John Gabbert knows a thing or two about financing a startup.
He’s the founder and CEO of PitchBook, a resource on private investment deals, funds, investors and service providers all across the tech industry. Gabbert built the Seattle-based company as an independent startup with just $4 million in funding, and it went on to be acquired by MorningStar at a valuation of $225 million.
Gabbert still runs PitchBook today, giving him an inside view of the funding that fuels the tech industry. We sat down with him to talk about that world on the most recent episode of the GeekWire podcast. Listen to the podcast in the player below, download it as an MP3 and keep reading for excerpts.
On the state of Seattle’s startup and tech ecosystem: I guess my short elevator pitch is: Things are looking good. Seattle, in general, is probably on pace to have the third best year over the last 10 of venture investing. That’s capital invested and number of deals getting done, as well as exits. Some good exits. We’ve had Redfin with an IPO recently, and so that’s really just completing that venture capital lifecycle of companies receiving capital, growing, employing people and then returning capital back to investors.
On how hard it is to raise funds in Seattle: See, that’s just a great balance. I think that that’s kind of how it should be. Raising money is really never easy. Certainly, we do hear about the [companies] that raise quickly and raise a lot of capital, yes. But in general, those are the outliers. Raising money is hard. It should be hard. I think those are the hurdles that entrepreneurs need to get over in order to have someone who’s earned that capital write them a check. So, I think it’s a good balance, the amount of capital and ideas. We built PitchBook with under $4 million — that’s what it took to build the business. And we were raising capital ’07, ’08, ’09. Over 200 people said no to us. So listen, when it comes to [the quoestion of] “Is raising capital hard?” I think I can contribute to that conversation.
On the issue of sexism and recent sexual harassment scandals in the startup world: I’m not sure that that I have the fix or know the fix, but I do think that a very good thing that is happening is the conversation. Inclusively is a big part of the conversation that we’re having at PitchBook today. And that crosses over lots of different things, whether it’s gender, race — many other things. So I think it is great that we are having this conversation and it’s such an open conversation.
I think that the media has been writing about this a fair amount and increasing awareness and some of the changes that we’ve seen at — not to name names — but certain companies that have had executive changes, as well as venture capital funds and more early-stage groups that have had changes in their leadership because of this issue. I think change takes time but I think change is starting to happen.
On the shortage of tech IPOs and abundance of unicorns: Certainly, the public markets are not what they used to be. If we rewound this ten, fifteen years, I imagine across the U.S. — I don’t have the exact stat — but I would imagine that half of the number of companies that were listed ten years ago are listed today. So just the number of publicly listed companies in the U.S. is down a lot. Most venture liquidity still comes through acquisition, and that’s selling to a strategic corporate acquirer, and then private equity firms are getting much more involved now. Growth financing. Where you used to have typical [leveraged buyout] shops you now have growth arms, and they’re really now providing that liquidity for early stage angel investors and venture firms as well as that next round of capital for growth, which used to be acquisition or IPO in the past.
On tech talent: There is a lot of competition for startups, with these larger companies that are either headquartered here or they are opening engineering offices here. So how do you deal with that? I think companies are getting creative when it comes to budgets, trying to understand how you’re going to allocate scarce resources. … I think as entrepreneurs we’re always looking to solve problems and with that being a real problem, finding talent, from the beginning [PitchBook] actually opened an engineering center in Ukraine. We have over 100 people on our team in the Ukraine and it’s been an amazing experience and a great working relationship, really a partnership, with this group there.
Advice for potential entrepreneurs: The number one thing that it takes is not to quit. You know, [quitting] is the only way to ensure that your business isn’t going to work out. And to my earlier comments about raising capital: raising capital is hard. It’s supposed to be hard. It should be hard. And I talked a fair amount about grit and grinding, and you do just have to put in the time. And I think one question that entrepreneurs should ask themselves — whether they’re coming right out of school or really any stage of their career — picture if you get an offer from Amazon for $80,000 a year or $100,000 or $120,000. Are you still going to do your idea? And if you pause on that or really think about that then maybe you’re not going to put in the time that it’s going to take to get through all the challenges. Something to think about is that it’s a journey and you’ve got to be able to grind.