News & Views

 

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

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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)

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

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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.

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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! 

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

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

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Our Investment in TwinStrand Biosciences, Leveraging Big Data And The Cloud To Improve Genome Sequencing Accuracy By 10,000x

Today, we’re excited to announce that Madrona has led the $16M Series A investment in TwinStrand Biosciences, a Seattle genomics company with the potential to profoundly impact all of us. TwinStrand’s technology will help detect cancer earlier when it can be most effectively treated, will help identify the most effective personalized therapies, and will help to recognize carcinogens quickly thereby lowering the development cost and time-to-market of powerful new drugs. We’ve previously discussed the incredible intersection of life sciences and computer science in our region – and TwinStrand is at the forefront of this amazing innovation opportunity.

When I first met Jesse, the founder and CEO of TwinStrand, he was discussing the technology in exclusively life science terms. However, as I listened, it was incredible how so many of the concepts had direct analogs to my experience with high scale software. TwinStrand’s “Duplex Sequencing” technology uniquely tags each strand of billions of individual DNA molecules with a chemical GUID. The DNA is then replicated to enable sequencing on a standard genome sequencer – resulting in up to 6 TB of data per run – then imported to the TwinStrand cloud where error correction algorithms are employed. The result is a high-resolution reading of the DNA sequence, 10,000x more accurate than standard sequencing. Duplex Sequencing reduces today’s DNA sequencing error rate of ~1% to below 0.0001%. This biochemical error correction approach reminded me of error correction techniques employed in high scale storage arrays in cloud datacenters.

Researchers are actively exploring how to use this level of precision to detect DNA mutations caused by chemicals (a market known as “genetic toxicology”). Today it can take more than 2 years to determine if a chemical is a carcinogen, as large tumors need to be given time to develop in lab animals. With Duplex Sequencing’s breakthrough accuracy, the resulting mutations can be detected as very small tumors within weeks – saving time, money, and the number of animals required. This testing is a critical step in the drug development process, but also is used to test the safety of agricultural chemicals, food contaminants, and even to examine the effect of space radiation.

When I talked with leaders in the clinical cancer community, a common response I heard was that this level of precision was amazing and insightful – but that today’s diagnostics don’t need that level of accuracy. This response reminded me of so many of the skeptics of 64-bit computing 15 years ago – who would ever need that much memory on any computer? With our investment, we are making the bet that new diagnostics, therapies and even information storage technologies will be developed to leverage this new precision, just like software has always found great new ways to leverage new system performance. It’s very exciting to see the future through the eyes of the TwinStrand team and invest in making it possible.

Jesse created Duplex Sequencing through his MD/PhD research with colleagues at the University of Washington. The TwinStrand team consists of half biochemists, and half software developers and bioinformaticians. Together, they have built an incredible foundation—contributing to more than 15 peer-reviewed scientific articles leveraging Duplex Sequencing and developing a portfolio of over 50 patents. To learn more, I’d suggest these three great recent articles:

TwinStrand’s product will be launching soon, and I look forward to seeing what scientists all over the world will create with it.

-Terry

P.S. Out of humility, Jesse doesn’t often share that he is the grandson of Jonas Salk, the scientist who discovered the vaccine for polio, definitively changing our world for the better. It’s pretty incredible to think that TwinStrand may have the same potential.

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Investor Predictions For 2020: Venture Capitalists On What To Watch For And How Startups Should Prepare

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How Amperity CFO Amy Pelly Overcame Her Aapprehension About Joining Another Startup

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Big Tech And Big Checks: Seattle Startups Claim VC Funding Record

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Investors Say These Are The 18 Hottest Enterprise Startups From Seattle’s Booming Tech Scene To Watch In 2020

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The Buzz At AWS re:Invent: What Tech Leaders Are Talking About At Amazon’s Big Cloud Confab

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Highspot Raises $75M To Support Rapid Growth Of ‘Sales Enablement’ Software In $50B Category

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University of Washington AI Project Takes Madrona Prize At Industrial Affiliates Day

Photo: CoAI team, Joseph Janizek and Gabriel Erion with Tim Porter at the Allen School

Madrona awarded the 14th Annual Madrona Prize to the CoAI team at the University of Washington’s Paul G. Allen School of Computer Science & Engineering. CoAI: Cost Aware Artificial Intelligence for Health Care applies ML to help healthcare professionals use accurate predictive models in time-sensitive and potentially life-threatening situations. The field of cost-sensitive ML builds algorithms that automate the feature selection step, automatically choosing the best subset of input variables to make a high-accuracy prediction. CoAI applies this field to the clinical setting — where “cost” is time — and enables, for instance, an EMT to run the appropriate predictive model while in the ambulance ride to the ER, rather than losing critical minutes after the patient arrives.

The team of consisted of PhD/MD graduate students Gabriel Erion and Joseph Janizek with MDs, Carley Hudelson and Nathan White and the head of UW’s Laboratory for Artificial Intelligence for Medicine and Science, Professor Su-In Lee.

The Madrona Prize is awarded at the end of the Allen School’s annual Industry Affiliates Research Day. The event includes technical talks throughout the day and culminates in an open house and poster session that showcases the latest research projects and papers being pursued by faculty and students at the school. The Madrona Prize has been awarded for 13 straight years and goes to the project that combines excellent research with what we feel is the greatest commercial potential. Since Madrona’s inception more than two decades ago, Madrona has funded 18 companies out of the Allen School. These companies include Impinj (NAS:PI), SkyTap and Turi (acquired by Apple), and most recently, OctoML, a company based on the TVM research project that won a Madrona Prize in 2017.

“The Allen School at the UW is an incredibly important resource for our region and as the school has grown and actively attracted researchers from many different areas, we have seen the breadth and depth of innovation grow,” said Tim Porter managing director, Madrona Venture Group. “Talking with the students during the research day is truly one of the highlights of our year, and we are both excited and inspired by all of the innovative projects we saw.”

Each year, the Madrona committee also awards runner-up prizes. This year the runners up were:

Runners Up
AuraRing: Precise Electromagnetic Finger Tracking via Smart Ring
Farshid Salemi Parizi, Eric Whitmire, Alvin Cao, Tianke Li, Ishan Chatterjee
Advisor: Shwetak Patel

HomeSound: Exploring Sound Awareness In The Home For People Who Are Deaf And Hard Of Hearing
Dhruv Jain, Kelly Mack, Steven Goodman
Advisors: Leah Findlater and Jon Froehlich

Molecular tagging with nanopore-orthogonal DNA strands
Katie Doroschak, Karen Zhang, Melissa Queen, Aishwarya Mandyam, Jeff Nivala
Advisors: Karin Strauss and Luis Ceze

For past winners visit click here.

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Female Founders Alliance Grad Give InKind Raises $1.5M For Social Support Platform

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100 Of The World’s Most Promising Start-ups To Watch In 2019 – Eclypsium & The Riveter Among Them!

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Booster Fuels Brings Mobile Gas Delivery Service To Seattle Region As Part Of Nationwide Expansion

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Wrench’s On-demand Vehicle Repair And Maintenance Service Picks Up $20 Million

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The Information’s Seed Investors to Watch

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