The Wild World of Wireless According to Tom Huseby, a Well-Connected Seattle VC

9/5/08Follow @gthuang

Tom Huseby has a fairly normal-looking BlackBerry phone. No fancy software on it, he says—not even from Ontela, SnapIn, or Zumobi, local mobile-tech companies for which he serves as chairman of the board. It rang two or three times during our meeting at his downtown Seattle office, and he dealt with the calls right then and there. It’s the only way he ever gets things done, he says.

I’d expect nothing less from one of Seattle’s foremost VC authorities in wireless and mobile technology, though he would disagree with that label (OK, maybe I’d expect a fancier phone). And what with all the local wireless deals in the past few weeks—SnapIn Software’s $180 million acquisition by Nuance, Medio Systems’ contract with Google and Verizon to do mobile search, and RadioFrame Networks’ latest $28 million funding round—I thought it would be a good idea to sit down with Huseby. He is the co-founder of SeaPoint Ventures, as well as a venture/strategic partner at Oak Investment Partners, Hunt Ventures, and Seattle-based Voyager Capital. I wanted to get his take on the history of wireless in the Seattle area, his strategy in doing wireless deals, and where it all comes from.

Huseby began by establishing that the Seattle area has “the highest concentration of wireless technology in the world. There are more cool [mobile] applications within a 10-mile radius than anywhere else.” (Next would probably be London, he says.)

Next, he gave a fascinating modern history of wireless, starting with the original AT&T Bell Labs technologies and moving into spectrum allocation by local towns and territories. Those territories got put together into the first nationwide network by Craig McCaw in the 1980s, when he started McCaw Cellular in Seattle. In 1994, AT&T acquired McCaw Cellular for $12 billion-plus. One of McCaw’s veterans, John Stanton, went on to start VoiceStream Wireless and Western Wireless in the area, which were bought by T-Mobile and Alltel in 2001 and 2005, respectively. “Every time someone was bought, they actually didn’t move people out of Seattle. People would move here, and it just kept growing,” Huseby says. “We have more concentration of carrier presence here than anywhere else in the country. It’s unbelievable. There are no wireless carriers headquartered in the Bay Area.”

The stage was set for a local explosion of mobile software and services companies. “The big famous shift in it all was, this also was ground zero of a lot of Internet technology,” says Huseby. “So when you combine Internet with the fact that we know mobile here, all of a sudden we started generating some of the first mobile data applications.” (These applications are distinct from things like networking equipment, fundamental radio-frequency technologies, and handsets, which are centered in other locales like Texas, Southern California, and Massachusetts.)

Pretty soon big software companies like Microsoft, Google, and RealNetworks were into mobile tech. On Microsoft, Huseby notes, “They should be buying software companies to get stuff on mobile phones, one after the other.” He adds: “So all of a sudden, little Seattle became the place to go if you wanted to build wireless applications.”

Which is where he enters the picture. Born in New York and brought up in São Paulo, Brazil, Huseby started his career in the 1970s with materials science company Raychem. Through the process of selling products to telecommunications companies, he got to know them very well. “It’s just as hard as selling to a wireless carrier. You had to work it from the bottom up, you had to guess what they were going to need way, way, way ahead of time, be patient enough to work towards that, and you had to make sure they were more afraid to not buy stuff from you than to buy stuff from you. You could work that by making the product really attractive and lowering the fear factor.”

After 17 years at Raychem, he came to work in Tacoma, WA, in 1991 to run a TV antenna company, which became a digital microwave-radio company, Innova. Three years later, he got together with Doug Reudink, a wireless inventor from Bell Labs, to start Metawave Communications, a successful company that made smart antennas and cellular infrastructure.

It was from there that Huseby decided to try his hand at venture capital, in 1997. The established VC firms Sevin Rosen, Oak Ventures, and Venrock Associates helped him start SeaPoint Ventures, originally in Bellevue, WA (now in Seattle). Why did he make the switch? “I think I’m better spread too thin than too thick,” he says. “I’d gotten to observe, sort of late in my career, what VCs did. I got fairly good at predicting what they’d do. I thought I’d be good at it, but I didn’t know.”

Among the companies he’s started in the last few years are Bellevue-based SnapIn, Seattle-based Zumobi and Ontela, and Mojix in Los Angeles. The latter is a bit of a departure from mobile consumer applications: Mojix makes radio-frequency identification readers that can read passive RFID tags from 600 feet away, for tracking assets and products in warehouses and assembly plants, using smart-antenna post-processing.

We talked about a lot of other intriguing technology ideas, but here are some business observations from Huseby that I found enlightening:

On what makes a good VC: “It really does help to be smart… but if you’re really smart, looking at countless deals, a lot of people fall into how to decide not to invest. The real trick is to find out why you should invest… You can’t succeed without being focused in this business. I look at 300 or 400 wireless deals a year. Oh my God — an incredible number of people pitch me deals around that space, so after a while you know one when you see it.” Huseby says he stays away from medical, enterprise software, and real-estate deals.

On how he likes to do financing deals: “Seattle is really collegial compared to the Bay Area. Up here, if I want to do a wireless deal, I love investing with Ignition. After a while, it’s like dancing with someone, who knows all your moves, you know all theirs. They’re quite predictable and they’re a big help.” Huseby says he also got involved with Frazier Technology Ventures to invest in SnapIn.

On what makes a wireless deal attractive: “There are no secrets. I am most focused on the value of an idea. I am more willing to go much further for a good idea than most VCs are. If somebody comes at me with a good idea, and they’re not the CEO or CTO or anything, as long as they’re willing to commit their energy and effort to it, I’ll say “OK, what else do we need?”—if it’s a really good idea. A lot of the stuff I do, I know there’s a need for the company. Like I knew with SnapIn—oh my God, mitigating calls to help [customer support], that’s a non-scaleable expense. Every time they add a million subscriptions in a wireless carrier, they open up a call center somewhere in the world. So I’ll go through a lot of trouble to follow up on a good idea.”

On the importance of a strong management team: “I’m not enamored with management teams that have done it before, so now they’re going to do it again… There’s a lot of that in our field. Just because it worked once doesn’t mean it’ll work again. So I get leery of the management team, because they may have had a perfect idea in the first one, and that doesn’t mean they’ll come up with a perfect idea in the second one… I really believe that good management makes a difference between a painful, long, miserable slog and something more like a marathon. With good management, you can run a marathon. With bad management, it’s like trying to run a marathon through a swamp. So you’ve got to get really good people on board, but I don’t have to have really good people when I start. I do have to have willingness to go get the really good people.”

On working with startups: “I can’t work with anyone that thinks my idea is what they have to do. And I really can’t work with anyone who won’t listen to another idea. So I really want to see if I can have conversations with the management team. I want people whose focus is on the success of the company first.”

On mobile and wireless exits: “I like deals where I can imagine the exit. At times it’s unexpected, but I always had an idea of what it would be sold for and why, and what we had to do to get there… Selling to a wireless carrier is the Holy Grail for most startups… In order to get through the castle walls you have to give a carrier an almost but not quite unbelievable value proposition. You have to make it so valuable for them to look at it that you can get through the guards… Will customers like this? They really worry about the consumer.”

At the end of the hour, his phone rang again, and it was time for Huseby to go evaluate the next startup idea on his plate. A wireless VC’s work is never done around here.

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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