News & Views

 

Madrona Was An Early Investor In The Last Three Seattle-area Startup IPOs

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The Human Army Using Phones To Teach AI To Drive

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Investors Pour More Cash Into Startup That Operates An ‘Escrow System’ For eSports Tournaments

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Highspot Raises $15 Million To Perfect Your Sales Pitch

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Snapchat Parent Snap Acquires Placed, a Seattle Startup That Tracks Consumer Location Data

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Work Management Powerhouse Smartsheet Lands $52M, Valuation Tops $850M Amid Global Expansion

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Echodyne Homes in on $29 million to Give Drones and Self-driving Cars ‘Radar Vision’

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Redfin CEO: To Survive, Keep Thinking Like a Startup

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Context Relevant Changes Name to Versive, Launches AI-powered Enterprise Security Technology

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Harnessing Innovation – with S. Somasegar

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This Founder Turned Doggy Daycare Into a $300 Million Business

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Fast-moving Rover Launches National Ad Campaign Starring Man’s Best Friend

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Working Geek: Madrona’s Growth Guru Ryan Metzger Uses Data to Stay Organized at Work and at Home

Working Geek is a regular feature on GeekWire that profiles technology and business leaders, offering tips, tricks and insights into how busy professionals get work done.


Madrona Venture Group’s Ryan Metzger is a diehard Seattle sports fan. (Madrona Photo)

As Madrona Venture Group’s in-house growth advisor, Ryan Metzger supports more than 60 companies at any given time.

He’s also a father of two, a runner, hiker, and avid sports fan. So how does he keep it all in balance? By relying on data.

A combination of health-tracking apps and productivity tools help Metzger stay focused on his goals in and out of the office.

At Madrona, he helps startups scale by offering marketing advice and customer data.

“How I help companies depends on their stage and their target customer. It could mean helping a company understand the value of different customer cohorts, getting a new marketing program up and running, or connecting a marketing lead with people and partners relevant to their business,” he said.

Before he joined Madrona, Metzger worked in customer acquisition and product roles at Zulily, Microsoft, Google, and Blue Nile.

“Some of the advice I give comes from my past, but I also stay current by learning from others who are executing well in a particular area,” he said.

We caught up with Metzger for this installment of Working Geek, a regular GeekWire feature. Continue reading for his answers to our questionnaire.

Current Location: “Downtown Seattle, Wells Fargo building, 34th floor. Views are nice, but it also has Seattle’s best sandwich shop in our lobby. My wife, Erin, oversees product there so please pass along any feedback on what you’d like to see in their summer seasonal.”

Computer types: “Windows 10 PC. Sometimes I have Mac envy since most people here and at startups use them, but I’m sticking with Windows. I sometimes get deep into Excel and the Mac version has let me down before. I also grew up not far from Redmond so have a little extra hometown pride that should keep me using Windows for the foreseeable future.”

Mobile devices: “iPhone 6S and Kindle.”

Favorite apps, cloud services and software tools: “Microsoft Office, Smartsheet, Airtable, Waze, Twitter, Slack, Spotify and Feedly. That last one doesn’t get much mention in these columns, but I still use RSS to keep up-to-date on the latest developments.”

Describe your workspace. Why does it work for you? “When I’m at Madrona I work from an office, but more often I’m out meeting with companies either at their office or at a coffee shop nearby. My current favorite is Slate on 2nd Ave near the Smith Tower. If you see me there and want to chat about the latest NBA/NHL arena development or growth strategies of your startup, please say hello!”

Your best advice for managing everyday work and life? “In both work and life, I try to use data to make sure I’m staying on track as it relates to my goals.

At home, it’s important to me to stay healthy so food and exercise logs have been good ways to make sure I’m eating right and staying active. A few years ago, I ran some experiments in those areas and wrote about what I learned here.

At work, I support over 60 companies, so I sometimes look at data on who I’m meeting with and who I’m emailing to make sure I’m balancing my time across the people and activities where I can have the biggest impact. I also seek out projects that can apply to multiple companies so that I’m getting leverage out of my role.”

Your preferred social network? How do you use it for business/work? “Social networks are critical to marketing these days so I keep tabs on all of them, but if forced to choose I’d say Facebook. It’s a place where nearly every consumer brand is active so I take a lot of screenshots when I see a marketer doing something unique. Lately, I’ve been in the crosshairs of Stitch Fix Men and they’ve been throwing everything but the kitchen sink at me. I’ve been served video ads, canvas ads, images of people wearing clothes, and images of clothes laid out flat. I’ve not yet signed up, but have been impressed with how they’ve been executing!”

Current number of unanswered emails in your inbox? “9. I’m writing this in the morning and going through emails is one of the first things I try to do. The number was quite a bit larger a few hours ago.”

How do you run meetings? “I don’t run as many meetings as I once did now that I’m in an advisory role instead of managing a team. Most of the meetings I’m involved in today are ones where I am trying to be as helpful as possible to marketing or growth leads at startups. I come prepared to these meetings with a few ideas, but the form they take depends on who I am meeting with and what they are focused on.”

Everyday work uniform? “Button down shirt, khakis or jeans. Unless it’s the day of an important Seattle sports event. Then I’ll tap into my extensive jersey collection and support the home team.”

How do you make time for family? “Weeknights between 6 and 8 p.m. is my main time to spend with my wife and two kids and I try to be off phone and email then. Weekends are also important for family time and you’ll often find us out on a walk together or at a local park.”

Some of Metzger’s sports memorabilia.

Best stress reliever? How do you unplug? “Being in the stands at Century Link or Safeco Field cheering on the home teams. I’m a native Seattlite so have lived through the ups and (more often) downs of the Seahawks, Mariners, Sounders and Sonics over the years. A few times a year I really unplug and tailgate for Seahawks games where I’m the guy who goes out of his way to make food related to the opposing team’s city. Next year’s schedule doesn’t have too many great opportunities, but there may be some Philly Cheesesteaks being served along Utah Ave that you won’t want to miss.”

What are you listening to? “Ben Harper, Pearl Jam, Guster, Pat McGee Band. I once read that people stop discovering new music in their 30s and those are all from my college days so it seems to be true with me!”

Daily reads? Favorite sites and newsletters? “Mattermark Daily and their growth-focused newsletter Raise the Bar, Growth Hackers (though I don’t like that terminology), GeekWire, Recode, Stratechery by Ben Thompson, Venture Pulse.”

Book on your nightstand (or e-reader)?Competing Against Luck: The Story of Innovation and Customer Choice by Clayton Christensen. I was a big fan of The Innovator’s Dilemma by the same author and was excited to hear what he had to say about generating new ideas. I’m halfway through and have already jotted down a few applications of his ideas that I’m excited to share with a few startups.”

Night owl or early riser? What are your sleep patterns? “Some of each. Pre-kids I was more of a night owl, but they are doing their best to turn me into an early riser.”

Where do you get your best ideas? “My best ideas come when I am outside going for a run or on a hike. Being outside removes distractions and helps me focus. It’s common that I’ll come back with a few new marketing ideas to share or even a new business that I may want to start or seek out.”

Whose work style would you want to learn more about or emulate? “This might be a surprise coming from a lifelong Seahawks fan, but former 49ers coach Bill Walsh. His teams were dominating when I first started following the NFL, but I didn’t truly appreciate how they got there until I read his book The Score Takes Care of Itself: My Philosophy of Leadership. Though I’ll never be a football coach, I still took away many lessons on preparation, teaching, and leadership that apply as much to the business world as they do to the football field.”

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Snowflake Cloud Data Warehouse Startup Raises $100M; Madrona’s Role Reunites Ex-Microsoft Execs

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Snowflake, a Cloud Native Data Warehouse and Our Newest Investment

Today we are announcing our investment in Snowflake. Snowflake is a cloud native data warehouse. Data warehouses have been used for years to store and analyze, not surprisingly, huge amounts of data. Over the past 5-10 years with the explosion of data and the rise of analytics & insights that this data provides, these stores have grown massively and are getting tougher and tougher to scale and manage in a cost-effective way. We are excited to back a company that embraced and leveraged the potential of cloud infrastructure from the start and is rapidly ramping their capabilities to meet the demands of enterprise cloud computing.

This investment is different from Madrona’s core strategy of investing at an early-stage in Pacific NW based companies. The company is later stage and is primarily based in Silicon Valley. But this company fits other Madrona criteria – the huge and growing secular shift to enterprise cloud computing, an A+ team with ties to Seattle and product and customer leadership in the emerging cloud data warehouse market. But even given this, why Snowflake?

Two of the massive computing trends we actively follow for investments are –  the movement of enterprise computing and workloads to the cloud and the development of intelligent applications that make use of data through ML/AI and continuous learning. Both of these require and deal with massive amounts of data. For all the progress that we have made on these trends, we are still in the early phases of this tectonic computing shift – especially for enterprise customers. Many of the previous attempts to make enterprise applications available in the cloud have simply been a reworking of legacy applications, as opposed to cloud native design. We are seeing more technologies that are being designed and built ground-up to be cloud native. That’s exactly what Snowflake did for the world of data warehousing.

Benoit Dageville (co-Founder and CTO) and Thierry Cruanes (co-Founder and architect) came with a rich set of database experiences from Oracle, and they were joined by Bob Muglia as CEO in 2014. Bob is a very accomplished enterprise software and business leader, having spent more than 20 years at Microsoft including running Microsoft’s $16B Server and Tools business. Under Bob’s leadership, Microsoft grew several different multi-billion dollar businesses. Soma has had the opportunity to work for and with Bob over the years at Microsoft and everyone at Madrona sees Bob as a world-class leader. All this experience, expertise and background make Bob the ideal leader for Snowflake. We are really excited about this team and think they are the ones to create a meaningful new business in this industry.

Snowflake is a data warehouse designed and architected for the cloud. It is the first data warehouse built specifically to run in the cloud, and offers a range of performance, concurrency, scale and infrastructure management benefits which legacy, on-premises and cloud data platforms were not designed for. This allows Snowflake to achieve better database performance, respond to higher volumes of concurrent queries without performance degradation, and provide a simpler ongoing SaaS model without infrastructure maintenance – all with an outstanding price/performance characteristic.

Despite only being about 4 years into development, a recent GigaOm analyst report (http://info.snowflake.net/rs/252-RFO-227/images/GigaOm-sector-roadmap-cloud-analytic-databases-2017.pdf) ranked Snowflake as the top cloud analytics database ahead of Google BigQuery, Teradata, Azure Data Warehouse and AWS Redshift. While these other solutions can be a good fit in certain situations, we see Snowflake as a long-term leader in this massive market with its cloud-first technology and cross cloud platform potential.

Source: GigaOm

Snowflake is building a team in Bellevue given the cloud and big data talent that is available in this region. The combination of a world-class proven team, the focus on a cloud-native solution and the potential to be a leader in a massive cloud data warehousing and analytics market are the main reasons we decided to invest and participate in the Snowflake journey. Snowflake is built on Amazon Web Services (AWS) and there is a good partnership and collaboration between Snowflake and AWS. We look forward to being a valuable resource on that partnership given our long history working with AWS. In addition, we are excited to partner with Bob and team and help them build Snowflake’s presence here in the region and around the world.

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Rover Acquires DogVacay, Its Biggest Competitor in the Online Dog-sitting Marketplace

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Welcome to Alice Ryder and Maria Karaivanova – New Madrona Team Members

Today we are announcing two new team members at Madrona. Alice Ryder is our new head of Investor Relations and Business Development and Maria Karaivanova is joining as a Principal. Each of them brings a wealth of experience to the firm that will translate directly to helping portfolio companies succeed, and contribute to the Seattle Innovation Ecosystem.

We first met Maria more than five years ago, and we were continually impressed with her deep network and knowledge of technology companies and trends. She started her career at Boeing and then moved onto Intel and Intel Capital where she got a taste of venture investing. After five years of helping to build and scale highly successful cloud security company, Cloudflare, in San Francisco, she is returning to Seattle to bring her many talents to Madrona. She is particularly interested in investing in enterprise cloud, security and infrastructure. We are excited to have her on board!

Alice worked side by side with Hope Cochran, our new Venture Partner, on growing very successful businesses in wireless, Clearwire, and in gaming, King Digital. She ran Investor Relations at those companies and previously held similar roles at Expedia and Nextel. Throughout her career, Alice has had a broad role in building strategic business relationships, and we are thrilled to have her talents in both IR and Biz Dev to deploy for our companies. She will continue to build Madrona’s program to connect CEOs, CIOs and CTOs of larger companies with portfolio companies to foster partnerships, customer relationships and strategic advisory.

Please join us in welcoming Maria and Alice! Below is a press release we issued today.


Madrona Venture Group Announces Two New Investment Professionals

Maria Karaivanova Joins as Principal and Alice Ryder as Director of Investor Relations and Business Development

SEATTLE, WA – March 20, 2017 – Madrona Venture Group, an early-stage venture capital firm, announced today two new additions to the team. Maria Karaivanova is joining Madrona as a Principal focused on sourcing and evaluating new investment opportunities, working with portfolio companies to explore and evaluate business strategies and developing investment themes for the firm. Alice Ryder is joining as Director of Investor Relations and Business Development and will work with Madrona’s investors, as well as continue to develop Madrona’s program for connecting C-level executives with portfolio companies for partnerships, customer relationships and advisory roles. Each brings a deep background of business, technology and finance experience to the firm, and has helped rapidly scale very successful businesses like Cloudflare, King Digital and Clearwire.

“Both Maria and Alice embody what we look for at Madrona, experts in their field who have a passion for working effectively with entrepreneurs and innovative ideas,” said Tim Porter, managing director, Madrona. “While they have been on board just a short time, each of them has already made meaningful contributions, and we are looking forward to working together in the coming years.”

Maria has nearly a decade of deep technology experience, garnered through roles at some of the world’s leading technology companies, including Cloudflare, Intel and Boeing. Maria comes to Madrona after five years as head of business development and an executive team member at Cloudflare, a San Francisco-based web performance and security company, where she helped build the company from 25 employees to unicorn status.

While at Cloudflare, Maria built a global ecosystem of over five thousand partners and launched strategic partnerships with Google, Rackspace and other leading cloud platforms, delivering significant revenue and distribution. Prior to Cloudflare, Maria was an investor at Intel Capital with a focus on enterprise technologies and cloud security. She was also part of the Intel-McAfee strategic engagement team helping to integrate security into firmware. Before that, Maria held various positions at Boeing specializing in intellectual property management and international business development for the Chinook, Apache and F-15 programs, and unmanned aircraft. She started her career as an analyst at Citibank.

“Seattle has emerged as the cloud capital of the world and Madrona Venture Group is at the core of its innovation fabric,” commented Maria. “I couldn’t be more excited to work alongside the Madrona team to bring innovative ideas to life across the Pacific Northwest and to support the remarkable entrepreneurs across our portfolio.”

Maria has an MBA from Harvard Business School and a BSBA in Finance with high honors from Saint Louis University. She is a frequent speaker at technology conferences and an occasional angel investor. Maria lives in Seattle with her husband and son.

As Director of Investor Relations, Alice Ryder will work with Madrona’s limited partners who have invested nearly $1.3 billion into funds that are more than 85% invested in the Pacific Northwest. Additionally, she will help foster business development by continuing to build out the C-suite program that connects CIOs, CTOs and CEOs with Madrona portfolio companies. Through this program over the past two years, portfolio companies have engaged new customers and made valuable partnerships with national brand name companies. Alice comes to this role with a strong background in finance and partnerships, built over 10 years in companies representing a diverse set of businesses in the technology industry.

Alice was most recently VP of Investor Relations at King Digital Entertainment, the maker of Candy Crush and other successful mobile games, where she helped ready the company for its IPO and worked closely with King’s global investor base through its public life, which culminated in a $5.9 billion sale to Activision Blizzard. Prior to King she was VP of Investor Relations for Clearwire. She has also held similar roles at Expedia and Nextel Partners. Alice began her work in technology investing as a banker at Donaldson, Lufkin & Jenrette.

“I’m excited to dive into the world of venture investing which is so important to the continuing growth of the technology industry,” said Alice. “The Pacific NW is full of engineering, entrepreneurial and business talent from wireless to software to infrastructure, and Madrona is at the center of it all. I’m looking forward to working with the team to help create new opportunities for growth in the area.”

Alice holds an MBA from Columbia Business School and a BS in Economics from the Wharton School of the University of Pennsylvania.

About Madrona Venture Group
Madrona (www.madrona.com) has been investing in early-stage technology companies in the Pacific Northwest since 1995 and has been privileged to play a role in some of the region’s most successful technology ventures. The firm invests predominately in seed and Series A rounds across the information technology spectrum, including consumer Internet, commercial software and services, digital media and advertising, networking and cloud computing, and mobile. Madrona manages approximately $1 billion and was an early investor in companies such as Amazon.com, Apptio, Rover.com, and Redfin.

Media Contact: Erika Shaffer, Erika(Replace this parenthesis with the @ sign)madrona.com, 206-972-5514

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Madrona’s 2017 Investment Themes

Every year in March, Madrona wraps up what happened in 2016 and we sit down with our investors to talk about our business – the business of finding and growing the next big Seattle companies. First and foremost, our strategy is to back the best entrepreneurs in the Pacific NW attacking the biggest markets.  But we also overlay this with key themes and trends in the broader technology market.  As part of our annual meeting we present our key investment themes for the year.   Below is a snapshot of what we are focusing on:

Business and Enterprise Evolution to Cloud Native

Tim Porter-Madrona-Venture Capital Seattle

Tim Porter

The IT industry is in the early innings of its next massive shift.  The transition to “cloud native” is as big or bigger as the move from PC to mainframes, the adoption of hypervisors, or the creation of public clouds. Cloud native at its core refers to applications or services built in the cloud that are container-packaged, dynamically scheduled, and microservices-oriented. Cloud Native enables all companies to take advantage of the application architectures that were once the province of Google or Facebook.  Companies like Heptio and Shippable are at the forefront of disrupting how IT infrastructure has traditionally been managed with vastly increased agility, computing efficiency, real-time data, and speed.  We firmly believe software that helps applications complete the journey from development on a cloud platform to deployment on different clouds, and running them at scale, will become the backbone of technology infrastructure going forward.  As such, we are interested in meeting more companies that are making it easier to network, secure, monitor, attach storage, and build applications with container-based, microservice architectures.

Intelligent Applications

Customers today demand their software deliver insights that are real-time, nimble, predictive, and prescriptive. To accomplish this, applications must continuously ingest data, increasingly using event-driven architectures, coupled with algorithm-powered data models and machine learning to deliver better service and novel, predictive recommendations. The new generation of intelligent applications will be “trained and predictive” in contrast to the old generation of software programs that were created to be “programmed and predictable.” We believe that intelligent applications which rely on proprietary datasets, event-driven cloud-based architectures, and intuitive multisense interfaces  will unlock new business insights in real-time and disrupt current categories of software.  Investments in intelligent app companies that leverage these trends will likely be our largest area of investment in coming years.

Voice and XR Interfaces for Businesses and Consumers

We believe the shift we are seeing for human computer interactions will be as fundamental as the mouse click was for replacing the command line or touch/text was for the rise of mobile computing.  This shift will be as pertinent for the enterprise as it is for consumers, and in fact will serve to further blur the lines between productivity and social communication.

With voice, we are most excited by companies that can leverage existing platforms such as Alexa to create a tools layer, or build intelligent vertical end-service applications.

In the realm of XR (from VR to AR), we believe this is a long game.  VR will not be an overnight phenomenon, but will play out over the next 5 years as mobile phones become VR capable and, particularly, as truly immersive VR headsets become less expensive and cumbersome. We are committed to this future and are particularly focused on VR/AR technologies that bring the major innovation of “presence” into a shared or social space, as well as “picks-and-shovels” technology that are needed by the XR community now to start the building process now even in advance of a largescale install base of headsets.

Vertical Market Applications that use proprietary data sets and ML/AI

As algorithms continue to become more accessible by way of access to open-source libraries and platforms such as the one our portfolio company, Algorithmia, provides, we believe that proprietary data will be the bottleneck for intelligent apps. Companies and products with ML at their core must figure out how to acquire, augment, and clean proprietary, workable data sets to train the machine learning models.  We are excited about the companies with these data sets, as well as companies, such as Mighty AI,  that help build these data sets or work with companies to help them leverage their proprietary data to deliver business value.

 One area where we see this is happening is when ML/AI and proprietary data is applied to intelligent apps in vertical markets.  Vertical market focus allows companies to amass rich data sets and domain expertise at a far faster pace than companies building software that tries to be omni-intelligent, providing both product and go-to-market advantage.  Most industry verticals are ripe for this innovation, but several stand out including manufacturing, healthcare, insurance/financial services, energy, and food/agriculture. 

AI, IoT and Edge Computing

Linda Lian

IoT can be an ambiguous term, but fundamentally we see the explosion of devices connected to the Internet creating an environment where enterprise decision-making and consumer quotidian life will be crucially dependent on real-time data processing, analytics, and shorter response times even in areas where connectivity may be inconsistent.  Real time response is crucial to success and is difficult to meet in the centralized, cloud-based model of today.  For example, instant communications between autonomous vehicles cannot afford to be dependent on internet access or the latency of connecting to a cloud server and back.   Edge computing technologies hope to solve this by bringing the power of cloud computing to the source of where data is generated.  We are particularly committed to companies building technologies that are focused on solving how to bring AI, deep learning, machine vision, speech recognition, and other compute-heavy services to resource-constrained and portable devices and improve communication between them.

Another facet of IoT where we continue to have investment interest is new vertical devices for consumer (home, vehicle, wearable, retail), healthcare, and industrial infrastructure (electrical grid, water, public safety), along with enabling supporting infrastructure.  Opportunities persist for networking solutions that improve access, range, power, discoverability, cost, and flexibility of edge devices and systems management that provide enhanced security, control, and privacy.

Commerce Experiences that Bridge Digital to Physical

Retail is in a state of flux and technologies are disrupting traditional models in more ways than e-commerce.  First, physical retail isn’t going away, but it has a fresh new look. 85% of shoppers say they prefer shopping in stores due to a variety of factors including seeing the product and the social aspect. This has led the new generation of web-native brands such as Indochino, Warby Parker, Glossier and Bonobos to open stores – but they are very different, carrying little physical inventory and geared towards intimacy with customers and helping find the right product for the buyer.

Second, the decreasing cost of IoT hardware technologies such as Impinj’s RFID, advancements in distributed computing, and intelligent software such as computer vision will fundamentally alter physical retail experiences. Experiments are already underway at Amazon Go where shoppers can pick what they want and casually stroll out without waiting in a check-out line.

Within e-commerce, vertically integrated, direct-to-consumer models remain viable and compelling. They bypass costly distribution channels and can build strong brands and intimate customer experiences like Dollar Shave Club, Blue Apron, or Stitch Fix. Marketplaces that leverage underutilized resources or assets; or the technology that underlies these marketplaces remain relevant and compelling particularly for the millennial generation that prioritize access over ownership. 

Security and Data Privacy

While certain security categories have been massively over-funded, new investment opportunities continue to arise.  Security and data privacy are areas of massive concern for businesses, particularly in the current macro environment.  Internally, enterprises demand full visibility, remediation tools, and monitoring capabilities to guard against increasingly sophisticated attacks. Particularly vulnerable are companies that house massive amounts of customer data such as financial services, big retailers, healthcare, and the government. Externally, the collection and analysis of massive amounts of real-time consumer behavioral and personal data is the bread and butter of sales, marketing, and product efforts. But new privacy laws in the US and imminent from the EU are creating heightened awareness of both the control and security of this data.  We continue to be interested in companies and technologies that take novel approaches to protecting consumer data and helping corporations and organizations protect their assets.  

Technologies Supporting Autonomous Vehicles

Transportation technology is experiencing a massive disruption. Autonomous driving will be the biggest innovation in automobiles since the invention of the car, impacting suppliers, car makers, ridesharing, and everything in between.  Lines are blurring between manufacturer and technology provider.  We believe the value creation in AVs will, not surprisingly, shift to software, and the data that makes it intelligent.  More innovation is required in areas such as computer vision and control systems.  Important advancements also remain to be made in component technologies such as radar, cameras, and other sensors.  Indeed, there are billions of edge cases due to construction, pedestrians, weather, and a murky regulatory environment that must be ironed out both at the technology and policy level before the promise of AV is a reality.

Additionally, the rise of AV could massively disrupt current modes of car ownership. Fleet and operations management software will become increasingly important as AV transportation-as-a-service becomes more and more tangible.  Software and systems for other vehicles including drones, trucks, and ships will also be huge markets and create new investment opportunities.

Seattle and the PNW are emerging as thought leaders in the area of AV, and we believe a technology center of excellence as well, creating new investment opportunities.  We are deeply interested in all the threads that go into this complex and massive shift in technology, the car industry and in social culture.

Well, there you have it – Madrona’s key investment themes for 2017.  Thanks for reading.  If you are working on a startup in any of these areas – we would love to talk to you.  Please shoot any of us a note – our email addresses are on in our bios on our website.

POSTED IN: Madrona News

100 Demos, 50 Company Pitches & a Year With AR/VR Headsets – What We’ve Learned

We received our first market-ready VR headset at Madrona almost one year ago now, and since then, we have done VR (Vive and Rift) and AR (HoloLens) demos for over 100 people who have stopped by our office to check out the next big computing platform. We have done demos for kids, parents, grandparents, pro football players, elected officials, company executives, gaming enthusiasts, people who never game, and people all over the spectrum from skeptical to extremely excited about VR. We have also participated in over 50 unique VR/AR demos from companies pitching Madrona.

First unboxing.

After all of these demos, it’s interesting to take a look back and think about what consumers’ first reactions to the products and content have been and where we think the companies betting on the future of VR need to go from here. Here are some of the key takeaways from our first year in VR:

The Product

  • It’s here. And it’s awesome. Every person to try on the Vive has been blown away by the level of immersion and the experience of getting transported away to another place. While companies are still debating controllers, tracking, resolutions, and wires, there is no doubt that the technology is now ‘good enough’ for people to feel completely immersed in another world. Seeing someone’s fear of falling off a ledge suspended a few hundred feet above a city when they are in fact just standing on the carpet in your office is incredibly fun and proves that VR is a transformative experience.
  • But not quite awesome enough. Despite the incredible experiences that people are having in VR, consumers are not excited enough to go out and buy headsets. Having done over 100 demos, less than a handful of people were excited enough to go out and spend $600-800 for a VR set up and likely another $1,500 for a capable PC to play with VR at home. Maybe we aren’t selling hardware hard enough at Madrona, but our experience seems consistent with the overall industry, with big companies coming in significantly below their initial 2016 forecasts for hardware sales – for example, Sony cut its 2016 forecast for VR headsets from 2.6M units to 0.75M. Further, we know first-hand how cumbersome it is to update software and firmware in order to quickly and consistently enjoy most VR applications.
  • Companies are earlier adopters of VR and AR than consumers. Nearly every corporate innovation lab has taken the time to create some sort of VR experience. IKEA built a kitchen visualization tool, Ford released an app that allows you to experience what it’s like to be a race car driver, and even SleepNumber built a VR application… to simulate what it feels like to be tired (in case you haven’t felt that before!). One of our favorite applications of VR is Redfin’s house tours that allow a potential home buyer to explore a house in VR before making a purchase. We are also seeing early adoption of Hololens AR technology and demos especially in health care, financial services, and various forms of design.  Companies are seeing the huge potential of VR and AR and quickly trying to determine what works and what doesn’t to advance their business objectives.

Redfin.

The Market

  • The first killer app will be social.The VR (and potentially “mixed reality”) apps that people will spend the most time in will be social. Humans have an innate desire to be social, and tools for communication are incredibly valuable – just look at Facebook, Instagram, Snapchat, WhatsApp, Skype, and Slack. Additionally, VR is a platform that is particularly well-suited for communication given the level of immersion you can experience when talking to other people. Early examples of companies with compelling social VR capabilities include Against Gravity’s Rec Room, BigBox’s Smashbox and Pluto VR’s general, mixed reality communications service.

  • Wow – Kids!if there is one thing that has been the most remarkable to watch — it’s how easily children pick up VR controllers and start flying around virtual worlds (before quickly asking if they can play Minecraft in VR). We know some kids who have spent dozens of hours playing social VR games like dodgeball and charades. The level of comfort and intuition that children have for navigating new technologies is incredible, and they will likely be able to imagine new ways to use VR that the current generation of developers haven’t even considered yet. Interestingly, the younger folks who try both AR and VR tend to be more interested in VR while older folks see more commercial promise in AR.

Onsite at Madrona.

  • Learning from Asia and 21stCentury “Arcades” – The US is way behind China for VR adoption, and we are seeing significantly more adoption in the Asian market through malls, theme parks, karaoke bars, and gaming cafes – not to mention the number of manufacturers of simple smartphone headset adapters that allow for a low-end mobile VR experience. We believe in the short to medium term that 21st Century VR Arcades will emerge around the world with the early learnings coming primarily from Asia. HTC is treating the China VR market as its first priority even though it is partnered with Valve on the Vive, and Tencent has begun producing VR movies. US-based VR companies are looking to learn from the Chinese experience, and they are also looking towards Asian investors to fund VR companies, as a large proportion of VR investments have been led by Asian investors. In fact, a recent CB Insights report showed that China-based investors participated in 21% of all AR/VR deals last year, including Magic Leap’s $794M Series C (Alibaba) and NextVR’s $80M Series B (5 Chinese investors).

    Looking Forward

  • Companies and investors are waiting for a big breakthrough.Perhaps it will be Apple’s first foray into AR/VR, maybe it’s mass adoption of the Google Daydream, or maybe it’s a wild success in Snapchat spectacles, but until there is a bigger user base, AR/VR companies will not be making a lot of money. Monetization is tricky, and with the exception of some early wins in indie games, companies do not have a lot of room to experiment with business models to grow their businesses. Even what is arguably the first “hit” of the AR world, Pokemon Go, required a beloved set of content to help create a global phenomenon. That makes it important for early-stage VR and AR companies to ensure they have a plan to survive and continue developing great products until the early majority are more easily able to try VR/AR experiences.

  • VR/AR signal a new era of human-computer interaction.Traditional text interfaces and GUIs force people to interact with data and applications in a way that makes sense to computers. VR and AR are new, natural user interfaces that will allow people to interact with technology in the same way that people interact with the physical world. That means using voice, vision, and gestures to interact with computing and content.  Think about how difficult it is to remember the positions of 100 different files on a shared drive and how comparatively easy it would be to say “show me the document from last week’s meeting with Sally” and have it appear in augmented reality. This will allow us to build new apps that take advantage of the ways that our brains work and interface with both the digital and physical worlds.

    YouTube, Microsoft Hololens. Source: https://www.youtube.com/watch?v=SKpKlh1-en0

    We are incredibly excited to see what happens in the next 3-5 years in the virtual and augmented reality market. Already, we are seeing great examples of profitable businesses creating VR demos of buildings before they are built, so developers can sell real estate before prospects can walk through the space. We are also seeing partnerships with groups like Microsoft, Case Western Reserve University, and the Cleveland Clinic where a medical student can put on a HoloLens with 10 of her classmates to walk around and examine the different pieces of human heart in 3D space to gain completely new insights on how the heart really works.

    As we look towards the technologies that will affect humanity the most over the next decade, we firmly believe augmented and virtual reality will change the way we work, play, and live.

    Madrona is an investor in Redfin.

    A version of this post originally appeared on VentureBeat.

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