Is Failure a Black Mark for Seattle Innovators? Insights from Erik Benson of Voyager Capital

Erik Benson is a quantum particle. OK, that’s the only metaphor I can think of to explain how he can be in so many places at once. The managing director of Voyager Capital is based in Seattle, but his orbit also includes Portland, OR, Silicon Valley, and San Diego. From what I can tell, he’s one of the most active (and connected) venture capitalists on the West Coast.

Which fits the Voyager Capital model pretty well, as I reported on a few months ago. Benson, who has been with Voyager since 1998, focuses on investments in software and digital media. He serves on the boards of Portland companies AboutUs, Elemental Technologies, and Kryptiq, as well as Seattle-based Trailfire and San Diego’s Covario. He was previously on the board of CapitalStream, which was acquired by HCL Technologies for $40 million last February. And back in 1999, he sourced Voyager’s investment in aQuantive, which was bought by Microsoft for $6.4 billion in 2007.

Last week, during the holidays, I had a chance to meet with Benson at his Seattle office (“money never sleeps,” he says). So I wanted to share a few of his keener insights on startups and the venture world here.

Heading into the new year, a lot of people have been talking about the future of venture capital in pessimistic tones. “2009 will be a tough year,” Benson admits. But he points to a couple of areas that he thinks will do well: health care and online marketing, particularly search engine marketing.

I asked Benson whether VCs will be focusing on their existing portfolio companies and later-stage deals at the expense of new startups. To Benson, the key issue is being profitable—the companies that make money will always be the most attractive. “Is that later-stage? Not necessarily,” he says. Entrepreneurs and investors will do fine, he explains, “if you stick to the fundamentals of what makes a great company: an entrepreneur who has done it before; a sound business model; great technology; differentiation on the technology or business model, or both; getting to revenue and cash flow break-even quickly.”

He certainly makes it sound simple—if not easy. “My goal in the Northwest is to invest in entrepreneurs who’ve done it at least once before,” Benson says. “And maybe they’ve failed two out of four times.” According to Benson—and this was interesting to hear—this is not the mainstream view of failure around here. “In Seattle, it’s like a black mark if you fail,” he says. That’s as opposed to some other places, like Silicon Valley or Boston, where failure is a “badge of honor” (as long as it’s not every time, of course).

That was the most surprising thing Benson said in our meeting. But I can see what he means. It will be interesting to hear what other investors and entrepreneurs have to say. Is the Seattle innovation community intolerant of failure, and if so, what can be done about it?

In any case, it sounds like this year will be business as usual for Voyager Capital, mainly because great tech ideas and startup talent aren’t going away anytime soon. “You’ll see an investment per quarter,” Benson says. “The best entrepreneurs don’t go back to work for Microsoft or Intel.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and Editor of Xconomy Boston. E-mail him at gthuang [at] Follow @gthuang

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