Calling Bay Area Investors: Seattle Entrepreneurs Want To See More of You, and Help Build Your Brand

9/4/08Follow @gthuang

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them build their personal brands, I would imagine we could get the VCs up here more frequently. I think the WTIA does a pretty good job of this.” (It’s an interesting point that Silicon Valley VCs need branding here.)

“Is getting more VCs up here important—absolutely from an entrepreneur standpoint. The more options you have from a money perspective the better. Having more valley VCs willing to invest in Seattle companies is a good thing. However, it never is about getting a lot of options, it’s about getting the right options. I would much rather have one term sheet that I’m really happy with versus a lot of term sheets that I’m only marginally happy with.”

Kevin Pedraja, VP of Sterling Communications (which does media relations for a number of local companies in wireless, software, social media and security) and head of Sterling’s Seattle office: “I think the expectation of most VCs, Bay Area included, is that startups will come to them, not the other way around (at least until things get to the due diligence stage). My sense is that when they do travel, VCs like to maximize their time, getting to see as many companies as possible. So they’ll go where they think there’s a critical mass of interesting startup companies and/or where the options for local funding might be lacking. The first part certainly applies to the Seattle area, but since we’ve got our own active and strong community of VCs, I suspect Bay Area investors think they’re at a disadvantage in terms of knowing the key players and generally just breaking in.” (This echoes Wetpaint’s point about Bay Area branding.)

So what do investors think about all this? At least the national VC firms I talked to in Seattle don’t seem to see reaching out to the Bay Area as a big need. Bill Bryant, a locally based partner at Draper Fisher Jurvetson, pointed out that every big VC firm in the Bay Area already has deals in Seattle. Alex Rives of Arch Venture Partners reiterated an earlier point that, at least money-wise, Seattle is not wanting for venture deals. And what about local versus non-local expertise? At least one authority from the angel community cautions against seeking outside seed funding at the expense of local financing:

Rebecca Lovell, program director at Seattle-based Alliance of Angels: “Though my experience is in the angel realm, for the group of investors I represent, these are highly engaged professionals who seek to invest not just their money but their time with their portfolio companies. And for the entrepreneurs seeking funding from professional angel organizations, one of the benefits of this process is building out a strategic board of advisors who can help move the company forward….angel investors are prime targets for such critical roles. So to that end—should local companies seek purely non-local financing, something very valuable could be lost.”

Lastly, one Bay Area VC, who declined to be named because of company media rules, gave what I suspect is a pretty representative view from Silicon Valley: “Seattle is close enough to the Bay Area that we’re very comfortable investing there. It’s not a 15-minute drive, but it’s one short hop on a plane. As it’s really quite competitive in the Bay Area, you see more VCs going north or south. I see lots of VCs on Southwest [Airlines] flights.”

Agreeing with an earlier point about geographic hurdles, the VC added, “For early-stage deals, there’s more conversation about syndicating with someone next door. It’s ‘we could do that, but should we call our friends in Seattle?’ So yes, geography is an issue with very early-stage businesses. You’re spending a lot of time with them. When a company is more mature, that sort of goes away.”

And as for innovative ideas coming out of Seattle? “The University of Washington has a lot of interesting technology. It’s very fertile ground. The perception is it’s a little less visited than the grounds of MIT and Stanford.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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  • http://www.rescuetime.com Tony Wright

    We (a Seattle web startup) explored both markets and ended up with a pretty gold-plated collection of seed-stage investors… Only 1 of them is from Seattle.

    If investors have to hunt and compete for good investment ops, entrepreneurs benefit. If I had it to do over again, I’m sad to say that I’d probably avoid the Seattle investor scene unless a motivated investor fell in my lap. If you’re buying a “product” like investment, it pays to go where there’s a competitive market– you’ll get a faster deal with better terms. I can’t imagine why Lozowska would think that having Valley folks looking north wouldn’t help Seattle entrepreneurship. It’s simple supply and demand.

  • http://www.teachstreet.com Dave Schappell

    I agree with Tony — having investors could only help startups. In our case (a consumer-facing application), in Seattle there were only a few VCs who would likely be keenly interested — we were really lucky to find a great partnership with the best one ;-) (Madrona Venture Group, we love ya!), but kidding aside, the other options were probably Ignition and maybe Maveron / 2nd Ave. I’m sure others will throw in many others, but the point is just that in the Bay Area you’d have so many more potential investors, and thus, you’d get that many more opinions, inputs/feedback, probing, etc.

    I think the other benefit, later on, is that you benefit a little bit more with exposure to other companies in the investor’s portfolio. Again, in our case, we really prefer having our Series A investor here in town — in fact, we meet with them very regularly (3-4 times/month!), because they’re adding a ton of value. And, they help make introductions where they’re valuable.

    As we grow, the exposure to contacts in other geographies will continue to grow in importance, so having more geographically dispersed/diverse investors active in our community will be a good thing. One example is Bill Bryant — he’s incredibly active in Seattle, but represents DFJ (I think…) — David Stern (at Clearstone) is another example of someone who’s down in the Bay Area, but who spends a lot of time up here.

    The more the better — I’ve felt a growth in startup activity (not sure if it’s real, or I’m just more tied in to activity), and the increased investing activity will only help grow that activity.

    Onward…

  • http://investor dr frank morgan

    I am a private investor based in the United Kingdom. I focus on seed capital, early-stage, start-up, ventures, LLC and all round completion and expansion of investment projects that need funding. I am interested to invest in your company on a long-term business relationship. If this is alright with you kindly get back to me with more details about your company. Dr. Frank Morgan.(Individual/Angel investor)

  • http://investor dr frank morgan

    I am a private investor based in the United Kingdom. I focus on seed capital, early-stage, start-up, ventures, LLC and all round completion and expansion of investment projects that need funding. I am interested to invest in your company on a long-term business relationship. If this is alright with you kindly get back to me with more details about your company. Dr. Frank Morgan.(Individual/Angel investor)morganfmf1@yahoo.com