People would tell me that I needed to meet Geoff Entress, Rudy Gadre, Chris Devore, Andy Sack, Andy Liu — all these people. So I systematically spent three months going around and meeting the key top 30 or 40 angel investors in the area. Not only did I want them to know me and what I was interested in, but I wanted to understand what they were doing and what they were interested in as far as the whole local ecosystem, and how I could possibly help and get involved. Through that I got introduced to more people who sent me deal flow, and I also attended events and joined organizations like the Keiretsu Forum, Alliance of Angels, and TAGS.
So why did I invest? I wanted to invest in the local market, and I know there are a lot of people looking for money that have ideas and really struggle to get in front of angel investors. So, a lot of times it’s who you know, and if you don’t know anybody but you have a great idea, it’s hard to get those connections.
I only invest in companies that I feel I can add value to. If somebody brings me a medical device, I probably don’t know too much about it or know anyone who can help beyond a check. But if you bring me something around analytics, e commerce, social media, marketing — anything like that — I’ll probably invest if they have a good team.
A lot of times I’m the lead investor because people need someone to start with before they can get the others, so I’ll take a risk. I’m probably more risk-willing than some angel investors because I’m really investing in people. People first, the idea second. A good team with a mediocre idea will know how to turn it into a great company. A mediocre team with a great idea will probably fail.”
GeekWire: Why are you focused on companies in the sports, e-commerce, social media, and marketing arenas?
Rubens: “I try to invest in clusters. It’s around areas that I think could use a little bit of disruption like the real estate industry. The process and fee structure of how people shop for homes hasn’t changed, and that needs to be disrupted.
I tend to invest in these clusters around themes that can work together, but aren’t competing. I also like to educate myself about an industry I can learn more about. I can also help these teams help each other. Ultimately, in the unfortunate case one of them fails, maybe they can absorb people from the other one. I don’t invest because of that, but it’s a way to add a little insurance to your bet.”
GeekWire: Since you have spent the past few years really getting to know other angels and entrepreneurs in the Seattle area, what have you learned about the city’s startup climate?
Rubens: “There are a lot of ideas out there and a ton of companies launching. In some cases, it feels like it’s relatively easy for people to get money if they know the right people. In other cases, really good ideas are struggling because the founders don’t know the right people.
I feel like my job as an angel investor is also to be a facilitator and connector. I need to get people in front of other angels. I need to get them exposed to the right people. If their idea truly is good, then other angels will see it — they want to see good ideas, but sometimes there’s not a way to connect.
I would say the scene is very hot, very lively — maybe not as hot as the Valley, but I think we’re definitely getting there. You’ve got a lot of top angels in town putting their money into things that you know are going to help this entrepreneur ecosystem in Seattle grow. There’s also a lot of money coming out of Microsoft and Amazon now, with people putting their money back into ideas, and people leaving those companies to start ideas. It’s pretty hot right now in Seattle with a lot of good ideas coming out of here.”
GeekWire: What’s unique about the startup scene here compared to other places?
Rubens: “The community is very wiling to work together. Everybody wants to meet new people that are in similar positions or that could possibly partner with or introduce them to people. I just feel like people are very willing to help each other here. A lot of angel investors and mentors are willing to meet with companies and not receive pay or equity. Just look at the Techstars program and how many people volunteer to mentor companies coming through. There are lots of local entrepreneurs and angel investors here who give time and money to help companies.”
GeekWire: Some people say that Seattle could use a lot more angel and VC money, especially compared to cities like San Francisco, New York, and Los Angeles. Do you agree?
Rubens: “I’m not really sure on that. Obviously we need more angel investors out there who invest a decent amount of money. My minimum investment is $100,000, whereas a lot of angels will do $10,000 or something. That is really difficult to help a company get any runway, and you have to have a lot of investors on your table to make it like that. I always advise startups to not take investors that are investing $10,000 unless you absolutely need it.
There are a lot of people coming out of Microsoft and Amazon that have made a lot of money. It would be nice to see them put some of that back in and reinvest in the future.
There also needs to be more VC firms in town. While you got guys here like Ignition, Maveron, and Madrona doing a lot of deals, I think some companies feel like they need to go to a broader market in the Valley where more VCs are funding deals.
I think more VC firms will come to Seattle if they start seeing enough angel activity here and Seattle-based companies getting exits. It’s just a matter of time. The more you see companies like Google and Apple opening offices here, I think you’ll see more money here both in angel and VC format. It will probably just take 2-to-3 years for that to really happen.”
GeekWire: You’ve made 50 deals in less than two years. Are you concerned about people like Bill Gurley warning that the current tech boom is starting to show signs of the dot-com boom (and bust)?
Rubens: “It’s different than the dot-com boom. I do think valuations are a little out of wack, both here and in the Valley, but more in the Valley. People are getting funded with ideas that are have these ridiculous valuations. Even at my stage as an early stage seed round investor, sometimes people come in with a cap of like $7 or $10 million — I’m like, how do you figure out your worth like that with no data yet? Unless they have some fantastic IP or a very unique idea, I give them a lot of pushback for three reasons.
One, I think their expectations are off. Two, even if I was to invest in an unrealistic valuation, I can’t pick up the phone and call Rudy Gadre or Geoff Entress or Andy Liu or Chris Devore or any of these guys and get them to invest because they will get hung up on the valuation. Three, it’s going to be very difficult to get the next round of funding if their seed round valuation was out of wack.
I try to advise entrepreneurs to look at the long road of what’s the next step. I want to talk to my fellow angel investors about the product or service and not get hung up on this ridiculous valuation this company has. I think there are some ways we have a little bubble going on with valuations, but I still think there’s a lot of money out there and a lot of angel money to be had and you know, I don’t see the bust happening anytime soon. I just think valuations need to be reasonably well thought out if companies want to fully get funded down the line.”
GeekWire: Any advice for people in the Seattle region that have money to invest, but are reluctant to do so?
Rubens: “If they are still busy or don’t have the time or don’t know how to go about investing, they should join a group like the Keiretsu Forum, Alliance of Angels, or TAGS. These groups provide a great way to dip your toe in and start learning about angel investing. Those groups do the due diligence with you so you don’t go at it alone. You get a lot of deal flow that way and it’s a great way to dip your toe in and be able to invest a little bit of money or just learn about companies and watch the process over a period of time.
People should remember how they got their money. They got it because of companies like Microsoft and Amazon and being at the right place at the right time, or possibly knowing somebody and having a good idea or skill set that got them the job. Maybe they can give some of that back to the system. It isn’t necessarily a charitable contribution, because they may end up hitting it big. But you can also give back your skills, time, and advice to these companies that you invest in.
There’s also another way they could look at it. They don’t have to invest money. They can just invest time and really help companies by offering advice and knowledge.”