Madrona’s mission is to help positively transform the world by partnering with incredible entrepreneurs to build lasting and significant companies. Every March at our Annual Meeting, we provide a progress report to our investors – primarily university endowments, foundations, and families who are aligned with our mission. This week, for the first time since 2019, we gathered over 100 people in Seattle to reflect on and look ahead to the opportunities created by entrepreneurs who take risks, endure setbacks, and think long term.
We discussed the importance of having prepared minds around investment areas where we believe technological and societal change are creating opportunities for innovation. We highlighted several founders and their companies where we have been part of the journey from Day One for the Long Run. And we described what we call the Founder-Market Fit Triangle, which focuses on the importance of curiosity and continuous learning through the power of asking “Why?” Before explaining what we mean by The Power of Why, here are highlights from our annual meeting.
People frequently ask us what we look for in the very early-stage founding teams that we back. In short, there are four core elements to Founder-Market Fit, and each element is grounded in a “why” question. We call it the Power of Why.
People frequently ask us what we look for in the very early-stage founding teams that we back. In short, there are four core elements to Founder-Market Fit, and each element is grounded in a “why” question. We call it the Power of Why
We’ve had the opportunity to help founders embrace the Power of Why for many years. I think back to one of my first investments over twenty years ago in Isilon Systems and the problem Sujal Patel and Paul Mikesell were solving for media companies wrangling large files and volumes of files that needed to “scale out” rather than “scale up.” Or Turi, which was founded a decade ago by Carlos Guestrin, Yucheng Low and others affiliated with the Allen School of Computer Science & Engineering at the University of Washington. Turi was one of the first horizontal AI and ML platforms, and it went on to power hundreds of intelligent applications inside Apple devices. And more recently, Anoop Gupta and the SeekOut team saw the opportunity to leverage data and ML to create a better way to recruit and retain employees. One of the most important attributes for founders is to be endlessly curious and open to new information and insights. In that curiosity, there are four “whys” every founder must ask themself when it comes to assessing their Founder – Market Fit for a potentially compelling company journey.
Why? A founding team must deeply care about why a problem exists and why it hasn’t been solved better before. Why is something broken? Why does so much friction exist in solving that problem? Why have prior solutions become outdated or inadequate? The problem can be getting your machine learning models efficiently deployed in production or rapidly and accurately distinguishing cancer cells from healthy cells. There are many important problems in the world, but it is a founding team’s deep desire to understand why that problem exists for potential customers and why it isn’t being solved better today that lays the groundwork for being the best solution builders.
Why Now? My college soccer coach loved asking us to “do the same thing only different” in practice, which is a metaphor for getting the timing right. In company building, that timing is often based on changing technological and societal forces we can understand but not directly control. Why did “grid computing” largely fail in the late ‘90s, but cloud computing successfully emerged a decade later? Perhaps the combination of standardized hardware, scalable virtualization software and developers who were frustrated with the time and hassle of accessing infrastructure all played a role. Or, why did Friendster and Classmates.com fall short of their potential when Facebook and LinkedIn soared? Founding teams need to have a firm grasp on why now – despite all the skeptics – is the time to launch a new and compelling solution. We love backing founding teams who turn the improbable into the inevitable. These teams are at the center of the Founder-Market Fit Triangle. And the core question they need to ask is: Why Us? Why are they the team that can be the foundation for building a company and products that might solve a real problem and positively change the world? Why This? Why can a new solution work to solve a specific problem better today where a solution may not have worked or worked as well before? And, that new solution can’t just be better. It must be “better enough” or 10X better to get the customer to overcome their anxiety, inertia, and risk-aversion for trying new things. While new products are never perfect, they must be able to solve a specific problem in such a compelling way that the early adopters rave about it and tell their friends – creating market momentum and eventually an ecosystem flywheel. In the beginning, founders often are “directionally correct” on the solution they have in mind, but they need to keep an open mind and triangulate the customer and market data they receive to move from founder-market fit to product-market fit. And that requires the self-awareness to recognize the skills and team members they will need to build, sell, and support their product or solution.
Why Us? We love backing founding teams who turn the improbable into the inevitable. These teams are at the center of the Founder-Market Fit Triangle. And the core question they need to ask is: Why Us? Why are they the team that can be the foundation for building a company and products that might solve a real problem and positively change the world? What is their set of experiences, passions and skill sets that drive them to succeed? What are their unique insights or “secret understanding” of the customer’s problem and the potential solution that can now be built and adopted? And why do they believe their team and culture will scale to be a market leader in the emerging market? The founders are the ones that stitch the outer edges of the triangle together to attract employees, capital, partners, and customers – they are the ones who build world-class companies that end up being the big winners.
Founder-Market Fit does not mean you must have years of experience in the market. It doesn’t mean knowing the path you are on with certainty – ask any founder who started with an idea and is now in the market, and they’ll tell you that you learn along the way. But it does mean asking these “Why” questions and then asking them again and again. Coming back to these “Why” questions supports founders, employees, and companies on trajectories that solve problems and build value for customers, employees, and shareholders.
We also reflect on these questions internally at Madrona as we hope to be the company-building partners with the most compelling founders working on the most important problems. We approach early-stage investing with prepared minds, so we can identify and understand themes and invest behind amazing founders who have aligned perspectives on how the world is changing. But that also begins with asking ourselves, “Why?” Why is this team and solution going to win? Why is this industry sector going to fuel the next big shift, and how? Why is the timing right to create a solution that is so much better that customers will just have to buy it? And, most importantly, why are we the right partners for a specific set of founders to leverage their fit with the opportunity? We must feel confident in all these answers as we evaluate new investments often at the earliest stages. When we are confident, though, and make that early-stage investment, we commit fully, investing in those amazing teams and their companies from Day One for the Long Run.
We partner with founders and their teams on what is often a decade-long journey. These partnerships are anchored in shared trust, strong alignment, and a commitment to rolling up our sleeves and investing time and capital to build great, lasting companies. We are there in the early seed days. We are there to help dial in and find product-market fit. We are advisers as they scale once they’ve accelerated growth and success, and we ultimately help guide them through an M&A process or public offering. It’s been our honor to work with Madrona portfolio companies and founders in 2021 and the 27 years across our history, and we are eager to find and back founders just as passionate about the Power of Why as we are.
