Madrona at 25, Reflections and Looking Ahead

Wow, this was not the 25th year we had envisioned. What this year has done is bring us together and has brought to the forefront how important community is for all of us – individually and as a venture firm. The essay below is an excerpt from a book we produced about the history of the firm and Seattle’s growth – it is from the entire Madrona team to the amazing community of innovators around us.

And if you want some history – check out How do You Start a Venture Firm? Here’s Our Story – a Founded & Funded podcast with early Madrona founders and team members telling the story in their own words.

We all have dreams and the power to imagine what might be possible. If you focus on a real need and a real opportunity that appears to be timed right, you might just turn the improbable into the inevitable. Amazon, Isilon, Redfin, Smartsheet, Snowflake, Apptio and many more of our companies did just that.

Anything that is truly aspirational needs grounding in some core principles and beliefs. Words and actions you can live by on a daily basis like curiosity, humility and integrity guide you in both good times and hard times. And, with a little good fortune, you might learn your way into a winning core strategy that can persist for decades and potentially change the world.

At Madrona, our core focus is helping exceptional entrepreneurs and their teams create successful technology companies primarily based in the Pacific Northwest. We roll up our sleeves from Day One and bring a long-term perspective to the company building journey.

At Madrona, our core focus is helping exceptional entrepreneurs and their teams create successful technology companies primarily based in the Pacific Northwest. We roll up our sleeves from Day One and bring a long-term perspective to the company building journey. We also have a mindset that there are immense opportunities to innovate that will persist for decades to come. So, as we help build the next generation of lasting companies, we are trying to build a bigger pie of economic success and opportunity across our entire community.

One of Madrona’s founders, Bill Ruckelshaus, liked to remind us that things never change as much in one year as you expect they will, but they change more in a decade than you could possibly imagine. And, things have changed more since 1995 than we could have imagined. We have moved from hardware to the cloud, from client-server to intelligent software-as-a-service and from PC’s to “always on” smartphones. The changes are immense across many different aspects of technology, business models and societal expectations – but what remains the same is the human element.

We start with extraordinarily talented entrepreneurs – believing in them, supporting them, opening doors for them. And that effort involves the whole Madrona family, inside and outside the firm, to help those entrepreneurs and their companies succeed. Employees at our companies, researchers at the University of Washington and beyond, investors who believe in us, and countless partners in the broader ecosystem; together we are working to build world changing technologies, businesses and communities. After all, in the innovation ecosystem it is still Day One and we believe that will be true for the long run.

The next 25 years…

At Madrona, we have been committed to a consistent strategy for 25 years. We have also foreseen and embraced changes in customers, technologies and society that produced countless breakthrough products and companies. This combination of anticipating change and sticking to core principles is at the heart and soul of Madrona’s plans for the next 25 years.

That means, we will continue to be founder-driven as the next generation comes up with new ideas we can’t even imagine today. For the future founders in our midst, it is your grit, optimism and insatiable curiosity to solve problems better than they have ever been solved before that inspires us. And, that too will never change.

There’s no reliable way to forecast what’s going to happen over the next 25 years. We know from experience we will get some things wrong, but there are a few major trends we can envision. Technology will increasingly be involved with every interaction we have in the physical world, from home to store to vehicles. Devices and sensors will become more ubiquitous and less observable enabling humans and “things” to be constantly connected. Software will be infused with data and machine learning to become “dataware” and augment human intelligence in almost every vocation. Combining DNA, the code of life, with human-generated code will unlock intersections of innovation in the biological and computer sciences previously unimaginable.

One thing is for sure. Nothing can shake our belief in this region’s entrepreneurs to see around corners and build technology that will change the world.

One thing is for sure. Nothing can shake our belief in this region’s entrepreneurs to see around corners and build technology that will change the world. Seattle and the entire Pacific Northwest will be a global powerhouse in technology innovation for decades to come, at a pace faster and more innovative than elsewhere.

So many people including entrepreneurs, investors, community, team and family members have supported us throughout Madrona’s journey. Thank you for your partnership and friendship. We are excited about pioneering, discovering and innovating together for many years to come.

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


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.


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.


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.


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.


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


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.


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.


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?


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.


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.


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


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.


How would you describe what Pulumi is?


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,


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.


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?


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.


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?


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.


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,


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.


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.


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?


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.


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.


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.


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.


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.


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.


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?


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.


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.


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


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.


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.


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?


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


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


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


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.


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


Thanks Soma.


Thanks a lot.


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

Founded and Funded – The Road to Product Market Fit is Not Smooth with David Shim, CEO of Foursquare and Founder of Placed

David Shim, founder of Placed, now CEO of Foursquare has some invaluable advice for founders. He built Placed over six years from an idea incubated at Madrona into the industry standard for brands and advertising agencies – and an acquisition by Snap. This conversation with Matt McIwain, managing director, covers how David and his team transformed Placed’s core location technology into a solution for the age old problem of how does advertising actually perform.

We hear the story of how David harnessed the power of big location data and revolutionized the way companies market to and understand consumers. Although he had developed a solution to a pain-point for many businesses, he ran into a few pain-points of his own, especially around finding product/market fit and scaling the company.

Matt and David reminisce about the trials of building Placed and how listening to the market transformed the potential of Placed. David and Matt talk about being frugal with spending early in a company’s journey. That frugality made it easier to raise more money and also created urgency amongst Placed’s team.

David recalls stories of his time with aQuantive, Farecast and Quantcast. He also weaves in a sheepish story of his time sharing Madrona office space with founder and CEO of Rover, Aaron Easterly.

This episode is well worth the listen!

Full transcript

Erika Shaffer 0:05
Welcome to Founded and Funded! This is Erika Shaffer from the Madrona Venture Group. In this episode, Matt McIlwain, Madrona Managing Director, sits down with David Shim. David founded and is now the CEO of Foursquare. Placed was incubated at Madrona and the two worked closely together for years. They talk about the journey of building the company including the struggle to find product market fit. Throughout his founder journey, David has consistently recognized big trends and embraced frugality. They talk about spending venture capital with intention to fuel the simultaneous development of a company and a culture of accountability. Listen on.

Matt McIlwain 0:49
This is Matt McIlwain from Madrona and I’m really excited to be here with my good friend David Shim. David and I have worked together for a number of years on a couple of different companies, but why don’t I give him a chance to introduce himself.

David Shim 1:00
Yeah, David Shim CEO Foursquare. Previously, I was the founder and CEO of Placed. Before that it was called Sewichi,thanks to the board we changed the name of. And for those who don’t know, Sewichi is a Korean term that I made up where “se” is three and then “wichi” is location. So location, location, location.

Matt McIlwain 1:17
I love that! David and I have had a great opportunity to work together. I’m actually going to take you back before Placed for a second because we got to work together on a company called Farecast that our great friend Oren Etzioni had founded back in 2003. And you joined in the business development area. So tell us how you joined Farecast cast and what you learned from that experience.

David Shim 1:39
Farecast was great. That was my first real experience in a small startup. So prior to that I was at a company called the aQuantive, specifically Avenue A doing business intelligence. So looking at how digital advertising drives specific actions like purchase on a website. During that time, someone named Mike Fridgen came along and said, “Hey, I’ve heard good things about you. Do you want to meet up for coffee?” And this is the first time I’ve ever actually, like been recruited. I’m like, yeah, sure, let’s meet up for coffee. So we meet up for coffee. He starts telling me about this company called Farecast, or at that time, it was called Hamlet

Matt McIlwain 2:11
Yes, to buy or not to buy!

David Shim 2:12
So he started giving me the pitch. And I was like, why is he telling me all this stuff? Why is he goes so deep in the business, and then he ended with like, “Hey, we’d love for you to come on board.” And that was kind of a first for me where I was like, “Okay, this is really interesting.” I like the idea. But it’s a startup. I’ve always wanted to join a startup, but there’s risks associated with that. So I kind of did the math in my head. And ultimately, I was like, let’s take that jump. And I will say, knowing that Madrona was funding that company went a really long way. Someone smarter than me believed in this company, that I should be more comfortable in taking the leap.

Matt McIlwain 2:44
Well, you know, that’s an interesting point. I mean, we have the opportunity all the time to meet with the talented young, you know, executives and really, it does seem to matter that somebody who is doing this for a living and helping build companies is on board and as a validation. And we were really fortunate to have you come and join the team, Mike Fridgen, was the VP of Marketing and Hugh Crean was the CEO. And at the end of the day, that company was one of the early companies trying to use data science in a very basic way to predict in that case whether airfares went up or down, and ultimately they were competing against Kayak. So what was your role there?

David Shim 3:19
So when I first started there, this is where it started for interesting, I came on board to lead marketing, and he got me the experience around things like PR when you’re in an ad agency, you think you do PR, but in reality, you’re doing a lot of PowerPoint, you’re doing a lot of spreadsheets and Excel. And so it got me to understand what is the full marketing in it all the way from spending media to see how it performs, to going in and actually saying, did that actually drive return? What’s the right narrative that you want to put what’s the right creative, it was a great experience to do all of those things in a very short amount of time. And I wouldn’t trade that experience for the world in terms of it set me out for what I was going to do next. And then from the role itself, so it was doing marketing first, then we expanded to things like monetization. How are you going to make money? And are you getting traction there or not. And in those days, we had a search engine similar to Kayak, we had airfare price prediction, say is the price going up or down. And people were using us at a very high rate, we were getting great press because this was the early days of Web 2.0. But what happened was we weren’t monetizing it because we weren’t selling tickets directly, we send somebody else and we get a referral against that. So we started experiment with advertising. And that advertising was like, hey, let’s put a Google Ad here. Let’s put some text links here, hey, let’s start to put logos on here. Let’s start to drop them off into other online travel agency websites. And we started to see revenue starts to come in. And then it became really kind of this experiment where what is the right layout? What is the right kind of area to focus in on to drive maximum revenue? And it was really fun in those days, because there wasn’t a bunch of software solutions. We were actually working with the web developer with Google and saying, how do we actually monetize this?

Matt McIlwain 4:54
Yeah, it was a lot more hand rolled as it were back in the day and one of the things I I noticed about you then is that you were great at coming up with little hypotheses, testing, iterating testing iterating, and it just kept getting better. The company got bought by Microsoft and became Bing travel, you went off to California, you know, in a flight of fantasy maybe mentioned that for a second. And then we’ll come back to how that led to the startup Placed.

David Shim 5:16
Yeah, I think this is I want to go to the valley like that was one of the things like if you are in the startup scene, it’s kind of like if you’re in country music, you can be in LA, you can be in New York, but you want to go to Nashville at some point. I went to Nashville for me, Silicon Valley, work for a startup that had recently been acquired. And the thing that I was missing in my kind of portfolio was Farecast was doing really well. But at the same time, we weren’t going to have a team on the marketing side that was going to be 20, 30, 40 at the time, and the opportunity came up with the startup that was acquired to say, “hey, we want you to come on board and we’ve got a team of 40 people right now that you would be managing,” and I did that not because I didn’t like Farecast but it was just more something to fill out my resume. I stayed there for a year good experience. learned a lot of things and then ultimately made the jump over to a company called Quantcast. Quantcast was a great experience. So during that time, it was a little similar to farecast and Hamlet in the sense that they didn’t have any monetization, but they had a lot of great data, a lot of great engineers and data science. So for people who don’t know, Quantcast, you will put a pixel on your website, and they would give you analytics but not analytics on what pages were most visited. But it would give you analytics on demographics, and who actually came to your website. And then where else do they go, what other websites that they visit, and they build a very large business where at one point, I think they were measuring, you know, 90 plus percent of the internet population, the US because they were on so many different types of websites. And that was a lot of fun because I had this great data set and they said, “hey, let’s figure out how to monetize it.”

Matt McIlwain 6:47
Yeah, and you had some experience with that. And so it’s really interesting to think if you go back there’s you know, Avenue A and aQuantive. And then there’s Farecast and there’s Quantcast and these names are all kind of blending together a little bit here, but what I’m noticing is that both from a sort of domain experience perspective, it was building a lot of experience sets for you. And then from a skill building perspective, it was building a lot of capabilities to potentially step into that role of being a founder. And you came back to Seattle, you saw the light, realize that it wasn’t quite so wonderful down there in Silicon Valley came back up to Seattle. And I remember, it was right around the beginning of 2011, that we had this conversation now.

David Shim 7:26
Absolutely. So the first thing I did want to get back to Seattle was reach out to Matt, I said, “Hey, I’m starting this company.” I didn’t think Madrona be interested. So this is where I was a little bit of a rookie in terms of the entrepreneurial space or the funding space. I was more moved up to Seattle because I wanted to start the company outside of the noise of Silicon Valley, because in Silicon Valley at the time, everybody wanted to be a founder and people were raising like a million dollars $2 million with four engineers, but they were really diluting the equity value right off the bat. So I came up to Seattle, I had some money that I earned from the Farecast acquisition as well as a couple of other things that I said “Hey, I want hire one or two engineers and I want to build out a prototype.” I met with Matt. Matt said, “Hey, this, it is interesting,” but I think he more believed in me as an entrepreneur, “He said, Hey, you know, we do seed investing.” And I was like seed investing, I kind of know what it is, but I wasn’t like 100% sure. And I was like, “Yeah, I don’t know.” I remember the conversation. I was like, “Oh, I felt really honored that you would say something like that.” But I also it wasn’t necessary part of my original plan. We continued to have those conversations. And I was talking with engineers and product people and saying, like, “Hey, do you want to come on board?” And I kept on running to like, it’s a really good idea, but you have no track record. And, and then we continued the conversation. And it really when I mentioned to someone, I think I probably mentioned one of the engineers I was trying to recruit, “Hey, I’m talking with Madrona.” All of a sudden, he changed a little bit where I got further along in that recruiting conversation. I’m talking with Matt McIlwain, who made the Midas list he’s the only VC in Seattle did that. And that actually helped me out a lot as an entrepreneur because becasue I didn’t have a track record. So I was kind of borrowing from you, that really helped me kind of say, I do need to get money from a drama in a way that it would be beneficial for the company, as well as beneficial for recruiting.

Matt McIlwain 9:10
That’s an interesting set of dynamics. And we’re just delighted that sometimes we can be helpful in terms of both the early capital because sometimes people are taking a big risk on leaving an established company and established job, even if they’re willing to kind of in that short term sacrifice a paycheck or portion of a paycheck that they would otherwise be able to earn for the equity and the excitement of being in a startup. And they want to know that there’s some kind of hooks and kind of guardrails around this really early stage startup. You know, one of the other things that really impressed me in addition to kind of your ground truth understanding of the market, is that you saw some of these big trends. I mean, the way I think about at least be interesting to hear how you thought about it, you appreciated that, you know, smartphones at that point, which were only like three or four years old, you know, we’re really maturing and the 4g network was starting to come online, and even the fact that there were cloud services where you could actually do real time analytics. Tell us a little bit about some of the trends you were seeing that led you to believe that this thing that came to be known as Placed after it was called Sewichi, might be possible.

David Shim 10:11
One was, even while I was at Quantcast, I wanted as a company for us to do more and mobile because the iPhone had just come out while I was at Quantcast. When I left Quantcast, iPhone two had come out and Android was just rolling out as an operating system. And what I did during that time was I actually had an engineering friend and I paid him to go to different conferences for me and just check in and say here, here’s my thesis, I think location is going to be important. I think that it requires an operating system that is available widely. And it has to enable programs to run in background and persistently. Yeah, so those things for a while didn’t exist like iPhone didn’t nice actually let you run apps and background for a little bit. Android did not roll out yet. So there was no kind of widespread adoption across carriers. But he went to one conference for Android. I think it was an at&t. conference, they said you could actually do this. So that was my kind of tipping point to say, Do I leave the company and work on this project? Or do I stay at Quantcast and really kind of continue to build a great company. And that was a really hard decision. Because when you’re in a startup that’s successful, that’s doing really well where you’ve got a lot of opportunity in front of you. But it’s also you don’t get many chances where you see that product market fit. And then you see the market saying like, “Hey, there is no incumbent, there’s nobody that is better than you bigger than you. It’s wide open.” And that was something that got me really excited. So that was one thing. So the the operating systems for smartphones were enabled technology in the smartphones were “Hey, most people don’t know this right now. But you actually had to carry this computer around. You put it in your car, it’ll give you directions.”

And then getting it into the smartphone. That was crazy. That was like “What is going on here?” And you see that where if you ever remember going to the Best Buy in the 90’s. They had a whole section for navigation. Yeah, that section completely disappeared and it was replaced by smartphones. Right and that just got bigger. getting bigger and bigger. That was a huge opportunity as well, in terms of market was saying I’m buying smartphones, the technology to do GPS was built into the smartphones, the operating system existed, then it was kind of a bet to say are mobile phones going to be big. That wasn’t a really hard bet to say, it’s just more when it was going to happen. And it was right around that.

Matt McIlwain 12:18
But it’s good to tease out the GPS point too. It’s now 10 years post that timeframe. And we just take it for granted that you know, there were the 4g networks and there was the GPS network and you could leverage it. I mean, I remember in the earliest days of Placed, you know, we were worried that we were just killing the battery life on phones so there was a whole optimization even once these things were available that you could run the place that but maybe tell a little bit about well what was the purpose of the place to app and why was it at risk of burning somebody’s battery life and why does it even matter given what you were trying to do?

David Shim 12:49
We started with this when check-ins were big and this actually goes full circle back to when Placed was started we built an app that was called Check-in King. It let you check into Foursquare, Gowalla, Google and Facebook and this is when it was really a fun thing to do is check into a place, let everybody in your social network know. As part of that, we actually went out and said, “Hey, we’re going to build an aggregation app,” that aggregation app would let us run location data and background and users would opt into that. And we were transparent. But these were people that love to check in and they wanted to show people where they were. So that got us a lot of data where it said run the application and background, people are going to confirm where they are. So it’s ground truth data points. And then we had scientists that actually ran models against that to say, “Is there enough signal to predict a store visit occur?” And so in the old days, batteries used to die very quickly. And so you’d have to be very careful on how you collect or measure that data and process the data. So we did something that was kind of unique back then, we didn’t actually push it out to the cloud right away. We said store the data on the device, collect it, but then when someone charges their phone, there’s a flag when the battery starts to go, then sync that up and you don’t have to use the cell towers, but you can actually use the WiFi connection. They’ll be faster. So you had to find all these like novel hacks to solve that battery issue.

Matt McIlwain 14:04
Yeah, you guys were really great. Not only I think, you know, technologically speaking, also, culturally speaking, I mean, one of these things that I used to give you a little bit of a hard time about I don’t do this very often is you were pretty frugal. So just tell us a little bit about like, in those early days, you know why frugality was so important to you into the company.

David Shim 14:23
I thought of the VC money as my money, it was a very high bar to side what to spend against. And the way that I kind of addressed it was to say, “Hey, would I spend my own money in the same way,” and that let me make the right decisions for the business where we raised $300,000, $400,000 seed round, like that is nothing these days, but that was a very big round for me that we wanted to make sure and Shepherd that correctly. And the way that I wanted to go out and extend that even further was I took zero salary. So technically, I think I’m employee number seven or eight, because I was never on payroll. But that that was that extended the runway even further out, and that frugality actually helped out on the recruiting side because people started to understand like, this is a company that wants to be around for a long time, they’re not going to go out and flame out after three months because they spent all their money. And that let me recruit the right type of person. And that right mindset,

Matt McIlwain 15:12
and I think that that frugality did serve you well. And it was part of that it was one of the cultural cores of the organization. And what was interesting is that, you know, you needed to get to a critical mass of these consumers that decided, “Hey, I’ll trade off having your app running in the background on my phone.” And eventually, I think pretty quickly, kind of the trade was well Placed would give you something, a Starbucks gift card or other kinds of monetary appreciation for allowing us to have your data so it was a very explicit triple opt in tray, but it took time to build a critical mass of those folks, but because you were so capital efficient, I think it gave us the confidence because that was taking a little bit longer to collectively put some more money in together.

David Shim 15:53
I would say also the frugality also had hunger. Yeah, where he you had to be successful. You had a clock, it wasn’t something where I could wait six more months and kind of develop the code further try to test out these different ideas, you had to make a bet you had to go all in on the men, but that actually helped to the people that we brought on board as well. The frugality actually said, like, “Hey, we have a small amount of money, we’re investing it correctly. Now let’s go really aggressive and dive into it.” And that’s where people were wanting to stay. This is like the old school startups where people would stay till 9pm, 10pm, 11pm. Like it was nothing. And then we come back in early in the morning, but that was the culture that we had built. And we kind of extended that even further out where this is unheard of these days, but we had office hours, etc. So we, we said in the interview process, anybody who wants to join the company, we have office hours, nine to six o’clock, if you are not okay, with nine to six o’clock, you should not join this company.

Matt McIlwain 16:44
And what David means by that is that there is this expectation that we’re going to all be in the office together during that time window because we want to productively work together, engage with one another, and we’re going to make that commitment to each other. And yeah, sure there was going to be obviously people had a little bit of a here and there. And there’s gonna be times when you had to work later. But it was it was another interesting cultural dimension of the company. Before you know it, you had thousands of people that had made this trade and then even 10s of thousands of people, of course, it cost you some more money to get people to, because you had to market to them, get them to download the app store very nacent at the time. Eventually you started having enough data that you started to think about what might we do with this data that might be valuable in a kind of an anonymized, abstracted way to different audiences?

David Shim 17:31
Now, and that’s where the thesis was. The digital world is very measurable today. Like if you go to a website, they measure every possible action on the site, they try to get inferences on who you are when you visit the site. But when it comes to the physical world, there wasn’t a Nielsen there wasn’t a comScore, which are rating services to say how many people actually went into a Best Buy and how many people went into a Walmart, a Starbucks. And so the play for me originally was to say, let’s measure the physical world, make it as measurable as the digital world, and then the use cases will come. And the first use case that we had was called Placed Insights. And this was the idea that if you wanted to go to our website, you type in any business, let’s say Starbucks, we could show you how many people visited a Starbucks that month, we could break it down by day, our what other businesses they visited afterwards. And that got a ton of attention. Like we were in the New York Time, Wall Street Journal, and I was doing the press and this is where I probably should have someone else doing the press. But we had a lot of traction in market where people were talking with us, I had VP’s, CMO’s pinging me. The problem that I ran into, and this is where Matt was actually great was, and I didn’t think at the time I was like, now you don’t understand my business. I know what’s right. So we probably spent 18 months to 24 months, acquiring the data from users doing it in a very transparent way. Then we had the analytics where our team was predominantly there was almost no business people on the team. It was mostly data scientists crunching the data as well as engineers on building the app and processing it. We built this great suite got a lot of press. We were able to go in and for the first time ever tell someone how many people went into a given business on Black Friday, and was that up year over year, but people wouldn’t buy it.

Matt McIlwain 19:07
People liked it. They appreciated it. They thought it was interesting data and made for great media coverage. But there wasn’t a business model there that was a sustainable business model. It was kind of a researchy, novelty kind of thing.

David Shim 19:18
Absolutely. And this is where Matt did a great job. At first, he’s like, Hey, this is great. You’re getting a lot of traction. But let’s look at the pipeline. Like what’s the flow in from the meetings that you have to the actual in person that gets to an opportunity that turns into a contract, and we we had a couple wins, but it wasn’t something that was like replicable. It wasn’t like, hey, for every 10 we got two meetings in person that one turned into a contract. And that was strategically that was as an entrepreneur. The mistake I made was sticking too long to what I thought was right, versus I think this is where Matt did a great job of just pinging me just kind of reminding me like, what’s the revenue model? What’s the sales process look like? Are people actually buying this even though you’re getting all of these meetings and over time it’s a subtle process, but because it was never like you need to get revenue, it’s very much like, are you thinking about this and we got to the point where this is hard. It’s like a six to nine month sales cycle and we’re making 100 grand on a contract like this is tough.

Matt McIlwain 20:11
Probably not going to scale. One of the things that you did is you also noticed the rise of these mobile ad networks. And I think this is where, you know, while we might have been encouraging you to think about is there a real business model here, your insight around the attached to the mobile ad networks, you know, made a made a big difference in terms of getting advertisers to see the value in mobile ad attribution. Tell us about that.

David Shim 20:35
I take zero credit for the product that generated all the revenue and the acquisition that it drove from so one was the board kind of telling us “Hey, look for product market fit, you’ve got a great solution but you haven’t found the right product or services to sell to customers.” The big thank you will be to Ground Truth formerly known as xAd, where Monica Woo, who was their head of marketing reached out to me and said, “Hey, I see all this press about you. Everyone trusts the you’ve got really great data, what we would love you to do is actually take our ad impression data, bump it up against your store visits because we have an audience that opted in to let us measure where they go and tell us did that ad drive someone in the store?” I actually told her no for about three months. So I said, I don’t want to do this, like I am comScore Nielsen for the physical world. That’s a billion dollar company like this. Then I then you had mentioned like, Hey, what’s the process? What’s the revenue? How’s this flowing? Finally, we took it. And I said, Sure, we’ll do it. I’m getting enough pressure from the board. Let’s try something else. And it worked, where they’re like, “Hey, this is great. We’ll give you 10, 20 $30,000 for one report, we deliver the report like, “Hey, we want to do five more.” And I was like, okay, we’ll do five more report back to board a we get someone that wants to five more should we explore this like yes.

Matt McIlwain 21:47
Sounds like it’s a winner!

David Shim 21:48
They were growing at the time they were offering it to more and more advertisers. As advertisers received the report, they saw the benefit of measuring media to physical store behavior, so saying this address Someone in the store, they started to ask other publishers and mobile ad networks to include Placed. And that just snowballed where all of a sudden, without a sales team without a business development organization, we went from no business to, you know, 10s of millions of dollars, hundreds of partners on an annual basis. And we never actually grew out that function. But by the time we were acquired by Snapchat, we had over 400 publishers that were using us for in store attribution.

Matt McIlwain 22:26
Yeah, I think that that was just a high leveraged, you know, sort of frugal and smart way to scale your organization because it started to become the expectation that if you’re running mobile ads, where you’re going to be able to attribute that to whether or not people actually went into physical stores. You had this by now really built out healthy network of hundreds of thousands, if not millions of people that had downloaded the app, and you had a really great panel. So you could get down from a demographic level into a really precise level. And as you say, you know, you were doing 10s of millions in revenue growing very nicely. So what happened? Why did you guys sell to Snapchat?

David Shim 23:00
It was very interesting. So as a first time founder, you don’t know when you’re actually being courted a lot of times. And you had mentioned before we’re having meeting with this big internet company, even early days where we just raised a series A people would reach out to us and say, “Hey, do you want to meet?” And I didn’t understand the difference between Corp Dev and Biz Dev. It’s I go to these meetings, it’d be great. It’d be like, hey, do you want to come back again? I’m like, That sounds good. And I would tell you, like, I think they want something else. Yeah. And I’m like, I don’t think so, Matt, I think I just wanted the business deal with them. So we had a couple of opportunities. But as an entrepreneur, I would say one thing I would recommend to others and I’ve done this myself is never think about the exit until you’re right at that point, because the minute you do anyways, for my personal mindset is I’ll overthink it. I’ll start to go to that direction because now I’m thinking about, “Hey, if I have an exit, that’s great. My employees will make this much money. I’ll make this much money. Hey, what would I do with that money?” It starts to clear a path to go down that direction. I’m glad I didn’t do that because we had multiple offers or any indications of interest over the last kind of six years of the business while we were independent. And with Snapchat, it was really they came to us and said, We want to partner with someone location space.

Matt McIlwain 24:08
Tell me about what you look for because you get, you know, young entrepreneurs coming and knocking on your door to get your advice. And sometimes have you consider making an angel investment. What do you look for in an entrepreneur, that’s at the the early early point of their journey.

David Shim 24:23
So I’m probably the worst investor in the world when it comes to seeing opportunity.

David Shim 24:26
But there are things in terms of what I look for. But I will say the reason why I’m the worst investor just so people know, Madrona incubated so that you have a space they gave us, internet, they give us desks, all these things that were great. And Madrona has this program back then where it was more of a section of the office that we worked into, but it was incredibly helpful because I didn’t need to hire an executive assistant office manager. Right behind the wall. There was another company that was being founded that I thought was a horrible idea. I was like, Who would ever do this? It was called Rover.

David Shim 24:56
There were dogs running around the office and they were having accidents and I was like “Is this a real company?”

Matt McIlwain 25:01
What is Madrona thinking about?

David Shim 25:03
And looking back at it, I should have said, “Can I invest in this?”

Matt McIlwain 25:09
Well, they’re really fun thing about that, of course, is that both you and Aaron Easterly, who’s the founder and CEO of Rover, were ex aQuantive folks. And in fact, Brian McAndrews ended up being on the Placed board prior, who was the CEO of aQuantitive. And a longtime friend here at Madrona, it does come down to people.

David Shim 25:26
Absolutely, absolutely. And then I would say the investments that I’ve done, it’s been people that I’ve it’s very similar to kind of how you invested in Placed It was about the people that I know. So when they’ve had success in a career that I believe that they’re really the best or one of the best in a certain area or field. They’ll come to me and they’ll say, “Hey, would you be interested in investing?” And lately, at first I dive into the business model, I’d asked a bunch of questions. Then I realized, like if you’re giving 20 or $25,000, that’s a lot of money. But at the end of the day, they’re trying to raise a really big pie like I don’t want to distract so you really kind of have to bet on the person more than the idea to live have cases and I think that has its early days because I’ve only recently started investing. But I think those companies that I’ve invested in where it’s bet on the person, it really does mean a lot more from a return perspective versus Hey, it’s a referral from somebody else. I think this person’s good, but don’t know as well

Matt McIlwain 26:17
Maybe share a thought or two on where you think the big opportunities are going for areas that you are more excited about. And obviously, as you were just saying, you know, you want to have people that intersect with those opportunities that can do something really special. But as you think about opportunity spaces, what are areas you’re interested in,

David Shim 26:33
one of the biggest areas that I’m interested in as part of Foursquare, but I think from an investment thesis standpoint is privacy. I think privacy is something that people care about. There’s a lot of news stories, but there hasn’t been a company that has been able to kind of address privacy. I think the closest that you’ve been able to see is things like ad blockers where that’s great, you block an ad, but it doesn’t really help the ecosystem at all from a publisher who creates the content. It helps for the user to not see ads, but you also get a blocked area where there’s no ad. So it’s not a great experience. There are things where there are bad players in space around advertising and measurement…

Matt McIlwain 27:09
where you want to block those people and consumers want more ability to control who gets access to their data. And I think there is a big play there to say, who actually controls the data. And how do I meter that? How do I monitor that, as a consumer, I don’t know what the actual play is going to be. But that is something that I’m very interested in. And it’s on the privacy side of the business. And you guys were also I think, very early to go back like 2011, 2012, 2013 and understanding the potential in the data and using both AWS from a cloud perspective and then also, you know, hiring some some smart machine learning data scientists to leverage that. Things have come a long way since then, you know, do you see those areas accelerating as well?

David Shim 27:52
Absolutely. I can see on the cloud side, more services going on there. I think as a part of Foursquare, being the leader in location, we are getting a lot of people asking to say, “Hey, can you put your services in the cloud? Can you process data in the cloud,” and we are exploring those things today, we don’t have anything to announce specifically. But that is where the market is pushing. And people want the data within their walls, because that lets them kind of control who has access to it. And I think this goes to the privacy theme, where if you’re a company, you might have a partner that you’re interested in. But you don’t necessarily want to give up all your data. Now imagine being able to process it in the cloud in a protected environment, and then taking the data and the value out and then you deciding how you want to use it. So it becomes more of a relationship of a service than it is a product at the end of the day.

Matt McIlwain 28:36
Right? Well, maybe as we wrap up here, you know, if you’ve got any last words of wisdom to entrepreneurs, having been through this journey since day one have Placed and seen a lot of different angles on it over time. What would you say to the you know, kind of the the entrepreneur who’s either trying to decide if they’re going to take the leap, maybe leave one of the big companies here in town to go start their own business or they’ve just taken that leap. The most important thing or two that they should really focus on.

David Shim 29:01
Where I’d say I made the right decision was to quit a company that was doing incredibly well where my options were worth a lot. But it was a decision point where it was an idea that I wanted to go after that. And I was willing to walk away from all this opportunity. When I talk with founders from an investor’s standpoint, a lot of times they have their foot halfway out the door, but not all the way out. And I think a lot of investors will disagree with me. But my take is that it is important for you to go all in. You don’t have to take zero salary like I did. But it’s you need to go all in and say, can you actually make this work? By doing it as a side project? I think from an investor from a an advisor perspective, it’s kind of like if you don’t believe in it enough, why should I believe in it, and I think you should, if you believe in the idea, you should make the full jump. Now with that said, I made the full jump where I spent money to hire a friend that went to different conferences, and he validated this this idea as possible. So there’s also you make the jump You make an educated jump to say, “Hey, does this idea exist in the marketplace? Is this even possible to do?” And there are a lot of entrepreneurs, and I’m sure you get this a lot where they haven’t done the research to say, Is there somebody already in this space doing this? And I think that’s important. I think the second is really being able to go in and say, an idea has failed. When I saw I didn’t have product market fit for placed insights, I should have moved more quickly, where I did see product market fit versus I was a little bit hard headed as an entrepreneur and saying, like, my vision, my way, I believe I have the force to make this a thing. And in reality, you can do that a little bit, but not all the way. And I think the easier path was the one where the market said do this. And then I was able to apply the same type of force. And I was able to accelerate that to a very large business.

Matt McIlwain 30:48
Well, it was such a pleasure to work with you for all those years. I miss it and I’m looking forward to the opportunity we get to partner together again and building a great business. So thanks for spending time with us today.

David Shim 30:59
Thanks a lot, Matt.

Erika Shaffer 31:01
Thanks for listening. You can find Placed powered by Foursquare on the web at If you like this podcast, please share it with your friends and subscribe. We have more great episodes coming in 2020 so stay tuned.

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Disrupting the TV Ad Industry with Sean Muller, Founder of

Madrona funded in 2013 based on the idea that TV advertising was ripe for disruption. Social network signals measured impact of the ads, and digital technologies enabled to report on which shows ran which ads. Within a year, the company narrowed its focus to provide advertisers with stats on where their ads ran, where their competitors ads ran and the engagement with them. Fast forward to today and is the leading provider of TV attribution – how effective was your TV ad at spurring customers into action to go purchase your product.

In the latest Founded and Funded, Madrona Managing Director, Len Jordan, sits down with founder, Sean Muller, to talk over his journey from wanting to know more about who was responsible for the creative in ads to tying effective advertising to business outcomes.

They talk about how these digital media natives who founded didn’t entirely realize what they had in terms of a data and business asset when they first launched. Could it be that TV advertising was not measured in real time in 2014? (Yes!)

Sean recounts how they got their first customers – a semi-cold call from ESPN – and the targeted use of the mute button during conference calls. He also talks about how having pivoted to a provider of metrics he foresaw that they had to take a bold step to bet the company on doing a deal with a TV manufacturer to take their business to where it is today – the go to source for TV attribution data.’s journey from startup to established provider of TV advertising and business outcomes data is one of both finding the market and then seeing where it could go – and pursuing that course. Available here and on all podcast platforms!

Indochino’s Drew Green on Surviving a “Success Diaster” and Building Meaningful Partnerships

(Drew on stage in China at the 40th Anniversary celebration of the Dayang Group October 2019)

In this episode, Scott sits down with Drew Green, the CEO of Indochino, a made to measure men’s clothier based in Vancouver, BC. Indochino has 50 storefronts where style experts measure and customers can feel and see the fabrics. The company started with suiting and has been adding casual clothing over the last couple of years with an outerwear line that launched this fall. Additionally, Indochino has teamed up with the Yankees, Red Sox – and most recently with RJ Barrett, a Canadian basketball player who just signed with the Knicks to promote Indochino’s menswear.

Drew joined Indochino in what investor Scott Jacobson described as the company entering a near death experience. Why did he do it? Drew recounts the story of the decision to move his family from Toronto to Vancouver BC which revolved around a conversation with Scott during half time of a football game.

Startups have a hard time partnering with larger companies. A partnership was crucial for the success of Indochino. Drew talks about how a great partnership is not hard to understand but is sometimes difficult to execute. For it to be a partnership, each party has to benefit from the relationship. When Scott and Drew traveled to China in 2014, to set up the partnership with the leading suit maker in China, the Dayang Group, they translated a deck (and hoped it made sense in Mandarin) and relied on an interpreter to communicate a deal that would save the start-up and put it on the road to success.

Drew, Scott and the Dayang Family, Fall 2019 at the 40th Anniversary celebration of Dayang Group

In Fall of 2019, Scott and Drew returned for the 40th anniversary of this company and Drew shared the stage with Warren Buffett (Drew was in person, Warren by simulcast) and it was clear that Indochino has become an incredibly important part of Dayang’s business over the last five years. A real partnership had been forged.

Click here to listen to the full podcast on iTunes. Also available on all other platforms.

How to Choose Your Early Customers with an Eye to the Future, with DocuSign Founder, Tom Gonser – Founded and Funded Episode 4

In this episode of Founded and Funded, Madrona Managing Director, Len Jordan speaks with the founder of DocuSign and Seven Peaks investor, Tom Gonser. DocuSign is a Seattle success story – and Len was an investor during his previous role at Frazier Technology Partners.

DocuSign was founded during a time when installed software was the name of the game and the DocuSign team recognized that using the web to enable secure access to documents was going to be how the tricky problem of document signing was going to be solved. It just took persistence to convince the market.

Tom and Len discuss how a company that is changing a process that is both regulated and used by small and large companies alike is a complicated process. You have to start with one industry (real estate in this case) but then recognize when there is the opportunity to broaden the customer scope. This is often realized through selling to small companies initially to provide low levels of monthly revenue and product feedback so that you can level up to larger scale enterprise companies that will provide confirmation to the broader market that the solution is needed – as well as the revenue to grow.

While DocuSign had some early fundraising success, Tom reflects on how the middle years were the hardest. During this time the team was working on the product, the market was experiencing a recession, and their revenue and progress stalled somewhat, but this was also the time when their focus on creating a solution for smaller companies sustained them.

Len and Tom also talk about how you build a successful team from zero to a billion. Tom made the unusual decision to not be the CEO early on. Tom’s experience in previous companies had shown him that his passion was product and customer experience and he pursued that at DocuSign. Tom addresses how the most important element to growing a company is making sure you have the right people in the right roles as you grow – and recognizing when a role has outgrown a person or vice versa. Finding people in the early days who can be flexible in their changing roles as the company grows is crucial to retaining the corporate knowledge and culture while also enabling the company to grow as it needs to.

Product roadmaps are often influenced by existing customer requests for features. Tom and Len talk about building customer engagement and the balance between charting your own product future and building to customer expectations. Many companies struggle with this and Tom admits that sometimes DocuSign got it right and sometimes they didn’t.

Listen below or on any of your favorite platforms and let us know what you think at [email protected].

Building a Team and a Culture at Amperity with Kabir Shahani – Founded and Funded Episode 2

Our second episode of the Founded and Funded podcast features the founder and CEO of Amperity. Amperity works with brands like Starbucks, Alaska Airlines, MGM Resorts, Gap, Planet Fitness, and Brooks Running to help them understand their customers. The company launched in fall of 2017 and from the beginning was purposeful about their company culture. Shannon Anderson, Madrona’s Director of Talent, talks to Kabir Shahani about the process they used to develop their values amongst the founding team and how they have kept it updated over the last two years of growth.

Listen below or on any of your favorite platforms and let us know what you think at [email protected].

Earlier this year, when Amperity moved into a new space, they created a book about their story and that book inspired this podcast (which is not available on Amazon – you have to join the company to get one).

Kabir talks about creating and living a company culture, what he has learned as a manager and CEO about management, and the romance of being a creator and entrepreneur. One of the elements Amperity’s team used to create their initial set of values was a personal philosophy document. Below is the process that Shannon Anderson uses with our new companies who are not looking to spend a lot of time thinking about these big topics.

This should take only 1 hour. If you take longer, you are over-analyzing.

Step 1: Pull together everyone from your founding team for one hour. Set the time. Each person works silently to write down six single word adjectives that reflect your personal values at work (how you personally like to work with your team and your customers, how you like to get things done, and the behaviors you value in working with others). (10 minutes)

Step 2: Each person writes each of their adjectives on a sticky note. Paste all the sticky notes on a common wall. (5 minutes)

Step 3: Step back as a team. Reflect on what you see and then collaborate. Do a values sort, refining all the sticky notes into six categories of adjectives. Invent a new adjective, as needed, to reflect the meaning of the collection. These are your company’s six core values. (10 minutes)

Step 4: For each of the six core values write down the signals and noise. Signals are “what this behavior looks like in action”. Draw these signals from the adjectives in step 3, and from people in your life who model this attribute. Noise is not necessarily the opposite of signals but are sometimes confused with signals. For example, someone who is unwavering, dogmatic, inflexible might be mistaken for passionate and committed. Or, too much of a signal (works hard, simplifies and gets things done) might be noise (works hard, creates complexity or works on the wrong things). Again, pull from the model of real people in your life where you have seen noise that looks like signal. (20 minutes)

Step 5: Thread this language into your everyday meetings, performance reviews, interviews. Hold each other accountable and demand that everyone behaves congruently with these values in good times or they will not serve you when the going gets rough.