Madrona expands geographic reach and targets later-stage deals with $100M ‘acceleration fund’

Madrona expands geographic reach and targets later-stage deals with $100M ‘acceleration fund’

2:36pm, 1st May, 2019
Madrona managing directors, from left to right: Tom Alberg, S. “Soma” Somasegar, Scott Jacobson, Matt McIlwain, Tim Porter, Hope Cochran, and Len Jordan. (Paul Goodrich is Madrona’s other managing director) (Madrona Photo) Call it the “ones we missed” fund. has raised $100 million for what it calls an “acceleration fund.” The Seattle firm, which has focused on early-stage deals across the Pacific Northwest throughout its 24-year history, will target later-stage companies based across the country with the new investing vehicle. But it is also targeting deals in its Seattle backyard that slipped through the cracks. Madrona is one of Seattle’s most successful early-stage startup investors — with recent successes such as Apptio, Smartsheet and Redfin under its belt. But even so, Madrona’s Matt McIlwain admits that the firm missed some opportunities, pointing to fast-growing Seattle startups such as Outreach, Auth0, Icertis, and Textio. “It’s fair to say that there are some great Seattle companies that we didn’t get right early on,” McIlwain said. The new fund frees up Madrona to participate in later rounds for more mature companies both in and out of the Pacific Northwest. Madrona began thinking about this new strategy last fall, just after it $300 million for its seventh fund. The venture capital firm had dabbled with later-stage deals, investing in more established companies based outside of Seattle such as , Tigera, and over the past few years. Matt McIlwain. (Madrona Photo) “We’ve done some of those, but very selectively,” McIlwain told GeekWire. “We wanted to have a dedicated fund and a dedicated focus on that acceleration stage.” He described that stage as when a company has already found product market fit and is “really starting to accelerate the growth of the business.” Best known as an early-stage investor — including an insightful gamble on Amazon in the 1990s by partner Tom Alberg — the acceleration fund represents a new strategy for the firm. But it is one that other firms have experimented with, though the approach of investing across stages of company formation has not always worked in the topsy turvy world of venture capital. (Madrona Image) Madrona will be “super selective” with the acceleration fund, with plans to make six-to-nine investments over a three-year span, McIlwain said. The average check size will range from $7 to $10 million. If all goes to plan, Madrona could raise another acceleration fund when it starts planning for its eighth traditional “core fund.” Madrona’s existing investors provided the capital for the acceleration fund. The firm remains committed to making early-stage investments in Pacific Northwest startups via its traditional fund. Madrona prides itself on planting seeds in companies from “Day 1” and sticking with them throughout a journey to acquisition or an IPO — Smartsheet, Impinj, and Redfin are examples of those investments. “We love our core strategy,” McIlwain said. “Nothing is changing there.” In fact, cash from the acceleration fund could very well go toward additional Seattle companies. “We are more committed to this region than ever,” McIlwain said. He noted Madrona’s partnerships with organizations including Techstars Seattle and the University of Washington, and said the firm’s new founder center, , has been “incredibly successful.” Madrona employs 30 people at the firm and has been bulking up its lineup, adding and over the past year. The same team will be working with both funds — this could help Madrona avoid issues that plagued Kleiner Perkins Caufield & Byers, which dealt with internal rifts after establishing a “growth” fund in 2010 to compliment its early-stage fund. “Our approach is very different,” McIlwain said when asked about last month’s Kleiner Perkins story in . “A unified team, unified process and consistent fund economics across the firm along with our collaborative approach will allow us to bring the full Madrona team’s value-add to all our companies across all our funds.” A staircase connects Madrona Venture Group’s existing office to Create33, a new founder center that aims to be an epicenter for Seattle startups. (GeekWire Photo / Taylor Soper) Madrona is facing increased competition from Silicon Valley firms that are . Recent investors in later stage rounds for companies such as Outreach and Auth0 include Mayfield, Spark Capital, Trinity Ventures, and Meritech Capital. McIlwain said he welcomes the new entrants in the Seattle market. “It is great for the Seattle ecosystem to have more investors partnering with great entrepreneurs and investors like Madrona to build global-leading companies,” he said. Madrona has proven its ability to back nascent startups that become huge companies. Its track record for investing in later-stage companies for the first time, especially those outside of its backyard, is not as clear. The firm hopes to use its hometown as an advantage. “And, we believe, it is essential to have the ‘Seattle Perspective’ as part of your team to accelerate growth and maximize long-term value,” it wrote in a blog post today. McIlwain said that perspective includes proximity to homegrown companies such as Amazon and Microsoft, and the cutting-edge technologies being developed across the city in industries such as cloud computing, machine learning, and artificial intelligence. Madrona believes it can make a difference for companies not familiar with the Seattle tech scene. “It’s the access to the insights from those domains; access to the innovators both in small and big companies we’ve had the opportunity to work with; and this whole area of a cultural approach that really values taking a trust-based, long-term style to company building,” McIlwain said. In addition to Create 33, other Madrona-related initiatives include , the “startup studio” backed by Madrona. Recent investments made by the firm include deals backing Igneous, Ovation, Knock, Polly, Pro.com, and Clusterone.
Madrona raises new $100M ‘acceleration fund’ to expand geographic reach, target later-stage deals

Madrona raises new $100M ‘acceleration fund’ to expand geographic reach, target later-stage deals

2:05pm, 1st May, 2019
Madrona managing directors, from left to right: Tom Alberg, S. “Soma” Somasegar, Scott Jacobson, Matt McIlwain, Tim Porter, Hope Cochran, and Len Jordan. (Paul Goodrich is Madrona’s other managing director) (Madrona Photo) Call it the “ones we missed” fund. has raised $100 million for what it calls an “acceleration fund.” The Seattle firm, which has focused on early-stage deals across the Pacific Northwest throughout its 24-year history, will target later-stage companies based across the country with the new investing vehicle. Madrona began thinking about this new strategy last fall, just after it $300 million for its seventh fund. The venture capital firm had dabbled with later-stage deals, investing in more established companies based outside of Seattle such as , Tigera, and over the past few years. Matt McIlwain. (Madrona Photo) “We’ve done some of those, but very selectively,” said Madrona Managing Director Matt McIlwain. “We wanted to have a dedicated fund and a dedicated focus on that acceleration stage.” In an interview with GeekWire, McIlwain described this stage as when a company has already found product market fit and is “really starting to accelerate the growth of the business.” “This fund is focused on Madrona making new investments in companies for the first time in that acceleration stage, not only in Seattle but across the West Coast and the country,” McIlwain said. The longtime Madrona director admitted that the firm has missed out on investing in some companies early, pointing to fast-growing Seattle startups such as Outreach, Auth0, Icertis, and Textio. The new fund frees up Madrona to participate in later rounds for more mature companies both in and out of the Pacific Northwest. “It’s fair to say that there are some great Seattle companies that we didn’t get right early on,” McIlwain said. “If it makes sense to be able to add some complimentary value to the other folks on the syndicate, we’d love to be thought of as a group that can do that. “Madrona has been known for being the seed and Series A group,” he added. “This helps communicate that we could lead or partner in a B or C round with other great investors and entrepreneurs.” (Madrona Image) Madrona will be “super selective” with the acceleration fund, with plans to make six-to-nine investments over a three-year span, McIlwain said. The average check size will range from $7 to $10 million. If all goes to plan, Madrona could raise another acceleration fund when it starts planning for its eighth traditional “core fund.” Madrona’s existing investors provided the capital for the acceleration fund. The firm remains committed to making early-stage investments in Pacific Northwest startups via its traditional fund. Madrona prides itself on planting seeds in companies from “Day 1” and sticking with them throughout a journey to acquisition or an IPO — Smartsheet, Impinj, and Redfin are examples of those investments. “We love our core strategy,” McIlwain said. “Nothing is changing there.” In fact, cash from the acceleration fund could very well go toward additional Seattle companies. “We are more committed to this region than ever,” McIlwain said. He noted Madrona’s partnerships with organizations including Techstars Seattle and the University of Washington, and said the firm’s new founder center, , has been “incredibly successful.” Madrona employs 30 people at the firm and has been bulking up its lineup, adding and over the past year. The same team will be working with both funds — this could help Madrona avoid issues that plagued Kleiner Perkins Caufield & Byers, which dealt with internal rifts after establishing a “growth” fund in 2010 to compliment its early-stage fund. “Our approach is very different,” McIlwain said when asked about last month’s Kleiner Perkins story in . “A unified team, unified process and consistent fund economics across the firm along with our collaborative approach will allow us to bring the full Madrona team’s value-add to all our companies across all our funds.” A staircase connects Madrona Venture Group’s existing office to Create33, a new founder center that aims to be an epicenter for Seattle startups. (GeekWire Photo / Taylor Soper) Madrona is facing increased competition from Silicon Valley firms that are . Recent investors in later stage rounds for companies such as Outreach and Auth0 include Mayfield, Spark Capital, Trinity Ventures, and Meritech Capital. McIlwain said he welcomes the new entrants in the Seattle market. “It is great for the Seattle ecosystem to have more investors partnering with great entrepreneurs and investors like Madrona to build global-leading companies,” he said. Madrona has proven its ability to back nascent startups that become huge companies. Its track record for investing in later-stage companies for the first time, especially those outside of its backyard, is not as clear. The firm hopes to use its hometown as an advantage. “And, we believe, it is essential to have the ‘Seattle Perspective’ as part of your team to accelerate growth and maximize long-term value,” it wrote in a blog post today. McIlwain said that perspective includes proximity to homegrown companies such as Amazon and Microsoft, and the cutting-edge technologies being developed across the city in industries such as cloud computing, machine learning, and artificial intelligence. Madrona believes it can make a difference for companies not familiar with the Seattle tech scene. “It’s the access to the insights from those domains; access to the innovators both in small and big companies we’ve had the opportunity to work with; and this whole area of a cultural approach that really values taking a trust-based, long-term style to company building,” McIlwain said. In addition to Create 33, other Madrona-related initiatives include , the “startup studio” backed by Madrona. Recent investments made by the firm include deals backing Igneous, Ovation, Knock, Polly, Pro.com, and Clusterone.
Stripe for ID verification: Investors bet on new Madrona Venture Labs accelerator startup Vouched

Stripe for ID verification: Investors bet on new Madrona Venture Labs accelerator startup Vouched

9:35am, 12th April, 2019
Vouched CEO John Baird. (Vouched Photo) , a Seattle startup using AI to verify people’s identities online, has joined the accelerator. The 3-month accelerator program in a bid by VC firm Madrona Venture Group to lure talent from tech giants. It is focused on established teams and offers startups coaching and connections to investors. Vouched uses AI to review documents in order to help companies verify the identity of its customers, clients and contractors. Those documents could be anything from passports and driver’s licenses to proofs of address and insurance. The idea is to turn a manual process requiring lots of time and staff into an automated one. “We’re working behind the scenes to verify people on sites you might use every day. You might have already used Vouched and don’t even know it,” Vouched CEO said in an email. Vouched has raised $700,000 to date. In addition to a $100,000 investment Madrona Venture Labs, Vouched’s other investors include Zulily co-founder , New Engen CEO , investor , Bulletproof 360 VP , Revolve CFO , and , CEO of EMEA at Footlocker. Baird said Vouched aims to do for ID verification what services like Stripe have done for online payments, with a focus on ease of use, affordability, accuracy and scale. Vouched is incorporated under the name Woolly Labs. Baird founded the company with , who serves as chief product and technology officer. is the startup’s head of AI research. “Increasingly, companies never meet their customers, clients, or even employees,” Baird said. “How do you know, for example, that a gig economy worker has the legally required credentials to work in their industry?” Baird declined to share the names of customers, but said that Vouched works with “companies in sectors such as the gig and sharing economy, telemedicine, transportation, and enterprise software.” This is the second company to join Madrona’s accelerator. The first was , a software startup that helps speed up clinical trials, which graduated in January and was a . The Madrona Venture Labs accelerator is currently . The program is run by managing directors and out of , the “founder center” that opened beneath Madrona Venture Group last year.
Madrona makes another healthcare bet, leads $5M round in clinical software startup Ovation.io

Madrona makes another healthcare bet, leads $5M round in clinical software startup Ovation.io

5:07am, 14th March, 2019
From left to right: Madrona’s S. “Soma” Somasegar, Ted Kummert and Chris Picardo; Ovation’s Barry Wark (seated) and Winston Brasor (standing). (Madrona Photo) , which makes cloud-based software for medical testing labs, has raised a $5 million round led by Seattle-based Madrona Venture Group. Fellow Seattle firm also participated, along with Borealis Ventures, Nat Turner, Zach Weinberg, and David Shaw. Ovation, based in Boston, is focused on helping labs — in particular, those that do genomics and molecular testing — manage their data and run their business. The startup’s platform helps with things like tracking samples, integrating with health records systems and managing client relationships and revenue cycles. Ovation was founded by Barry Wark and Winston Brasor with the idea that existing laboratory software needed a cloud-era makeover. Wark launched the company shortly after receiving his doctorate in neurobiology and behavior from the University of Washington. “Genomics and molecular testing labs have complex workflows that require new functionality that can only come from a modern SaaS and cloud-based solution,” S. “Soma” Somasegar, managing director at Madrona Venture Group, said in a statement. “At the same time, these labs have clinical and genomic data that is being under-utilized to provide improved patient outcomes.” “Barry, Winston, and the team have built an easy to use and rapidly deployable system for one of the most vibrant areas of precision medicine diagnostics and we are excited to help them grow their team and presence in the market,” he added. Madrona has shown a growing appetite for health tech with three recent investments in the arena, including: , which makes AI assistant for physicians; , a personalized population health company led by Concur co-founder Rajeev Singh; Envisagenics, a startup that’s developing RNA therapeutics. While Madrona doesn’t plan to greatly expand investments in this area, the VC firm said it sees room for innovation when combining the cloud, data analytics, and the large amount of data being produced by life sciences companies.
Madrona leads $10M round for Knock, a CRM and communications service for apartment landlords

Madrona leads $10M round for Knock, a CRM and communications service for apartment landlords

12:24pm, 7th March, 2019
The Knock team. (Knock Photos) When it comes to communication with customers, many apartment landlords still rely only on phone and email to connect with potential tenants and existing renters. wants to change that. The Seattle startup today announced a $10 million Series A round led by Madrona Venture Group to help grow its communications and CRM platform used by nearly 200 multifamily property management companies. The 52-person company has seen revenue grow by 11X over the past two years and is operating in nine U.S. cities. Total funding to date is $15.5 million. What Knock does: Knock’s technology facilitates communication between property managers and renters — responding to questions, organizing tours, etc. — and also manages customer relationships, bringing both services in one place. Knock’s product can be used with property management software systems such as Yardi and Realpage, and also provides back-end analytics data to highlight engagement and internal sales statistics. It integrates with communication tools such as Facebook Messenger and productivity apps including Outlook and Slack. Knock will use the fresh funding to invest in data science and analytics that can help property managers predict tenant turnover and reduce vacancy rates. Backstory: Knock, originally called ZipDigs, was co-founded in 2014 by and , two University of Washington grads who previously worked together at UBS Wealth Management. The entrepreneurs were frustrated with the leasing process, specifically with how difficult it was to communicate with landlords. “All these different communication channels in one centralized platform was just not available prior to Knock,” Petry said. , the company’s other co-founder, left in April 2018. More renters: Themelis said that almost every major metropolitan market is seeing a record amount of multi-family development. That’s good news for Knock. “With all that supply, there’s competition to get renters to move into those properties,” Themelis said. Competition: Some companies offer landlords lead management or communication tools, but Petry said none bring them together in the way that Knock does. Knock co-founders Tom Petry and Demetri Themelis. Investor insight: In a blog post, Scott Jacobsen, managing director at Madrona, detailed how Knock “grew from a booking widget for prospective tenants to a comprehensive CRM.” “By listening to customers and deeply understanding the pain points and friction (a behavior we see in all great founding teams), the Knock team has built the best CRM system for multi-family property managers and are just getting started in their ambition to build a comprehensive, modern marketing cloud for the industry,” Jacobsen wrote. Not that Knock: There’s another real estate startup called Knock that a $400 million round two months ago for its “home trade-in program.” Seattle real estate startups: Knock is one of several startups in the region building tech for the real estate industry. Others include , , , , , MoxiWorks, IMPREV, and Faira — not to mention industry giants such as Zillow Group and Redfin.
Surveys in Slack: Madrona leads $7M round in Polly, a Seattle startup that builds polling software

Surveys in Slack: Madrona leads $7M round in Polly, a Seattle startup that builds polling software

11:22am, 13th February, 2019
Polly co-founders Bilal Aijazi and Samir Diwan. (Polly Photo) With millions of employees at thousands of companies now getting work done with collaboration software such as Slack and Microsoft Teams, it’s created opportunities for startups to build tools that help enhance these new workflows. Investors — including Slack’s own VC fund — like what they see so far with , a Seattle startup that announced a $7 million funding round led by Madrona Venture Group. , Amplify Partners, Fathom Capital, and existing investors also participated. What Polly does: Polly’s software is used to quickly collect feedback from employees using Slack, Microsoft Teams, or Hangouts Chat. Use cases include anything from automated polls every time an IT ticket closes or periodic surveys for new hires going through the onboarding process. The idea is to gather and analyze data to improve operations across various parts of a company. “As work converges in Slack, we’ve seen an increase in demand from teams and organizations to connect these pieces of work together,” said Polly CEO and co-founder . “This is why you see Slack and Teams using the language ‘collaboration hub’ more often, because that’s exactly what’s happening. As teams look to measure the success of these processes, with Polly they can trigger feedback requests based off of key events.” Pivot: Polly launched more than three years ago. After graduating from Techstars Seattle in 2016, it a $1.2 million seed round. At the time, Polly was focused on using chatbots to survey employees inside of Slack. Diwan said the software shifted to be less conversational. “Conversational has a time/place, but when users and customers want something, sometimes there are significantly faster ways then to have a text-based conversation,” he said. “There is space in this world for conversational bots — Polly isn’t one of them.” But the company was certainly on the right path. Since Polly started, the use of Slack and other new tools such as Microsoft Teams has increased. Slack, , has 10 million daily users and more than 85,000 paying customers . Microsoft in September that it had 329,000 organizations using Teams. Competition: There are a few other Slack-related polling tools but Diwan said Polly’s software sees higher engagement in part because of its simple and intuitive design. “Others have tried to copy us but they haven’t been able to pull it off,” he noted. Customers: Polly has hundreds of customers, Diwan said. The company launched its enterprise product last year and tripled its user base in 2018. Founding team: Diwan and his co-founder, , are former Microsoft engineers. Employees: Polly employs 11 people and plans to double its headcount. Investor insight: Total funding to date is $10.4 million. Madrona Partner Sudip Chakrabarti will join Polly’s board as a result of the new funding. Here’s why he’s excited about the company, per a blog post from today: Our investment in Polly follows from our core thesis that, enterprise workflows, for the most part, will move away from legacy systems and email to modern online collaborations platforms like Slack, Teams and Mattermost. While these platforms started their lives as messaging tools, they now have the opportunity to become the “operating system” for modern enterprise workflows. That is already happening. Forward-looking organizations are creating Slack teams whose mandate is to adopt and/or build applications to enable enterprise workflows on Slack. As enterprise workflows move to collaboration tools, measuring the effectiveness of those workflows — so that those could be analyzed and further improved — becomes critically important. That is exactly what Polly enables. Polly enables organizations to collect and understand feedback from key constituents so that enterprises can measure and optimize their workflows and thereby, deliver a much better experience.
Food safety monitoring tech startup wins first place at Madrona machine learning hackathon

Food safety monitoring tech startup wins first place at Madrona machine learning hackathon

12:45pm, 8th May, 2018
The HyperAI team, from left to right: Benji Barash, Yves Albers, Dave Matthew, and Elizabeth Nelson, with TiE Seattle board member Shirish Nadkarni and Madrona Venture Labs CTO Jay Bartot. (Not pictured, from the Hyper AI team: Ritesh Desai and Joaquin Zapeda) (Photo via Madrona) Food safety is a pressing issue. The latest example came last month when an elusive strain of E. coli linked to romaine lettuce sickened 121 people across 25 states and killed one, for how food is screened for safety and quality. Now a newly-formed group of entrepreneurs wants to use machine learning technology to help keep food free of harmful bacteria and containments before it reaches the dinner table. Hyper AI took home the first place prize at a hosted by TiE Seattle and Madrona Venture Labs, the startup studio housed inside Seattle-based venture capital firm Madrona Venture Group. The event featured eight teams who came together last month and spent this past weekend creating startup ideas that incorporated the latest machine learning and deep learning technology. Eight teams participated in the Machine Learning Startup Creation Weekend at Madrona Venture Labs. (Photo via Madrona) The winning team, Hyper AI, aims to help the food industry with hyper-spectral imaging tech that can detect everything from foreign objects to deadly bacteria. It plans to deploy edge devices on customer premises and do the heavy lifting for image analysis with machine learning in the cloud. The group, made up of Amazon vets and experienced technologists, explained that existing solutions are either too manual and expensive, or too specialized. It hopes to use machine learning to improve the food scanning technology over time as it learns how to detect more and more contaminants. “They were able to demonstrate why there is increasing awareness of the issue and demand for new, innovative solutions,” said Mike Fridgen, CEO of Madrona Venture Labs who helped judge the pitches. “They had defined their beachhead opportunity, where they would start, through in-depth conversations with potential food processor customers.” As the first place prize winner, the Hyper AI team will now meet with Madrona Venture Labs with a chance to land a $100,000 investment and participate in , which just . Accepted startups in the accelerator will use Madrona Venture Labs resources — expertise in company creation, design, engineering, etc.; access to Madrona’s advisor and investor network; and more. It will be housed in Madrona’s that opens later this summer underneath its existing downtown Seattle office. Madrona Venture Labs held in the past and ended up investing in the winning companies. The studio is focusing on supporting “vertical” machine learning and artificial intelligence startups, as explained . The second place team from last weekend’s event was FireWise, which aims predict wildfires before they happen. The third place team, HealthShop, wants to help guide healthcare patients to surgery centers. (Editor’s note: I was one of the six judges at the event. Others included Madrona Venture Labs CEO Mike Fridgen; Flying Fish Managing Partner Heather Redman; Madrona Ventures Venture Partner and University of Washington professor Dan Weld; Koru CEO Kristen Hamilton; and Microsoft GM Sona Vaish Venkat )