Techstars Seattle Alumni Raises $4.8m in Series A Round

Great news rolled in today. Leanplum, a Techstars Seattle alumni, just closed a series A round. Leanplum is out of the Techstars Seattle 2012 class. The two ex-Google founders Momchil and Andrew worked immensely hard during the three-months program, or as they call it “our ninety day week”. It initially paid off with a $825k seed-round raised upon Demo Day, and now an additional $4.8m from Shasta Ventures.

the game is changing

I'm speaking on a panel next week as part of the MIT Enterprise forum here in Seattle. The topice of the talk is Venture Funding - It's a New Game. The game has for sure changed, and I think the success of Founder's Co-op, TechStars and Lighter Capital shows some of the ways entrepreneurs and investors are adjusting. 

The panel is a good mix of people across the startup funding landscape, with a wide range of experiences. I think it should be a really interesting talk, so no matter where you sit in the startup funding world (entrepreneur, investor, service provider), I think there will be some juicy nuggets you can catch here. Check it out next week - details below.


Have you heard about recent exits in which start-ups have been acquired for several million dollars within a couple of years of founding with little or no outside investment? Or clean energy start-ups that can’t raise the millions needed to grow their business? Or a game company that sold for hundreds of millions of dollars with relatively little VC participation? What’s going on? 

Join us as Rebecca Lovell, Chief Business Officer at GeekWire, moderates our panel of industry insiders including:

  • Frank Artale, Partner, Ignition Partners
  • Tom Duterme, Corporate Development Director, Groupon
  • Andy Sack, Co-founder of Lighter Capital, Judy's Book and several acquired tech companies
  • Dan Shapiro, Kept Entrepreneur at Google

Our panelists will tell us where acquisition and venture money is coming from today, including specific deals. They will explain new venture funding models such as revenue financing and incubators that offer mentors, connections to investors, and significant cash. More importantly, they will provide a framework for understanding how funding in the Northwest has been transformed by increased capital efficiency, technological development, and the global economic malaise, as well as explain the impact on entrepreneurs and funders, such as angels, VCs, and corporations.  

Audience Takeaways

Audience members will learn:

  • Details of recent Northwest exits and financings
  • What has changed in the last two years
  • About the explosion in new ventures and trends in capital efficiency
  • What acquirers and investors are looking for today
  • What is hard to fund and why
  • About new venture funding models such as revenue financing and incubators with advisors, connections to investors and cash

My least favorite VC behaviour?

The following post is from a well respected entrepreneur in Seattle with a GREAT business.

"My least favorite VC behavior lately has been this process:

  1. I get an email from an investor saying they want to chat
  2. I tell them it's only worth my time if they're incredibly serious about the company and have partners who are interested in an actual funding event
  3. They ask for some data/metrics, which I send
  4. We have a call
  5. They express lots of interest and want to meet immediately
  6. I fly to location X and sit down with them
  7. I never hear back
Did you really need to waste my time with that plane flight (granted, I usually have several other meetings/business in those locations)? What excited you on paper and over the phone that didn't in person?
Maybe it's just part of the game, but ugh. I'm respectful of your time, which you clearly treat as sacred. Please show me the same courtesy. I think the new bar is - you come fly up to Seattle and show me you're really interested or it's not happening."


FirstMark Capital is spamming our companies with this email

Everyone one of the CEO's in our portfolio got an email like this.


Hope this note finds you well.  I’m with FirstMark Capital, a $2B venture firm based in New York City.  A friend of mine who runs a startup here in Manhattan shot me a note to check out [COMPANY NAME] over the weekend, and I had chance to spend some time on your site last night.  I found your [SITE DESCRIPTION] to be really interesting, and thought that your company seemed to mesh well with several of the investment verticals that we focus on as a firm.  I’m not sure if you’re familiar with FirstMark or not, but we invest in early-stage tech companies in a number of sectors like emerging media, retail/commerce, vertical apps & services, and infrastructure software, among others, and count a number of awesome companies like SecondMarket, Shopify, Clickable, Knewton, and Riot Games as current investments.

If you’ve got a few minutes sometime this week or next, I’d love to connect and learn more about your company as well as introduce you to FirstMark and tell you more about some of the ventures and initiatives that we’ve been involved with recently.  I look forward to hearing back on if and when you might be available.



No harm in this really....just kind of funny.  And thought I'd call it out. Sincere inquiries like this are always welcome and it's hard as a CEO to sort out the wheat from the chaffe. It might be worth a follow-up call if you see a fit but be aware that it's not all about their love for your unique business ;)


Naked Juice with Vulcan Steve Hall ....interpret that!

Steve Hall   Naked juice
A picture or two should help you interpret the post title.  
I had coffee and juice with Steve Hall yesterday. Super fun. Steve is a really smart guy who understands where technology and business intersect. He convinced me to try evernote. It's the third software product for the week I'm going to give a trial month to -- Quora, Evernote, and The Shared Web.

In my opinion, the rate of change of the web seems to be increasing. I can't keep up with all the new ways to post, share, and consume.  Can you?  

The story behind RevenueLoan...and why I'm excited about the company

I started RevenueLoan because I am on a mission. I have a passion for entrepreneurship. I've been starting and running technology companies for 15 years now.  I love entrepreneurs and generally find myself spending all my time trying to help them with all aspects of their business. 

Why do I do this? Well, two reasons. First, I received lots of help as a young entrepreneur. I wouldn't have been nearly as successful had it not been for the help and mentorship of lots of kind friendly people. Second, I believe MANY people aspire to be entrepreneurs and to build something that they and their employees believe in and can be proud of. To accomplish this goal, financing is a often a core impediment to realizing small business success and growth. 

Two and half years ago My partner Chris DeVore and I started Founder's Co-op because we thought that the traditional venture capital model was broken.  We thought success for a startup company was better facilitated by a super angel entity than by a traditional vc fund. We continue to believe this....and are in the process of proving it! I want to be clear -- this does NOT mean that I think venture capitalists suck or are useless. On the contrary, venture capitalists play a vital role in the startup process. 

During the first year of operating Founder's Co-op, we perceived another opportunity to support a group of underserved entrepreneurs. These entrepreneurs had small businesses and big visions and were impeded because they didn't fit traditional bank debt or traditional venture capital or angel equity models. This market insight-- which was  facilitated by Erik Benson and the partners at Voyager Capital -led to the creation of RevenueLoan, the company. We did the first two RevenueLoan investments under the Founder's Co-op umbrella (or flag) before determining that the opportunity required a separate investment vehicle. One of those deals has already proven to be very successful for the entrepreneur and for us!  

Founder's Co-op is on a mission to innovate in the area of financing of early stage technology companies. RevenueLoan is a vital innovation.  The reason I'm so excited about the company is because I think it's the best investment agreement I know of that truly aligns entrepreneur and investor incentives.  RevenueLoan puts an extra focus on increasing top line revenue growth which for any entrepreneur is a critical success metric!

In conclusion -- and just to put a fine point on it -- I'm excited about RevenueLoan because I think it is going to help a large number of entrepreneurs grow their businesses.  

The Big Door financing history: an insiders view of Keith Smith's comeback

Founder’s Co-op has been an investor in BigDoor since shortly after its inception in2009.  The CEO and co-founder of BigDoor is Keith Smith, and Keith and I have been friends for going on seven years now.  It is a friendship forged in the board room, sales pit and the business trenches – yet cemented over drinks and political debate.  I think there is a good lesson to be learned from Keith’s story over the past couple of years, so I thought I’d tell it.

The economic tsunami of 2008 left Keith and his company in rubble. The company that once had annual revenues north of $78MM and significant monthly profits that placed its worth well over $100 MM in market value was sold in April 2009 for for pennies on the dollar.  In an attempt to save his company, Keith mortgaged his home and poured every last dollar he had into the company.  Despite those investments, all of the proceeds of the sale went to the company’s lenders and Keith’s personal fortune went the way of his company, south….way south. 

Shortly after the company he had spent a decade building and running Keith was offered the job of CEO of an Internet company located in the Midwest doing double-digit millions per year in revenue.  He then began debating whether to take this job (and go work for someone) or begin again and start his own company.  When he sought my advice, I told him that he should do what’s right for him – that he’s captain of his own ship and needs to make the call about what direction to take his career.  I told him there’s no shame in working as a hired gun for someone else. 

Keith took a trip to Cancun with the plan that he would spend a week on the beach to make a decision about what would come next. Rumor has it that he drank a fair amount of tequila and partied hard on the beaches for a week. When he returned to Seattle, he declared he wants to start a company.   He had a vague notion of starting a company focused on offers; kind of like Offerpal but aimed at non game sites. 

I told him I’d like Founder’s Co-op to lead the financing.  My rationale was simple: I wanted to bet on Keith. I think he’s one of the best CEOs I’ve met and personally he is one of those people that knows how to make money.  He’s also someone that I’d never want to bet against. My assessment had much more to do with the attributes of Keith than with his new business. I just know he’s smart enough to figure it all out – and now he has a chip on his shoulder to prove to everyone that he can do it again. 

We decide to go to Las Vegas for the weekend and try to pencil out a deal while drinking by the pool.   The negotiation was none too hard. We both put our key limitations on the proverbial table – there’s a lot of trust between us and neither of us tried to over optimize the deal.  We left Las Vegas with the following deal: 

Founder’s co-op leads a 500K investment in Big Door

  • 250K at a low valuation
  • 250K in a convertible note that will be done in Nov 2010

In November 2009, Keith & Jeff and I returned to Vegas for the annual sojourn to pubcon .  On the plane, I looked back to see Keith and Jeff in a deep conversation. Jeff twisted around in his seat talking intently to Keith in the seat behind him – who is furiously taking notes.  Upon landing in Vegas, Keith & Jeff tell me they’ve decided to alter the direction of the company. I asked them lots of questions and their thought process made sense. I encouraged them in their new direction but I told them to get a customer.  Customers will validate whether their change makes sense. 

Also in November 2009, Brad Feld (Foundry Group) and Keith met for the first time at the TechStars in Seattle event.   I facilitated an introduction over a beer and a burger. 

In January 2010, Keith closed his first customer on the revised strategy: BuddyTV.  The sale of this customer is a milestone for the company. Around this time, my confidence in Keith and the plan he was pursuing  began to increase significantly. I began to see the wisdom of the change in direction that Keith and Jeff had made.  I began making introductions for Keith to a bunch of local and non-local venture capitalists.  Keith and I both knew that the company is going to need additional capital.  Fortunately, a number of the venture capitalists got interested in the company. 

In February 2010, Brad Feld started to engage more with Keith.  They began to develop their own relationship.  . Keith closed his second customer: the Cheezburger Network.  Around this time a few other venture capitalists started to request 2nd meetings with Keith and are began to express serious interest in the company –but the chemistry and momentum and fit was nothing when compared to Foundry Group. 

In April 2010, Brad and his partner Seth came to Seattle . We had breakfast and then Brad, Seth and Keith had a 2 hour meeting with Keith.  A few days later, Keith calls me from the SFO airport and tells me he ran into brad at the airport and Brad informed him that he will not be investing.  Brad really liked the company but for a few reasons couldn’t get himself off the fence to actually invest.

Keith was a bit surprised and disappointed. Frankly, so was  I.  Up to that point, the chemistry and momentum between Brad and Keith kept pointing to a likely term sheet. I kept thinking that Brad would put a termsheet down but the valuation would be too low for Keith.  I told Keith not to give up and to reach out immediately to Brad to tell him he made the wrong decision and I told him to get on a plane and get to Colorado.  Keith reached out to Brad and Brad was receptive, so they setup a meeting for later that week in Colorado.

They meet at the Foundry offices for a few hours and by the end of the meeting, Brad had tentatively agreed to change his mind. BUT, Brad wanted to discuss the investment with his partners. I encouraged Keith to keep the heat on and to email Brad’s partners and tell them how much he wants to do the deal with Foundry as opposed to other investors. 

I also told Keith he needs to work on a backup plan. Two weeks later Brad agreed to invest.   The deal closed 21 days later (i.e. last week). 

The big lesson to learn here is; never give up.  Whether you have a company that fails, or a deal that falls apart – don’t get discouraged, don’t give up, keep going. 

Opening the door to a more imaginative future: Big Door Media raises $5 million dollars from Foundry Group and Founder's Co-op

I'm happy to let you all know that one of Founder's Co-op portfolio has raised $5MM dollars in venture capital from the Foundry Group.

As I pulled my car into the parking lot this morning and was thinking about Big Door I imagined myself getting points for getting to work on time, or for parking in the worst spot in the parking lot, or for getting to work in less than 5 minutes when my average time is 5:30 seconds.  You may think I'm a bit nuts, but working with BigDoor has me imagining the future differently (and admittedly I am a bit nuts). And the future I see is all about games.  

Keith Smith, the CEO of Big Door, pointed out the opportunity to create a platform to help publishers enable game mechanics and virtual economies.  Once he pointed it out -- I jumped on board and started to imagine life with points, points, and more points. And all I could think about was how FUN!   This post may be a bit abstract ...but it's because I'm rushed. I'll try to fill you in more as the weeks go by...if you want to see a practical implementation of Big Door check out cheezeburgers new implementation of's powered by Big Door Media.

This investment has been a blast. Nice job Keith, Jeff and the whole team.  (Welcome back Roy)

I plan on writing a long post about the story of this company and this financing in the next week. But I am so swamped with work that I can barely make this post.  I'm busy with my own announcement yesterday of RevenueLoan which is pioneering an innovative approach to financing early stage companies (i.e. companies of 1 to 5MM in revenue).  

Join me in welcoming Geoff Entress to Founder's Co-op as a partner

I just wanted to welcome Geoff Entress as a partner at Founder's Co-op.  Chris DeVore and I are super excited to have Geoff join us. His work as an angel in the Northwest generally, and Seattle specifically is unparalleled and makes him a perfect addition to the Co-op.  As we ramp up our activities in the very early stage investing area, Geoff is a perfect addition. Geoff brings a great track record of successful deals and complements Chris and I from a personality and skill set perspective!  Special thanks to Voyager Capital in making this transition smooth from everyone's perspective -- they're very supportive of Geoff and Founder's Co-op union and we very much look forward to working together with them (i.e. Voyager) in the years to come. 

You can look forward to more news from Founder's Co-op over the next few months. 

Raising capital is an emotional process not a rational process

The other night I spoke about how raising capital is an emotional process. I can't emphasize this enough. The entire process of raising capital -- is an exercise in managing relationships.  Investors want to feel good about their investment.  Investors want to like the entrepreneur and feel confident in the person's ability to execute the business. Once you recognize this fact, below are some concrete tips for raising capital:

  • Ask investors questions -- understand who they are and their rationale behind past investment decisions
  • Ask questions about who they are - - where they live, what they listen to and what they watch
  • Entitlement has no role in the financing process
  • If you screw up, apologize
  • Recognize the process is a game, play it to the best of your ability
  • When your raise your money, say thank you
  • If you switch investors abruptly, apologize.

Remember it's not business, it's personal .  Entrepreneurs should ignore this fact at their peril. 

Do I suck as a venture capitalist?

I thought I'd write a post following up on my guest post on TechFlash and let everyone know some of the things that I know I suck at when it comes to investing.  You should feel free to comment and add to either list  (I of course prefer you add to the why I don't suck :-) .  

Why I don't suck as a venture capitalist

  • I have experience running and selling start up technology companies. I've been doing this for 15 years, and have managed to sell 3 companies for a nice sum of money and 2 for a loss (both about $0.50 on the invested dollar).
  • I have managed up to 120 people. I've recruited lots of VPs before and managed many management teams.
  • I love sales of all kinds -- and know how to sell.
  • I blog and try to be transparent about my position on topics.
  • I have an opinion and am direct. You may not like what I have to say but most people know where they stand with me and whether I like their business.
  • I think of myself and am told that I'm approachable and open.
  • I know my shit smells  -- and I know I've made lots of mistakes (and continue to make them)
  • I'm scrappy, cheap, aggressive,and know how to bootsrap business 
  • I'm willing to be wrong
  • I have an emotional IQ
  • I try not to take myself too seriously
  • I care a lot about entrepreneurs and the community. 
  • I pay my taxes and am a huge fan of the films : Old School and Meet the parents

Why I suck as a venture capitalist

  • I'm now an investor and think like one
  • I'm valuation sensitive. We tend to deals in the sub 2MM pre-money valuation zone. 
  • Our deals include a liquidation preference as a standard term.
  • I think my experience should matter to you
  • If I dont' like your business or you, I usually tell you (doesn't win me friends)
  • I'm cheap and sometimes negotiate too aggressively.
  • People have told me that my direct style intimitades them. I don't mean to!
  • I don't read all my emails and am occasionally lame about follow thrown
  • I have definately mismanged expectations in the investment process on more than one occasion.
  • I like to make money.
  • I am wrong plenty. 
  • I care about the people side of business a lot.
  • I don't have enough money to invest -- I have a small fund and thus can't do bigger deals.
  • I like the movie Wall Street and once thought about being an investment banker, an options trader, and a management consultant. I did none of the above but would probably still enjoy being an options trader.

In defense of Ignition Partners

This is a comment I wrote on Tech Flash in response to the recent Ignition bashing (be sure to read the comments section to get the full discussion)

I've actually worked with Ignition Partners and lost some of their money when I wasn't able to get Judy's Book to a successful exit. Moreover, I haven't had any business relationship with the firm for the past year.

I tell you this so you have context for my comments.

I wrote my post about "Do VCs suck" in part because of the negative comments about venture capitalists (and Ignition in particular) on this board.

I encourage people to read that article -- and to give this firm (i.e. these guys) a break.

  • Yes -- they're venture capitalists.
  • Yes that means they have companies that don't make and entrepreneurs that they say "no" to.
  • Yes -- they've human and make mistakes (entellium).

But I have to say, you learn a lot about a firm when you see how they deal with things not going according to plan (i.e. something other than success). In my experience over 3 plus years, they're smart, well meaning professionals with a lot of value add.

In general, I recommend these guys. I would work with them again. They have operational expertise, know-how and relationships that are of tangible value.

If you're an entrepreneur and want an informed opinion of this firm -- contact me.

One last thing -- I think the anonymous flame throwing posts on this board (i.e. Tech Flash) are crap. If you've got something negative to say -- put your name on it and stand behind it.

I'm a huge fan of UGC, but it needs to be managed and constructive and right now this board's tone and value add to the community sucks.

A vc blew and an entrepreneur jizzed his pants

Forgive me for the suggestive nature of the title of this post. It's a play on the song which I've become a huge fan of ...if you haven't heard the song you should go here and listen to it. 
I was recently reminded of the time (1996) when Ted DIntersmith of Charles River Ventures came to our offices at abuzz and expressed interest in what we were doing. I was SO excited -- it was exciting to have someone acknowledge what we were doing with the potenital of investing a few million dollars to make our dream real. Well, when he came to our offices on Galen St. in Watertown, MA I think I jizzed my professional pants. I smile just thinking about that time. I never did a deal with CRV -- Ted was just doing his job and checking out "neat"technology companies in the Boston area. I share this story because entrepreneurs shouldn't get too excited when a VC calls on them - don't jizz your pants - there can be lots of reasons for the call....and a vc call doesn't make a deal or a company. That said, it's natural to be excited -- and by all means take the call and see where it leads.

Revenue is the only milestone that counts now

It used to be that release of beta, hire of a VP, or first 100K eyeballs were milestones in the life of a high tech company and in the eye of investors. They showed progress. Today -- these events are just that events. They are not events on the way to revenues. Revenues show progress -- and if you want to be more specific, revenues are milestones on the way to cash flows and profits. 

Venture Firms: "Closed for the holidays"

Since the great stock market crash of 2008, a number of entrepreneurs raising capital have asked me for advice on their financing.

My advice starts with my world view: Given the recent swings in the public markets and the uncertainties about the size of the global recession heading our way, venture capitalists won't be doing deals for the remainder of the year. 

Venture capitalists won't tell entrepreneurs that they have an invisible sign on the door that says: "Closed for the holidays."  But trust me, things are closed tight for the next three months (and perhaps longer). 

The venture capitalist thought process will go something like this:
  • Their current portfolio will start to need more attention as the ripple effect of slowing demand hits projections and revenue lines.
  • Moreover, their current portfolio may well require more funding and so venture firms will hoard cash for follow on financings.
  • With uncertainty about the overall economy and potential exits, venture firms will enter the "wait and see" mode on investments.

All these factors will contribute in the short run to a slowing of new investments.
So what's my advice for entrepreneurs?

Look closely at the assumptions underlying your business plan and the amount of capital you plan to raise. And get prepared to make do with less.

You're going to need to get your hands dirty in the gritty world of bootstrapping. 

In technology companies, this "bootstrap mentality" isn't that easy to come by. 

But in the land of scarce capital resources and easy sources of Series A funding, your business plan is simplified to the "cash flow one step."  (?) Get financing from customers in the form of revenues! 

Whatever your grand plans, you need to show revenue traction and capital efficiency.  Given the choice between growth and survival, make sure survival is taken care of first.  Then and only then will you be able to grow.

If this seems harsh, or not what you had in mind, then you, too, should close for the holidays.