We just wrapped our 2022 annual meeting, which we were able to have in person for the first time in three years. Madrona has worked with many of our investors for well over a decade, and they span all types of foundations, universities, pension funds, and family offices.
The annual meeting, with about 150 attendees this year, was a much-needed dose of human connection that reminded many Madrona investors why they got into this business in the first place — people and more specifically — great founders. During the day’s events, the audience heard about Madrona’s results, of course, but the stars of the show were the founders and leaders at our companies — and we took the opportunity to check in with them on this week’s episode of Founded and Funded.
Full Transcript – This transcript was automatically generated and edited for clarity.
Welcome to Founded and Funded. This is Coral Garnick Ducken Digital Editor with Madrona Venture Group. We just wrapped our 2022 annual meeting, which we were able to have in person for the first time in three years. Madrona has worked with many of our investors for well over a decade, and they span all types of foundations, universities, pension funds, and family offices.
The 2022 annual meeting, with about 150 attendees this year, was a much-needed dose of human connection that reminded many Madrona investors why they got into this business in the first place — people and more specifically — great founders. During the day’s events, the audience heard about Madrona’s results, of course, but the stars of the show were the founders and leaders at our companies. I thought it would be a great opportunity to check in with some of them on the challenges they face last year and how they were able to overcome these challenges. And we spoke about what they’re focusing on in 2022. And here at Madrona, we’re always looking for and working with new founders. So, I asked them for a piece of advice, they’d share with someone just setting out.
One of the first companies to present during our 2022 annual meeting this year was Clari. Co-founder and CEO Andy Byrne updated us on his enterprise SAS company that arms chief revenue officers with artificial intelligence that allows them to drive more revenue and boost the predictability and accuracy of their forecasts. And while growth is certainly on the agenda for him in 2022, and he has a plan focusing on expanding value for customers, Andy recognizes that 2021 had some growing pains because of the massive growth the company saw in direct response to the COVID 19 pandemic. Companies wanted visibility into their forecast and pipelines more than ever, and Clari had just the tool. But being ready for that growth and required scale at the flip of a switch is not easy, Andy said
Andy: A lot of things broke, and we had to go about moving from what I would call scrappy startup point solving to scalable machine actual system solving. And that’s really a different mindset shift as you get into the level of scale that we’ve experienced. That was probably our biggest challenge. And the graduation from that sort of scrappy startup to machine actual has been really a joy to experience.
Coral: Frank Mycroft co-founder and CEO of Booster faced another sort of transition in 2021. Not only did the transition from 2020 to 2021 mean another year of unexpected pandemic restrictions and working in a mostly virtual environment for his team, which is re-inventing cleaner fuel delivery services. But he also had a new addition to the family. The birth of his third child came mid-year. While it was a bit more challenging than he remembered. He said it gave him some new perspective.
Frank: I was expecting the baby, I was not expecting how difficult newborns are. They’re really not self-sufficient, are they? And I had forgotten that. I felt like 2021 was a year where it was easy to have short attention spans. And it was easy to have group think because everybody was reading the same things and on the same Zoom calls. So being very intentional about saying no to things you didn’t want to do and carving out time to be intentional first-principles thinking on your own was really important.
Coral: Another company that was very intentional in 2021 was CommerceIQ run by founder and CEO Guru Hariharan. Commerce IQ is an intelligent commerce platform that helps consumer brands like Colgate, Nestle and Kimberly Clark grow their e-commerce business. The company had growth goals, but because the platform is only appropriate for certain verticals, identifying expansion, targets was becoming difficult. But by asking hard questions and digging in, the company is better for it. And it actually just announced a $115 million funding round at an over billion-dollar valuation.
Guru: We had to do some introspection in terms of how we land and expand how we provide more value. We had to go back and do some soul searching. The way we did that was actually going back and asking our customers how they thought this market was going to be evolving over the next few years. And they told us “Look, point solutions are not going to work for us. I don’t expect in the year 2025 or 2030 to wake up to say, ‘I’m going to be looking at a supply chain system, taking an Excel file from there and pushing it out into a retail media system, taking an Excel file, from there and pushing into a promotion or a sales management system.’” They told us that point solutions are not going to work. But at the end of the day, we were a point solution at that point. It pushed us to sort of take a step back and really create the right vision for the company.
This is one of those where just using customer interviews, and the ability to work with customers in a way that we understand their problem, but we were not necessarily listening for solutions from them. So, we understood the problem that point solutions was not going to work. We connected the dots and we said, well, we need to then create a platform. And we went back with a vision that was fleshed out, and we showed it to them, and they said, this is perfect. So, our big learning was going back to the roots and trying to understand from a customer perspective what were the key problem areas, and then going back and actually creating some solutioning around it and then creating the vision for the company. It was a phenomenal experience. And frankly, that was one of the key reasons why we were able to raise a billion-dollar valuation round, because now we are making some significant waves by showing that vision to our customers and to the market.
Coral: It was really fun talking with Rec Room CEO Nick Fajt during our 2022 annual meeting. Rec Room, of course, is the virtual reality world where you can create and play games with your friends. And the metaverse is a huge topic of conversation with Facebook changing its name and both Mark Zuckerberg and Satya Nadella not being able to go through an earnings call without saying the word more than a couple of dozen times each, but Nick launched his company a few years before the pandemic hit, and since December 2020, when Madrona led the series C round, Rec Room has raised $265 million and has millions of player-created rooms. Usage also took off during the pandemic and has continued to grow. Coming out of the pandemic, Nick says he is focused on three big pillars for Rec Room.
Nick: The first is user generated content. Everything in Rec Room is built by players, and we’re constantly looking at ways we can improve the tooling and help people build whatever’s in their imagination. The second area we focus on pretty deeply is building a fun and welcoming community for everyone — what are the ways that we can use our unique reach and our unique platform to help people connect across geographies and across time to make those meaningful connections, make meaningful new friends and make memories with those folks. And then the last area we talk a lot about is being a radically cross-platform app. It’s really something that helps both the user-generated content because it means you can create content on any device and it will go to every device, and it means your devices can get out of the way for the social and the community aspect. For most technology, you really don’t want to connect your device to your friend’s device, you want to connect with your friend. So we take this radically cross-platform approach so we can help people connect regardless of what device they have. So, we’ll be coming to some new and exciting and unannounced devices later this year.
Coral: One of the most recent Seattle-based portfolio companies to land unicorn status is SeekOut following its $115 million funding round. Companies are all facing the great resignations, so recruiting and talent retention are top priorities. SeekOut’s intelligent application pulls data from across myriad sources to find companies the best and most diverse candidates. As SeekOut co-founder and head of product John Tippett looks to 2022, he said the company is focused on scaling and applying its considerable success in recruiting to building the tools needed for internal employee engagement and retention as well. I’ll let John explain.
John: The biggest thing we’re focused on as a company at SeekOut is scale. How do we provide more capabilities to more customers, so they can be more efficient and more effective with their talent as we get into this new world of work? So we’re building out all of our teams and we’re building on new capabilities. One of the things we’re also focused on is how can we turn all the things that we’ve done for recruiting new people into a company to helping you retain, engage and grow your internal employees. And I’ll give you an example of how we got to this. SeekOut’s passive sourcing product has the ability to look at talent insights about any talent pool. So, you could say, what do we know about accountants in Chicago? And when we show that to customers, they say, “this is amazing data — I wish we had the same kind of data for our own employees.” And it’s really based on that insight, we decided we could do this around talent insights for companies so that they could optimize where they’re investing, who they’re hiring, even where they’re building new offices when they eventually get back to that.
Coral: One of Madrona’s investment themes in recent years has been the intersection of innovation. And at this year’s meeting, we heard from David Younger at A-Alpha bio and Jesse Salk from TwinStrand. And of course, we also had the distinct pleasure of having Dr. David Baker from the Institute of Protein Design give the keynote address during the event. The opportunities coming out of combining the power of data and computer science with life science research seem almost endless. And Dr. Baker actually mentioned during his address that the students in his lab used to want to all become professors, and now they almost all want to start their own companies. So, the opportunity for madrona to help founders fund and build up companies in the space will hopefully be plentiful.
David youngers company, A-Alpha Bio actually spun out of Dr. Baker’s lab. The company combines high throughput, synthetic biology with machine learning to dramatically accelerate the discovery and optimization of lifesaving therapeutics by focusing on antibodies and molecular glues. I will let him tell you in his own words, what they’ll be focusing on for the rest of the year.
David: So, antibodies are protein therapeutic, so they’re made of protein and they function by sticking to other proteins. A-Alpha Bio is the protein, protein interaction company. So antibodies are right up our alley. Everything about them is protein, protein interaction. And so, in that space in 2022, we’re doing a lot of work to build and optimize our own internal antibody library and really go through the workflow of discovering novel antibodies for targets that are otherwise very, very challenging to find the right antibody properties for. So that’s a combination of partnering with leading pharmaceutical companies in the antibody space and also doing some of our own internal antibody discovery and optimization to build our own proprietary pipeline.
In the molecular glue space — molecular glues are small molecules, but they function by bringing together by essentially gluing together two proteins that wouldn’t otherwise interact. And this is an incredibly exciting and relatively new therapeutic modality. And what A-Alpha Bio is able to do very uniquely in this space is identify targets that are suitable for molecular glues. And so, we’ve started to do that with partners. Late last year we announced a partnership with Kymera Therapeutics, who’s one of the leaders in this field, but we’re also starting to build out our own internal capabilities to start programs of our own. So that’s a major initiative for 2022. And then all of this kind of falls under the umbrella of generating a lot of data that we can use to train and validate our machine learning models.
Coral: Another company with a lot of data and the potential to impact a lot of us profoundly is TwinStrand Biosciences led by founder and CEO Jesse Salk. TwinStrand’s technology is working to utilize informatics to make existing genome sequencers 10,000 times more accurate so scientists and doctors can see subtle changes in DNA that are not only relevant to basic science but particularly to cancer patients. But launching its first product into a pandemic was not the ideal scenario. So, Jessie is looking forward to seeing what the company can do with restrictions lifted.
Jesse: We are really looking to get out in the field, work with more customers, work with more of our clinical and research partners, go to more meetings and generally get an opportunity to spread our wings and use all the sophisticated infrastructure we’ve built the last two years while we’ve been a bit stuck at home. This is my first company — I’m a trained scientist and a physician. So, this is my first time doing this, so it’s been a little bit, challenging to be operating with so many different variables, but I think we’ve done Pretty well. And, you know, part of our technology is about, high accuracy, high sensitivity, and understanding evolution of cancer and cancer cells and so we think we also need to be able to evolve and we’ve done a pretty good job.
Coral: I promise advice from founders who spoke at our 2022 annual meeting. And I’m going to start here with Jesse because while his may seem straightforward, I think it’s something people often forget.
Jesse: I think you need to have some humility — be very open with what you’re good at and what you’re not good at and what you need to learn, be willing to recognize that there are many colleagues around you who know where you are and are a few years beyond you and are willing to give advice. I learned a lot, and I had tons of support from Madrona, from our other investors, from colleagues and CEOs of other companies. And, just be very comfortable with who you really are and take stock and use others as resources. And I think I’ve tried, to give back and kind of do the same thing because there are certain things, that are not rocket science, but it’s just, you know, you’ve got to learn it and there’s no reason to make everybody reinvent the wheel.
Coral: Next. We have Clari CEO Andy Byrne.
Andy: Take your idea, get with three to five customers that believe in your idea and your vision that they just fundamentally say, “You build that and I will figure out how to get it into my company, and we’ll try to use it and together let’s go build something great.” And that entrepreneur needs to identify who those early adopters are and then you’ve got to go find the person inside that company that’s also saying, “I’m willing to take a risk. I’m willing to turn it on and be a champion internally for you.” So you find those three to five and then you partner together and you co-design and you never, ever, ever give up. And you listen incredibly carefully not with happy ears, with ears that are like, well, if the customer says, “Oh, I would love you to build that.” You need to say, “Well, hold on. Why?”
“Well, because we might use it.”
“Well, why would you use it?”
“Well, because we…”
“Well, why is that valuable?”
And you get down to the depth of knowing, okay, this is actually something that I can monetize. And if you do that level of work of identifying the logos, getting the people in those accounts — three to five of them — and have all this tenacity and the ability to MVP and exceed the customer’s expectation with a product that blows them away that they got earlier than they thought they would. Then you start to get momentum off of your base foundation of customers that become your key marquees that allow you to then build on top of that foundation and start growing incrementally to your next handful of milestones. So that would be my advice to a young entrepreneur who’s starting out and never, ever, ever give up.
Coral: Finally, I’ll leave you with advice from Booster CEO Frank Mycroft.
Frank: You got to sell the product first before it even exists. Take that time you would’ve spent developing it and get out to your customers. Go talk to them even better. When we were starting out, we lived, we literally lived and worked in offices right next to our first customers. You’ll iterate so fast on the idea and you’ll save yourself so much time. And when you finally get to the build part, try to build on the riskiest thing. First, this is not easy for an early entrepreneur. You want to work on what you’re comfortable with, what you know, really what. But if you want to really win, I think you’ve got to figure out the scariest thing, and go work on that first, because if it doesn’t work, you’ll be grateful. You didn’t waste a lot of years doing other stuff before you figured that out.
Coral: Thank you for listening to this special episode of Founded and Funded. Tune in next time, as we launch a series spotlighting our IA 40 winners.