News & Views

 

OctoML Raises $15M to Make Optimizing ML Models Easier

POSTED IN: Portfolio Company News

Ask The Expert: Tim Porter, Managing Director, Madrona Venture Group

POSTED IN: Portfolio Company News

Seattle Tech, Business, Sports Heavyweights Raise $27M for COVID-19 Community Support Fund, Call on Others to Join

POSTED IN: Portfolio Company News

Washington State Authorizes Mobile Fueling; Legislator Calls it ‘Timely’ as Residents Practice Social Distancing

POSTED IN: Portfolio Company News

Founded and Funded: Building an Open Source Business from Scratch with Eric Rudder and Joe Duffy of Pulumi

This week we are publishing a non-covid related podcast – recorded before Seattle was hit hard. We hope it provides some relief! We are also prepping some great podcasts that deal directly with how founders and people are managing through this time – and looking to the future. Stay tuned for those!

A few quarantine essentials: Non-perishable food items, toilet paper and the Founded and Funded podcast. Founded and Funded is back with Episode 5 of Season 2. In this Episode, Madrona managing director, S. Somasegar sits down with the founders of Pulumi, Eric Rudder and Joe Duffy.

During their time at Microsoft, Eric and Joe found the most joy in building something from nothing in the form of one-off products. Along their journeys, they paid very close attention industry inflection points which helped time the perfect jump. However, before they could take a bet on their idea, they had to take a bet on each other as co-founders.

Listen in on their conversation as they chat about the time they spent together working at Microsoft, the promise of open source technology, and their experience building a company that empowers both its employees and its customers. Looking for insight on how to time your leap into entrepreneurship? We have that too!

Full Transcript

Erika

Welcome to founded and funded. This is Erika Shaffer from Madrona Venture Group. Today we’re going to hear from Eric Rudder, and Joe Duffy, who are the founders of Pulumi. Pulumi helps developers create, deploy and manage modern cloud infrastructure. They speak with Soma, about their time at Microsoft, where they all worked together and knew each other and how they are applying what they learned there to startup life. This was recorded before the onset of the Covid-19 crisis. So it has a little bit of a light hearted tone. I hope you enjoy it. Listen on.

Soma

It’s really an exciting opportunity to get a chat with a couple of people that I’ve known for many, many years and I’ve had a chance to have the opportunity in the past. Religion to work together over the years. I’m Soma Somasegar, a managing director here at Madrona Venture Group. And let me have Eric and Joe introduce themselves.

Joe

My name is Joe Duffy, I’m founder and CEO of Pulumi. Me prior to this, I, you know, I was at Microsoft, where I got the privilege of working with so Maya and Eric, for many years, really fired up about developers making developers productive and really excited about what’s going on in the cloud. And that’s kind of why we started Pulumi. And I’m excited to be here and kind of tell tell the story of the journey.

Eric

And I’m Eric Rudder, founder and chairman of Pulumi. I’m equally excited. I think at Microsoft we used to say super excited. So I’m super excited to be here. And I think we’ll have some fun today.

Soma

Great. You guys have had a very successful career at Microsoft. You were there for sort of many, many years, couple of decades. And Joe, you’ve been there for 12-13 years of Microsoft very accomplished, very successful. What made you guys decide to say like, Hey, I’m going to sort of give up all that goodness and safety and get in get to be an entrepreneur and start the entrepreneurial journey with Pulumi

Joe

That story like, for me, I actually started my career. Actually, when I was in high school, I kind of started a little consulting business where I was helping companies get to the internet. And that gave me exposure to kind of some of the sales and marketing and customer relationship parts of a business, you really need to think about making a profit and making customers happy. And so I actually looked at starting a company before coming to Microsoft, and then the opportunity to come to Microsoft arose and I knew, hey, I’m gonna get to work with the best people in the industry. I’m gonna learn so much. I figured I’d say for three years and then go start a company. And every year I asked Is this the year and turns out 12 years passed quicker than I could realize seeing things at scale, seeing innovation at a company like Microsoft is just completely leagues beyond what you see typically, you know, in most companies, and frankly, I would have met some I would have met Eric if I if I didn’t do that. So, really, to me, I just wanted to get connected to the customer. You know, I felt like a big company is great. There’s lots of funding to do really innovative, new bold bets. But really the appeal for me of a business is it’s a meritocracy of business. The idea succeeds because people pay money because it, it delivers value to them. And so that that economics aspect to me was always fascinating. That’s been the biggest learning curve after leaving Microsoft as well as you know, hey, you’re thrown into business and customers and sales and marketing and finance. And that’s been, for me the best part of the journey so far.

Eric

I think my journey is probably similar to Joe in high school, I was actually a manager in a hardware store, Max matching swatches of sofa fabric to custom paint colors, and getting people the right size of lumber. So I guess you’d say both of us have helped people build things from a very early age, but I want to but at Microsoft, kind of on a lark, and as a great career, I got to do lots of different things there. I got to, you know, work on developer tools. I got to work on research, I got to run, you know, Business Development at the company. And it was a great experience great people always, at its core, Microsoft’s been a developer Led company in terms of its culture and audience and products, and kind of went through the typical, you know, kids out of the house empty nest thing you always look at, you know what I want to do with, you know, my next 20 years of career and it’s always a challenge to build something from nothing and get Microsoft, you know that I had the most fun and the most joy, literally building one Oh, products versus taking a product from 7o to 8o. Not that they’re, you know, aren’t the features that I’d like to add to PowerPoint for their next version. But it’s always more excited to establish a product or establish a category, you know, the opportunity was just too great. We kind of started the company. At a time when every application was becoming a cloud application, it was clear that a lot of the tooling was geared towards, you know, sort of the previous generation of products and we’re just starting to get towards, you know, modern container infrastructure, modern computing infrastructure, you know, multi cloud, you know, many cloud connecting data sources, and it was just clear we were at the right inflection point to go do something. I’m old enough I’ve watched the inflection points, but I’ve seen the inflection points from character to graphical. I saw the inflection point from client base to client server. I saw the inflection from client server to internet. You know, once the industry was closed on cloud native, I was like, Okay, this time, I’m going to lead from a different perspective rather than Microsoft and Joe and I just started hacking away in his basement, literally, as we call the winery, since Joe’s hobbies is making wine. So it’s a big wine barrel down there. And we just started working together and it’s been a great ride ever since.

Soma

You know, one of the things that entrepreneurs always say is like, Hey, there are a lot of critical positions that they ever make day in and day out. But one core fundamental decision that they have to make earlier on is who their co-founders are going to be. As much as you guys have had the opportunity to work together and get to know each other over the years. How did that decision or ordering the journey come along? Where you decided to take a bet on each other and say, like, Hey, we are going to together co-founder below me?

Joe

I think I you know, I worked with Eric throughout the years at several points. You know, I look back and a lot of my fondest memories Working at Microsoft Word these sort of 1o projects where we work together to build something from nothing. So I had seen that happen before I actually had that experience. And honestly, we did hang out in my basement for starting the company and see, Hey, can we can we build the thing? Can we figure this out? Can we figure out kind of how one plus one equals three? And I think that period really gave us the confidence. Not only was it the right partnership, but also the right opportunity at the right time. So actually, you know, just deciding, hey, we’re going to do this. And frankly, we’re both sort of ready to do it at the same time. That doesn’t happen very often. Right? It was almost like stars aligning that we were both ready to leave Microsoft, which frankly, is kind of a scary thing. You know, you’ve got an established career. You’ve got a network, you’ve got that financial safety, but both of us were at the point in our lives where we’re ready to say to take that leap.

Eric

Yeah, I think you know, for Microsoft, we just literally decided let’s work together and see how it goes. Let’s build something. We built little things that looked at Twitter streams and lit up light bulbs. Joe remembers that.

Joe

I do! During the Superbowl one year detecting who was talking about Beyoncé versus the actual game? Yeah.

Eric

We looked at, you know, doing some infrastructure products together, we looked at doing some Mar tech stack together. And I think Later, we’ll probably talk about how we got to the idea for Pulumi. But it wasn’t that the Pulumi idea was the first thing we just thought I was hated. We enjoy working with each other, and we would, you know, kind of start working in the morning, we literally would, you know, take a break for lunch and cook lunch together. Well, Joe and I are kind of into cooking, and I won’t claim them quite the shift Joe is, but it is a way to see you know, do we enjoy social time together because startup life is sometimes intense and sometimes many hours during the day. And so, you know, we enjoyed spending time with each other and were able to build the solutions we set out to build I think that’s the most important thing is you know, because it’s easy to just ideate and kick stuff around. But we were actually able to build stuff, get stuff done, you know, sort of encourage each other trust each other. And that was hopeful and we were able to take the leap.

Soma

How would you describe what Pulumi is?

Eric

Yeah, I think I’ve said before that all applications are cloud applications. And Pulumi really enables developers, DevOps, DevSecOps, to build better cloud applications faster. You know, when we got started, as I said, we were literally incubating something different. We were kind of working on a Mar tech solution. And we got to the point where we were like, okay, let’s kind of stand this up in the cloud. And let’s see what the state of the art is for provisioning something, giving our customers the power to run it on the cloud that they wanted or on prem. And we found that there wasn’t any tooling to do this. And so you know, the oft quoted Necessity is the mother of invention, really was the thing that got us going to fulfill the need, there was absolutely a need to probably about 30 companies before we actually founded Pulumi or wrote our first line of Pulumi code and there really wasn’t need Pulumi helps people provision, deploy, run, secure their infrastructure, we call it modern infrastructure, as code you Making sure that Devon DevOps can work together. It’s based on the idea of using real programming languages. So people don’t need to learn new specific dsls. They get to use their favorite editors, their favorite tools, their favorite integrations, their favorite package managers, their favorite versioning semantics. And we’re extending it to letting people write rules about policy, security, all these things that people kind of struggle with today, in terms of keeping up you know, Pulumi makes that easy for dev teams,

Joe

Honestly, our backgrounds caused us to take a pretty radically different approach to the space, I think all those years, really obsessing over developer productivity and making developers happy and bringing them joy and making them you know, giving them superpowers, right, that that that was our day job that got us up out of bed every morning, you know, for decades. We brought that same attention to detail that that kind of human care factor of Hey, we want, we want this to be not only productive, safe, secure, we actually want to bring joy to the idea of building cloud software. And so that that idea of really integrating the cloud development experience to the inner development loop is pretty novel. And you know, Pulumi is really, in, you know, a completely different approach than anybody else in the market today. It is open source as well. And that’s really important to us, we see a community and a community is really core to everything that we do with Columbia as well.

Soma

He just reference open source, Joe, you can’t like, you know, think about developers without thinking about open source today. And most companies that sort of do something or other with open source, A, then they start off with like my head, I’m going to observe an open source project, and the project becomes successful Can I think when I let me think about building a company around that, or the other way, which is like, no, hey, I’m building a company, I’m building a product, I’m building a service. And then sometime down the road, I decide that I want to take a piece of what I’m doing and make it open source for all the right reasons, but you guys decided earlier on almost from day one, to take a different approach. You said like a hair. We want to build a commercial entity here. And by the way, because we are focused on building something of huge value to developers, we want to think about our open source strategy. And let’s keep both in mind from day one. How did you guys come to that decision? And how was that journey for you?

Joe

Yeah, we knew from day one, it was really important that, you know, the core of the platform we’re building needs to be open source for a number of reasons. One, it encouraged contributions. It encourages, you know, people just want to understand how it works. It gives people confidence that we’re some part of the company to change, they still got the project, they know the project, they’ve got the source code for the project. It’s table stakes, right? For developers, that core technology they’re using, especially to author your own software needs to be open source. So we knew that going in. The question was, we didn’t want to end up in a situation we see other folks struggling with where they open sourced the business model. They didn’t think of how we’re going to make money. They really focused on community and nothing else, assuming that eventually they’d figure out the monetization strategy. And we see time and time again, it’s not easy. A lot of these companies don’t figure it out. And so we waited longer than we Had to open source until we had figured that out. And it’s interesting. There’s an interest in our Horowitz article that talks about the three waves of open source monetization strategy from taking into selling support as kind of wave one, wave two is really the open core model and wave three, it says, and this came out just a few months ago, but you know, we knew SAS was going to be big, and there was a natural alignment besides the open source technology. So what we did is actually said, Hey, we’re gonna open source, the whole platform, it’s all going to be there. We’re not holding anything back. The thing that we’ll charge for is the SAS. And this is, you know, an increasingly popular approach. It definitely comes with some challenges, but the benefit is from day one. We knew how the business would unfold. We knew how the community interacted with those revenue opportunities.

Soma

Now that it’s been what, two and a half years since we made that decision, are you still feeling great about the decision? Any learnings that you want to share the process?

Eric

Yeah, I think we I think we feel better about the decision every day. I think the other thing Just to build on Joe’s answer, like, we’re also living the lifestyle, right. So as we were bootstrapping our company, we’re benefitting tremendously from open source, right. So we’re a multi platform multi language company. And quite frankly, we could not have done it without leveraging open source contributions of many. So, you know, we often talk about, you know, standing on the shoulders of giants, and we definitely benefited from keep the people who came before us. And it just seemed like the right thing to do, right is to, you know, to contribute back fixes rather than fork and, you know, give credit where credit is due. And that was the great thing for us. The other thing we wanted to do was make sure that we added value as a company immediately to people who were using the open source and so we decided to provision a service and more probably a free service. So even if you’re just using illuminate casually from the open source distro, you could connect it to the Pulumi service for free and continue to give back to the community and to kind of nurture them along and for To discover, you know, what was unique about the commercial part of polygamy is no question. It’s a it’s a tough boundary between deciding what’s in the, you know, the free version and what’s in the premium version. And we’re absolutely tried to build a business and the maturity thing, but we made a fundamental decision that know the core value proposition of Pulumi is going to be open source, we were going to continue to support the community, encourage community contributions and be good members of the open source community in the large and that’s been a great founding decision. Honestly.

Joe

I’d say the one other just lesson learned to add was, I think it is really important to be clear upfront with your community, that here’s what we’re doing, and here’s why we’re doing it. And you know, I remember the day we launched the commercial edition of ourselves and in the community Slack, we had heart emojis and you know, celebration emojis and like the community actually is rooting for you provided you are open and honest about what you’re trying to do and why you’re doing it and the community wants you to have a system business because they enjoy the open source project you’re building. And they want that to be funded for many, many years to come. And so you’ll actually find if you’re open about where that boundary is and why people are super supportive,

Soma

Joe, you enter sort of one of the earlier problems of open source of Microsoft. And one of the big decisions that we made many years ago, Microsoft rose to open source dotnet framework. Tell me a little bit about that.

Joe

You know, I was in the windows organization and one of the goals was to modernize the engineering systems and try to work a little bit more like open source technologies, being able to use components in the open source, one of the challenges of proprietary sources, you’re always reinventing the wheel, you’re always creating solutions to problems that people have already solved and, and so we’re looking at ways to embrace that inside internally and actually share across the company as well have this notion of we used to call it internal open source which was unlock collaboration across all of Microsoft. So no matter where you are, you can contribute whether it’s a bug fix or feature recommendation or whether you’re just trying to apply you know, security standards across Company try to unlock that. So I had that coming into Dev. And someone asked me to start this project. And to be honest, I was flabbergasted that we were going to do that and super excited to start. And the thing that was amazing was more of a cultural transformation within the company than it was even a technology one, I remember, my team’s PC renewal was coming up. So people had to get new laptops, and I kind of said, Hey, 50% of the people in the team are gonna get Mac books, they have to give up their windows laptops. And I can’t tell you the number of people that came to me said, Wow, did you know almost everything we work on? If you have a Mac Book? is it relevant to you? And that most people doing development these days use Mac books. That means most of what we’re working on doesn’t apply to most developers. And so it was just like, really rejuvenated the team. There’s a Renaissance and, and I see now just years later, the impact that had on the entire culture across all of Microsoft was just super transformative. So is the human part actually, it turned out to be the best part of that, that whole journey.

Soma

It’s been what not to go into fields also since we started Pulumi Every day is a sort of a new day as an entrepreneur, what are some of the key learnings that you guys have had as part of the Pulumi journey in the last couple of years that you think other entrepreneurs would love to hear from your experiences?

Joe

So one for me is change is the one constant, my job changes month over month, you know, we’re a little bit further along now. So it’s, I would say things have settled a little bit, the roles and responsibilities settle a little bit as you as you hire people into functions. But in the early days, you’re doing a little bit of finance, a little bit of product, a little bit of coding, and frankly, I was coding very well into the journey, even when we had customers and doing marketing. And, I mean, you have to wear a lot of hats. And you have to be comfortable with the idea that how you spend your time next month is going to be very different than how you spend time this month.

Eric

For me it was probably I was fortunate to meet Colin Powell, one of his favorite sayings is a positive attitude is a force multiplier. When you talk about good days and bad days or you know some things go your way and some things don’t. It’s tough when things don’t, right. You’re young company. No one’s ever heard of you. You know, it’s  hard to open a bank account, it’s hard to raise capital, it’s hard to get an internet connection at the right speed, it’s hard to find a real estate place to work at a reasonable rate. It’s hard to hire versus big companies yet, you know, that core belief in that, you know, hey, there really is a market need for what we’re doing. We believe in it. We believe in the product, we believe in the community. You know, we believe in the opportunity, that enthusiasm is infectious. There’s times you just need to suspend disbelief, and go forward and take that leap. You know, and I get to, you know, lots of credit for, you know, having that blind faith and, and, you know, leading us forward, I think that’s the thing that you can never underestimate in terms of just staying positive. And just reflecting on these, you know, one or two things may not have gone well, but look at all that we have accomplished. Both Joe and I by personality are not the greatest in the world at stopping and celebrating what we’ve accomplished in the week. I think both of us are much more likely in our status reports to write the low light section before we write the highlight section and yet don’t minimize what you accomplish in terms of getting good You’re just this decision to take the leap to lead the company to start your own thing to build the first version, you know, the, all these famous quotes about, oh, you should be ashamed of your first version or you know, they’re all true. And yet just having the belief overall, we’re going to do it, we’re going to succeed, people build off that people feed off that your customers feed off that your partner’s feed off that your employees feed off that it’s a super important thing to do. And I take away that learning I think I’ve internalized by doing a startup.

Joe

But we were talking about one plus one equals three kind of thing. I mean, that is something that Eric does have to remind me about. And so I’m super happy he does because it’s really important. You know, you have these people that believe in the vision, they believe in the company and things aren’t always rosy. But you have to figure out a way to celebrate those successes, no matter how small to keep people kind of pointing in the right direction and feeling inspired feeling like yeah, last week, we had a few setbacks, but you know what, we’re gonna, we’re going to do this thing and I still believe and that it’s tough as a founder because you’re, you’re definitely shouldering a lot of these burdens. Like the final financing you want to share, because employees want to know kind of, if things aren’t going well, you don’t want to hide that from people, but you have to frame it in an appropriate way. And that’s definitely a challenge. But it’s very important.

Soma

If I’m looking at it from the lens of you know, hey, I would love to learn from any mistakes that Joe and Eric have made other things that you wish you had done differently.

Joe

Yeah, so one that stands out is a mistake that I frequently make that Eric frequently corrects me. Which is, there’s this notion, especially if you’re building a venture backed business, that you need to be a quote, hyperscale company, right? You have to, it has to be up into the right all the time, you can never fall short of 10xing the growth or, you know, crazy, crazy growth metrics. And it’s really easy to get caught up and looking at survivorship bias of, well, this this great company over here, lift to you know, grew, you know, 10X year over year for the first three years, you know, so if we don’t do that we’re a failure. I think the real key thing is to be intentional and focus on what matters. There’s a lot of value Any metrics that people kind of get caught up in and really having that slow, steady growth and being responsible about how you’re funding that growth, so that you actually do measure return on investment. Like, if you’re not 10xing your growth, it’s easy to think that money will solve the problem, right? hire more people do more PR do more expensive events. And the reality is until you have that solid foundation, trying to scale too quickly, just it’s not gonna work. And it’s a quick way to run out of money, frankly.

Eric

Get annoyed, I’d say the so we talked about like Joe and I working together in his basement for awhile we probably worked on and off in your basement and my dining room table for what for about six months, I’d say we should have worked together for about two months. We talked about you know, taking the leap and how tough it is to take the leap. The opportunities out there are tremendous Do it Do I wish we got started four months earlier only when I think about it, which is only every day, you know, because you look at these growth modes and they’re  all compounding right. And so if we had, you know, an extra four months in our pocket, you think about all the employees you could have hired, you know, A lot of these things are timing based and you know, the opportunities. We missed a few people, they decided to either re up their current companies or go to other startups or start their own companies. I think we knew early on that the opportunity was big, even if we weren’t sure exactly how we were going to pursue it. Like we knew early on that we were able to work together, in part because we had a shared work history. I think we were lucky, we had friends from the outside sort of encouraging us to take the leap.

Soma

You know, as entrepreneurs, when you think about success of the company, in this case, success blew me. There’s all these sort of what I call financial and customer metrics that you can talk about. But for you guys, personally, how would you define success for you, Joe, for you, Eric?

Joe

when we started the company, we knew we wanted to build a business, right? We want to build a great company, we want to build a business that, you know, could become profitable. The point of businesses, you know, you fund the business eventually actually makes money. Right. And I think that, to me is the outcome that we’re seeking is we want to build a sustainable long term business. You know, we could have, especially a lot of tech companies can build the company and with the intent of selling it or having a quick exit, or you can optimize for different things. And for me, that’s the most satisfying outcome is happy customers happy end users sustainable business, because then, you know, we can branch out into other adjacencies that are in this fast growing phase, you know, cloud is here to stay this, this transition that’s changing, the whole industry is just getting started. I really want us to have a business that can be here now solve some problems, but solve those problems in five years and 10 years that are going to just be even bigger than they are today.

Eric

Yeah, I mean, it’s kind of a big question, right. Even before we get started, we’re actually talking about Clay Christensen just passing away and he’s actually got a great essay in Harvard Business Review on sort of how do you define success, who some of them are business metrics, some of them are personal metrics, you know, being a great family member. And then his last one is how do I stay out of jail which is really you know, an ethical consideration. I think in the on the business side, we wanted to build Something of enduring value that really made a contribution right to the industry in terms of helping people write cloud applications, when you look at, you know, still the opportunity out there for the cloud applications that are going to be deployed that are going to change our life and fundamental ways we can be a small part of that. That’s a tremendous contribution. You know, we wanted to create a company with a culture that people enjoyed working out, people felt that their work was rewarded. People felt that they were respected that one of the benefits of starting your own company is you get to start and create your own culture. And I think that’s a that was a tremendous opportunity. Get to pick the people that you hire, what rules you employ. I think we firmly believe in the no assholes rule. You know, these are people that you’re gonna be spending lots of time with on a regular basis. I think we’re off to a great start with Pulumi. We’ve got a great core of folks, we’ve got a great core of community, a great set of customers a great set of values. And you know, the opportunity before us is tremendous. I think that’s the personal front. That’s one set of stuff I can assure you will stay out of jail. And then the other business side, it really is, you know, creating a great company that creates great products and fosters a great environment for employees.

Soma

If you think about like the next, say, three years, or five years or even 10 years, what aspirations do is follow me.

Joe

I mean, for me, I think of every developer on the planet, being empowered to use the best of what the cloud has to offer to build more innovative software and for their company for, for whatever they’re  doing, but really just supercharging their ability to innovate using all these great cloud capabilities that today, frankly, are off limits for many of them. So to me three years, five years, however long it takes to get to that level of scale. You know, every developer when they think I’m building an application, they think, Hey, Pulumi is the way to do that, because it’s the best way to build this application and achieve the intended outcome. And I think honestly, as more people become developers, you’ll see more hobbyists becoming developers, frankly, folks that are growing up now. You know, a lot more of them are learning how to program very early. And so they’re gonna be a lot more developers, the developer segment is continuing to grow. folks that don’t consider themselves developers today will uplevel their skills and learn how to write code and become developers. And so really sort of tapping into that, I think is the opportunity for us.

Eric

Yeah, I think when I walk into one of our customers shops, I want to see every cloud engineer in that environment with Pulumi open and running on their desktop, helping them get their job done faster, helping them build better applications, really helping our customers be more productive.

Soma

You had the choice to design, the company Pulumi wherever you want, and you chose to build it in Seattle. How do you see Seattle as an emerging as a technology as a, you know, innovation as a startup ecosystem? Both over the years and more important in the future?

Eric

Yeah, I mean, I think we chose Seattle mostly for the weather.

Eric

I think we’re on day 45 now of straight rain.

Joe

Great for productivity by the way, you don’t, you don’t have the sun distracting you calling you outside.

Eric

You know, the thing about Pulumi is I think we recognize the opportunity very early on for cloud applications in particular, you know, we sort of touch on cloud infrastructure in many ways. And Seattle is a is an incredible community of cloud talent. I mean, obviously, all the big three cloud giants have strong, you know, representations here, in addition to the other tech companies, you know, sales are a great place to live. It’s a great quality of life. I think that’s what brought us here in the first place. The community is, you know, continuing to grow in its maturity, like, you know, it’s the, you know, it’s one of these things in the industry, where you sort of overestimate what will happen in one year, and underestimate what will happen in three years or five years. When you look back on the tech community 510 years ago, you might argue is a little bit sleepy, it’s vibrant. Now, you know, we’re literally taping this in a tech incubator. There’s bunches of interesting companies that we meet every day, whether it meetups or you know in our own headquarters coaching on how to use Pulumi the talent pool is great, the people is great, the culture is great. And at the same time, I think it was important when we started Pulumi me to embrace sort of the modern work style. And so we do have employees that work remotely. So even though our headquarters is here, we’re very much a modern internet style company, you know, employees in California, Utah and New York, we’ve employees now abroad, and Amsterdam London bath. And so part of it is embracing the worldwide culture, even though Seattle is kind of our home and hub. And I think we’ve really managed to get the best of the local community and the worldwide community and kind of fusing those things together. But we love being in Seattle, we love the talent and people in Seattle at the university anchor is fantastic. The big company tech anchors is fantastic. It’s kind of a built-in captive audience for us it for customers that are easy to see, and for building the community of plumbing users as well.

Soma

I really enjoyed this conversation. Thank you both for sharing your thoughts and experiences in this podcast. See you again.

Joe

Thanks Soma.

Eric

Thanks a lot.

Erika

Thanks for listening to founded and funded. If you liked this episode, please subscribe. We’ll have some interesting episodes coming up with CEOs and experts talking about managing through this downturn and difficult adjustment period for many companies and businesses and employees. Stay tuned for those

POSTED IN: Madrona News

Seattle Businesses, Government Leaders Set Aside Differences To team Up On Coronavirus Response

POSTED IN: Portfolio Company News

These Are The Most Innovative Security Companies of 2020

POSTED IN: Portfolio Company News

Inside Rover’s Pet Friendly Seattle HQ: People And Dogs Stretch Out As Company Aims For More Growth

POSTED IN: Portfolio Company News

Our Investment In Esper To Enable The Dev-Ops Of Smart Devices

Today, Madrona Venture Group announced that we’ve led the $7.6M Series A investment in Esper, an investment that Tim Porter and I spearheaded for the firm. Esper is a devops platform for Android IOT devices.

As everything around us becomes smart and connected, developers of devices have many new challenges. We are no longer just designing a single piece of hardware – but developing a full solution spanning many cooperating devices and supporting cloud software. During development, we have a variety of deployment, testing, and versioning requirements. Once deployed, we need to support device maintenance and updates on both hardware and software through a variety of complex deployment variations, while also supporting that rare remote debugging session. We have regular security updates to the firmware, OS, and apps to manage. We need to integrate device signals with CRM systems, billing systems, and more. Like we’ve come to think about a “dev-ops” process for cloud services, we now need to think about a dev-ops process for our smart devices.

For non-phone devices which require a user experience, Android has become the most popular platform due to the free price, broad silicon support, and broad software framework support. Amazon Echos, Peloton Bikes, and many home televisions all run a version of Android. When it comes to managing these devices, there are many options available for corporate IT to manage personal Android phones — but there’s no great solution for devices where a developer needs to manage these endpoints into the dev-ops process of their overall solution.

This is the challenge which the co-founders of Esper lived through as they worked in their prior roles. Yadhu Gopalan, CEO of Esper, most recently led the development and deployment of all the smart devices in the Amazon Go retail stores. Shiv Sundar, COO of Esper, most recently helped lead the Cyanogen Android device ecosystem. Prior to those roles, I worked with Yadhu and Shiv on the development of the Windows embedded operating system. It’s fun to be working with these great engineers once again!

After introducing their solution late last year, Esper quickly started serving many impressive customers across over 50,000 devices. Each customer we talked with discussed how they had tried to use a mobile device management solution designed for personal devices, but it had failed to meet their dev-ops needs.  We’re excited to work with the Esper team to scale their solution, delighting developers all over the world as they enable billions of smart devices to do amazing things.

It’s been great to partner with Tim Porter on this investment. His experience with other developer focused investments like Heptio will be invaluable in Esper reaching its full potential.

This blog post was also posted on Terry’s LinkedIn page.

POSTED IN: Madrona News

Our Journey With Snowflake

We first met the Snowflake team three years and three months ago. At the time, Snowflake was at a sub-$10M revenue run rate, and we were skeptical that the world needed another data warehouse, given the number of other data warehouses from both the cloud providers and legacy on-prem competitors.

However, after meeting the team and speaking with early customers, we realized that Snowflake was a must-have product for next generation intelligent applications. By rebuilding the data warehouse from the ground up with cloud-first design principles, modern enterprises can benefit from both higher throughput and speed as well as better concurrent queryability, and for any data-driven company, Snowflake’s product is a must-have, not a nice-to-have.

At the time, Snowflake also wanted to take a bet on the Seattle ecosystem to build stronger relationships with the cloud providers and to tap into the local talent pool of systems and database engineers.

So given the combination of technically superior product, early but strong customer traction, the perfect team for the space, and our ability to support their growth in Seattle, we decided to invest in the company.

Today, we are excited to announce Snowflake’s $479M funding round, led by Dragoneer Investment Group and Salesforce Ventures.

Despite Snowflake being the fastest growing enterprise company we have ever seen at Madrona, it still feels like it’s early days for Snowflake, and we are looking forward to the next chapter of their journey.

POSTED IN: Madrona News

Snowflake Set To Be Worth $12.4 Billion After New Funding, Making It One Of Tech’s Most Valuable Startups

POSTED IN: Portfolio Company News

Ex-Amazon, FedEx Leaders Raise $3M From Madrona And 8VC For Seattle Trucking Startup FreightWeb

POSTED IN: Portfolio Company News

FreightWeb For The Win

One of the most fun opportunities I get as a venture capitalist is to partner with founding teams from the very beginning of their journey. It’s with great pleasure that I get to announce one such journey, which we have been working on for a while … our investment in and partnership with Will, Marty, Farah and team at FreightWeb Services.

FreightWeb has all the ingredients we love to see in Day One companies:

  • Massive markets ripe for new thinking and innovation
  • Founders with deep domain expertise who understand the customer(s) and pain point(s)
  • Founders who have been part of rocket ship rides and know what to do when they grab a tiger by the tail
  • Products that leverage copious amounts of data to deliver simple and effective solutions
  • Solutions that deliver clear, tangible, and near-immediate customer value

Simply put, FreightWeb Services’ mission is to increase the utilization of trucking capacity that moves freight in the U.S., an $800 billion market in 2018. As we started collaborating with the FreightWeb team and digging into the domestic trucking market, we were surprised to learn that most trucks transporting loads in the United States carry less than half of their maximum freight capacity. There are a number of reasons for this, but a primary one is that, as a shipper, it’s difficult to buy a fraction of the space in a truck. If you have less than 5 pallets to ship, there’s a service called Less than Truckload (LTL) shipping that works reasonably well. If you have 20+ pallets to ship, renting the full capacity of the truck (Full Truckload Shipping, or FTL) is a relatively simple and cost-effective option. But for all of the loads in-between, there is no great option. Mid-sized loads (often called partials) are hard to quote, hard to book capacity, and expensive. But they don’t need to be. And this is the problem FreightWeb is singularly focused on solving.

Will Payson, the co-founder/CEO of FreightWeb, uses the virtualization of cloud infrastructure, and the ability to sell compute and storage in bite-sized pieces, as a helpful (albeit rough) analogy. Many moons ago, when we wanted to run web applications, we’d have to buy or rent a server dedicated to running that application. Renting a server in internet land is akin to renting a full truckload to move your payload. If you don’t have much traffic on your server, the server capacity goes mostly un-utilized and your rental cost per unit of consumption is high. If you don’t have a lot of stuff to put in a truck, the truck space goes mostly un-utilized and the cost to move a pound of goods is very high. If only we could find ways to rent truck space, on-demand, measured in arbitrarily sized chunks, we could make the system much more efficient.

This problem is worth solving for all the players in the freight-hauling ecosystem. For shippers, buying freight in chunks of any size means they no longer need to optimize their shipping to conform to the restrictions imposed by the current system. They can buy smaller chunks of trucking capacity more cheaply while moving freight more frequently, shifting the balance from batch to continuous flow to better adapt to market demand. For carriers, they can better fill their trucks with freight from multiple shippers, increasing capacity utilization and total revenue. Innovations that enable the parties on both sides of a transaction to benefit financially are hard to find, and that’s one of a number of things that make the FreightWeb opportunity compelling.

We were first introduced to Will by Mike Fridgen, co-Managing Director of Madrona Venture Labs (MVL), a startup studio founded at Madrona in 2012 which has grown significantly since then. Many entrepreneurs start their journeys collaborating with MVL to develop their concepts and accelerate early learning and building. In this case, Will and his co-founder Marty were ready to go, but needed a strong technical co-founder to build out the core technology. Even before we wrote the check, our talent team (Matt Witt and Shannon Anderson) and Chief Product Officer/Venture Partner, Ted Kummert, helped define the spec and develop a list of target candidates for the co-founder/CTO role. We were delighted when Farah Ali, a seasoned technology executive and top of our prospect list, chose to come aboard as a co-founder to launch the company.

It’s early days in the life of the company, but we have been very impressed with the caliber of the team that FreightWeb has assembled, we are excited about the vision they have set out, and we look forward to our Day One for the long-run journey together.

POSTED IN: Madrona News

AI2 Incubator Hatches A $10M Fund For AI Startups With Support From Big-name VCs

POSTED IN: Portfolio Company News

Steve Singh Joins Madrona as Managing Director – A Personal View On Working With The Next Generation Of Innovators

With the start of the new decade, I started life as a venture capitalist – with Madrona Venture Group. A venture firm that has steadfastly invested in entrepreneurs and businesses from Day One for the Long Run.

I have been an entrepreneur for the majority of my career. Being an entrepreneur spoke to my need to build, to be in charge of my own destiny, to create opportunity where none existed before, and to work with amazing people from all corners of our wonderful world. Building a business comes with all the emotional ups and downs you would imagine. But it was always exhilarating – every single day.

Being a venture capitalist speaks to those same needs – through the next generation of entrepreneurs. It affords an opportunity to pay forward guidance and wisdom others were kind enough to share with me. It is an opportunity to help others avoid the thousands of mistakes I made as an entrepreneur. It is an opportunity to help others build great companies. Companies that can provide tens of thousands of jobs, be the foundation of deeply satisfying friendships and careers, that create wealth, and that can improve the trajectory of life for hundreds of thousands of people.

It affords an opportunity to help amazing entrepreneurs build the next layer of our shared economic foundation.

Madrona, like any great venture capital firm, invests in amazing people. It may be when a brilliant entrepreneur like Kabir Shahani, the CEO of Amperity, is looking for a partner on Day One, or when we meet an extraordinary entrepreneur like Andy Byrne, the CEO of Clari, who is scaling his business 100% year over year.

Our investments are against a core set of themes that we see as the major drivers of the next phase of computing.

I am particularly passionate about one of those themes – Intelligent Applications. Over the past few years and the next few, we will see the formation of the next generation of enterprise application companies. Over the subsequent decade those companies will replace legacy companies like SAP, Oracle, Salesforce and WorkDay. It will happen for a simple reason. It will happen because applications will become, well, intelligent. As ML/AI become integrated into every element of the application stack, applications will learn on a real-time basis and start to take action on our behalf. As applications and data become integrated on a real-time basis, new economic models will emerge. We are already starting to see that in enterprise financial applications.

It will not be a straight line from here to there. Our philosophy of being there for our entrepreneurs from Day 1 for the Long Run will continue to be our guide.

This much I know. It is going to be exhilarating – every single day.

(Also appeared on LinkedIn)

POSTED IN: Madrona News

Ex-Concur CEO Steve Singh Joins Madrona As A Managing Director — Here’s How He Plans To Invest

POSTED IN: Portfolio Company News

Our Investment in Uplevel, Helping Engineering Teams Become More Effective

(founding team – David, Joe, Ravs, Dave)

Today, we are excited to announce our investment in Uplevel, whose mission is to empower software engineering teams to do their best work. The company announced $7.5M in seed funding from Madrona, Norwest Venture Partners and Voyager Capital.

Engineering productivity has become a tough nut to crack for many growing companies. Developers are pulled in many directions at once, constantly bouncing between immediate and cross-team meetings, code reviews, planning, strategy, and, of course, actually writing code. With more interruptions comes lower productivity. While there are many tools available to other types of teams within an organization, few are designed with the engineer and engineering team manager in mind. Enter Uplevel.

Uplevel is designed to help engineering teams and managers take back their productivity. At Madrona, we believe in the power of intelligent applications to provide important insights. Uplevel’s unique combination of machine learning from ambient data created by and in systems that developers use every day (think messaging apps, calendar, code repositories, project management tools, etc.) plus deep organizational science knowledge fits this thesis to a “t”. Uplevel’s system generates data-driven insights that are rich, actionable, and help teams make small changes that provide outsized results.  The product fundamentally is designed to help the sometimes overlooked firstlevel manager who most developers in an engineering organization report to, yet lacks the management tools available to senior management or individual contributors.  Equally important, the product helps the team work together to become more effective by providing insights to both the manager and the individual developers so everyone has the same information and can openly collaborate using data instead of gut feel.

We are also pleased that the original idea for Uplevel was hatched by Dave Matthews, co-founder and Director of Product Management, at a hackathon run by Madrona Venture Labs. David Youssefnia, co-founder and Chief Strategy Officer, was also working in the labs as an Entrepreneur in Residence (EIR).  He had previously been leveraging his PhD in Industrial-Organizational Psychology by helping companies answer these tough productivity questions using old-school surveys, but he knew that there must be a better way. They were joined by co-founder and CEO, Joe Levy.  Joe is a startup veteran in Seattle, having had successful go-to-market leadership roles at a number of SaaS analytics companies.  Joe is someone we have been fortunate to know for a number of years and are thrilled to be working together at Uplevel.  To perfectly round out the founding team, CTO Ravs Kaur came onboard from Tableau Software, bringing ideal experiences building and scaling software products and teams, data visualization, and a keen understanding of the “voice of the customer” pain point that Uplevel is solving.  They have since recruited an amazing initial team and built a vibrant and fun culture.

While operating in stealth mode for the past year, the company has built a fantastic initial product and great group of blue-chip customers. They are now scaling rapidly and further building out their team (yes – they are hiring!).

Uplevel represents exactly what we love to do at Madrona:  back amazing founders tackling important problems in massive markets using cutting technology, from day one for the long run.  We have been fortunate to work with these founders since before Uplevel was even officially a company.  We are enthused at their progress since, creating an innovative solution for this important challenge for product and engineering teams.

POSTED IN: Madrona News

Can Your Seed Stage Investors Go the Distance?

Madrona is approaching our 25th Anniversary as a firm committed to seed stage investing in Seattle and the Pacific Northwest. Over the past 25 years we have made 155 seed stage investments (on average 6 per year), from Amazon in 1995 to OctoML in late 2019. In the early days, Madrona was a “super angel” group, and today we continue our passion for seed stage entrepreneurs and their companiesWe are active in the ecosystem as long term supporters of  seed groups including Techstars, Madrona Venture Labs, other labs, Create33, UW’s Startup Hall and many more.  

By definition, seed stage investments are “Day One” opportunities. We believe that rolling up our sleeves with great entrepreneurs from the earliest days creates a material advantage for company success. We also believe having an investor partner with the capital, commitment, and expertise for the long run (often 10 years or more) provides the greatest opportunity for entrepreneurs to realize their highest aspirations. Madrona was recognized last year for exceptional outcomes for our seed investments by The Information.  Eighteen Madrona-backed companies have gone public and over 60 have been acquired for positive outcomes over the past couple decades and we were the seed or Series A lead investor for most of those companies. We also keep learning from the over 75 current Madrona portfolio companies across all stages of growth. Based on our experiences, here are some thoughts entrepreneurs may find helpful about partnering with investors from Day One for the long run. 

Finding Long-Term Partners Upfront 

We often get asked by entrepreneurs what partnering from seed stage onward with Madrona looks like. We encourage entrepreneurs to talk with the founders and CEOs who have experienced this partnership, including companies that were big successes and those that did not achieve their goals. In addition, founders should ask any potential seed stage investors their perspectives on how they will add value near term and help build the company over the full journey 

Seed stage investors are generally looking for alignment with an exceptional team that is passionate about a customer problem and has a vision for novel solutions.  Investors want to work with founders who have an insatiable curiosity and humility around what they know and the questions they are trying to answerAnd, these founders have the market understanding and technological capabilities to build a compelling solution while attracting other team members to help build the company. Finally, the founding team and the seed investors need to share general core beliefs about the timing and nature of big market forces that can enable the company to succeed.   

As a founder, you hope to find investors with big picture views similar to your own and relevant experiences that will directly help you succeedIt is especially useful to get beyond “pitch mode” and have a conversation about themes and real-world learnings. A good example here is how we have partnered with entrepreneurs around one of our major technology investment themes –the rise of “Intelligent Applications”. For the past decade we have been investing in seed and first venture rounds of companies that fit this broad theme. Horizontally focused companies we seeded in this area include Turi, Algorithmia, Xnor.ai and OctoML. Vertically focused companies have included Amperity, Highspot, Tesorio, Suplari and most recently Clari. The intelligent applications investment theme is just one of our key areas of focus and experience. The main point here, though, is for founders to seek strong alignment even at the seed stage with investors who understand their market and how a company in an emerging sector can be built over time. 

Going the Distance with Capital and Value-add 

Companies built to last take a long time to build! Entrepreneurs take the greatest risk because they are highly concentrated on one big bet with their company. They deserve investing partners who think and act like owners, show respect and appreciation, and have the resources to support the company over a long period of time. Founders can get the best of both worlds from a venture capital firm that has proven seed stage investing and multi-stage company building capabilities. They should expect investors that will combine their capital, time, experience, and value-add to help a company materially increase the probability of long-term success. Every company has its own journey. But experience has taught us some common lessons and patterns around navigating the entrepreneur’s journey. 

  •  EVERY company has one or more “near death” experiences. There are just too many things you can’t directly control (macro forces, market timing, regulations) and too many times you make sub-optimal choices (hiring, product priorities, go-to-market strategies) to always get it right. Having both macro awareness and self-awareness helps the most successful entrepreneurs navigate and grow from their “near death” situations. Isilon Systems had hardware reliability issues that forced a product “stop ship” in the Spring of 2003. Smartsheet had to rewrite its front-end in 2009. Amazon may have run out of cash in 2000 if they had not raised a substantial amount of debt before the market crashed. Having investors who have been through these experiences can be grounding and also provide valuable guidance in challenging times .
  •  Establishing your own style of a “Learning Loop” culture and process can significantly improve the potential for success. A learning loop culture combines curiosity, triangulation and rapid decision making to help a company learn better and faster than others. It is important to establish this culture early, at seed stage, so that you can absorb and grow from “experiential learning”, quickly dial-in initial product-market fit and create a virtuous cycle of customer and market understanding. This “formula” can help a company achieve early market leadership and establish a foundation for greater success. Your investors will be on this road with you as well so finding curious and thoughtful partners is key to navigating this continuous cycle of learning together 
  •  Look around corners and make hard choices at every stage. Circumstances are always changing and scale breaks people, processes and sometimes strategies. For example, finding and starting to scale product-market fit is an exhilarating phase of the company building journey. Having found that initial fit usually means your company will at least have a positive outcome somedayBut there are many challenges to scaling and sustaining early markeleadership. Initial products often meet a minimum threshold for bleeding edge customers, but the next set of customers expects more. Early employees who are great at running small teams or being individual contributors aren’t necessarily interested in or capable of running larger teams. In addition, established competitors start to mimic your messaging (even if they don’t have a product) and other startups observe your success and “pivot” to your market.   At each stage of scaling, you want investors, board members and management teams who you have built a trust-based relationship over years of working together. And, you want them to keep looking around the corner to anticipate emerging risks and respectfully raise valid concerns. This type of trust-based relationship takes time and shared experience to establish 
  •  Financial transactions, especially M&A and IPOs, are usually the most intense and potentially misaligned periods in a company’s journey. During these times, trust and transparency are put to the test and are crucial to navigating these waters successfully. Most companies go through several rounds of financings. And, whether it is a Series A, Series F or an IPO financing round, they are always intense. In fact, the process of selling a company in one form or another (acquisition, recapitalization, merger) is the only time that is more anxiety-inducing than a financing round. This is especially understandable for founders and key executives who may be experiencing that process for the first time and are “all in” on the company. 

Further complicating the intensity is the potential for misalignment between management and investors, and sometimes between the major investors. Investors can have different time horizons for when they hope to sell. Other times investors have different levels of capital to invest in follow-in rounds leading to different views on financing strategy. Investors also made their investments at different valuations, terms and ownership levels. Often investors can have varying views on strategy, capital requirements and operating plans. And, that is just differences you may encounter amongst your investors! Founders and senior executives might have differing views on all the above topics as well. And, they can feel misaligned with one or more of their major investors/board members as a result.  

For example, a broadly held view amongst Silicon Valley investors the past few years was to delay going public for as long as possible. Comparatively “cheap” capital for later-stage private companies was available and the temptation to raise private capital was strong. In some situations where a business didn’t yet have sufficient scale or predictability, staying private was advisable. But, in many cases the combination of cheaper capital and less business scrutiny led private companies to insufficiently focus on unit economics and value creation. Regardless of the specifics for any one company, the IPO timing debate highlights how financing decisions can lead to misalignment between and across management team members and investors. Having investors who have been long term trusted partners accustomed to transparent communication with the entrepreneur gives the company a clear advantage in getting through transactional times.  

Some Questions to Consider 

While it is hard at the seed stage to be thinking around the corner to future financing rounds, potential IPOs or eventual M&A scenarios, it is critical to understand the experience and perspective of your seed investors. Are they committed to building a trust-based relationship with you over the long-term? Do they roll up their sleeves and continually add value at each stage of the company? Have they shown good judgement and sought alignment during financings and sales of prior companies? And, do they appear energized and culturally aligned with you and your team to build a great company over the long run? If you are answering yes to these questions, you and your investors are likely on an aligned and positive path to success. If you are just starting to evaluate outside capital and investors, I hope these thoughts and questions help you and your company achieve your goals! 

POSTED IN: Madrona News

Rainway Lets You Play Your PC Games On Mobile Devices Or Web Browsers

POSTED IN: Portfolio Company News

Echodyne Steers Its High-tech Radar Beam On Autonomous Cars With EchoDrive

POSTED IN: Portfolio Company News