UW Faculty Entrepreneurship Seminar Series

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UW Faculty Entrepreneurship Seminar Series

• Greg Gottesman
• Madrona Venture Group
• December 5, 2006

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Madrona Overview

• Madrona is a leading venture capital firm focused
  on sourcing and growing early-stage technology
  companies in the Pacific Northwest
• Founded in 1995, headquartered in Seattle
• 425M under management across three funds
• Investments made in over 70 companies
• Current fund is 170M Madrona III fund (2005
  vintage)
• Average initial investment 2M 5M
  (occasionally smaller)
• Madrona team
• 4 Managing Directors Tom Alberg, Paul Goodrich,
  Greg Gottesman, Matt McIlwain
• 6 Strategic Directors Jack Creighton, Jerry
  Grinstein, Keith Grinstein, Pete Higgins, Bill
  Owens, Bill Ruckelshaus
• 3 Venture Partners Prof. Oren Etzioni, Prof.
  Dan Weld, Brian Goffman
• 6 additional Investment Professionals
• http//www.madrona.com

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Current Portfolio

• Madrona invests in enterprise software
  services, consumer software and services, and
  wireless infrastructure
• Current active portfolio of 27 companies

Consumer Software
Enterprise Software
Wireless Infrastructure
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Exits
Over 30 successful exits via IPO or acquisition
Selected Exits

• Recent highlights
• Acquisition of Employease by ADP in October
• Isilon filed for IPO September 1
• Microsoft acquired Seadragon Software in February

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Deal Sourcing

• Ideas and companies are discovered through
  multiple sources
• During Q3 of this year, Madrona reviewed over 150
  deals and listened to over 75 formal
  presentations
• Primary sources include
• Extensive networks of Madrona team
• UW Computer Science Department
• Major local companies (Microsoft, Amazon, Real,
  McCaw Cellular)
• Portfolio alumni
• Referrals
• A trusted referral is the most effective way to
  have your plan stand out

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Strong Partnership with UW

• 10 spin-outs (and counting) from the University
  of Washington
• Current portfolio companies
• Portfolio alumni
• AdRelevance (acquired by MediaMetrix)
• Appliant
• Asta Networks
• Netbot (acquired by Excite)
• Nimble Technology (acquired by Actuate)
• Performant (acquired by Mercury Interactive)
• Viatru

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What Do We Look for in Prospective Companies?
Companies that scale or a potential VC trap?
Source http//www.thevc.com/strips/strip36.html
Robert von Goeben and Kathryn Siegler
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What Do We Really Look for in Prospective
Companies?

• Great team
• Large opportunity
• Competitive advantage
• Compelling business model/value proposition
• Right market timing
• Reasonable terms

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Current Investment Themes

• Advertising increasingly moves online
• Open source becoming more prevalent in the
  enterprise
• Digital media explodes especially
  user-generated content
• Virtual applications and services emerge

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Top 10 Lessons Learned

• Good technology is not enough
• Valuations matter
• Hiring the wrong CEO is death
• Too much money can be a bad thing
• A great deal structure cant rescue a bad deal
• Control is underrated
• Choose the right financial partners and service
  providers
• Dont invest in a crowded space
• Listen to customers and build what they will pay
  for today
• Cash is king