Tag: Madrona Venture Labs

Our Investment In Strike Graph

Cyber security is no longer a “nice to have,” it is table stakes. Today, we are excited to announce our investment in Strike Graph. Strike Graph is building an intelligent platform to help B2B companies manage the difficult challenge of setting up their cyber security controls and then passing and maintaining the strict annual cyber security certifications necessary to build their business.

In today’s world of data-driven companies, a business’s greatest asset is less and less often related to any particular physical object and more often related to the data it collects from its users and customers. This data, which comprises myriad inputs, is a foundation that leads to insights, competitive advantages, and strong business models. However, it rarely sits in a silo. Bits and pieces must flow through and work with other businesses in order to be most effective. Consider how some companies upload their contracts to DocuSign, entrusting DocuSign with a specific task (e.g., getting multiple parties to sign on the dotted line) but also entrusting that DocuSign does its part to keep that contract private and secure, and only accessible to those who are supposed to see it.

Many data flows like this are common and necessary nowadays, and it is each company’s responsibility to maintain strong cyber security practices to securely manage that data. To do this, companies are being required to undergo strict cyber security audits for a variety of certifications including SOC2, ISO 27001, FedRAMP, and others. These annual audits are incredibly intensive and time consuming but achieving and maintaining certification has become a crucial requirement by these companies’ customers and partners.

Strike Graph was founded with a vision of helping B2B companies improve their internal processes that sit at the heart of this cyber security – and ultimately, sales – issue. Strike Graph has built an intelligent application that helps SMBs and Enterprises walk through the process of identifying their risks, choosing the appropriate controls, and automating evidence and testing – all with an end-to-end platform that helps them prepare for and achieve these annual cyber security certifications.

We met CEO and co-founder Justin Beals when he was incubating the idea for Strike Graph at Madrona Venture Labs. Justin is a top-notch product creator and technology leader. Most recently he was CTO at Koru leading up to its acquisition by Cappfinity. With the support of the MVL team, he was able to prove out the concept for Strike Graph, build a working alpha version of the product, and recruit co-founder Brian Bero. We were delighted when Justin and Brian joined forces, as Brian has deep domain knowledge both from his time as co-founder at Apptio and his own venture, Greytwist. Together they have rapidly built and launched the product and have onboarded a staggering number of pilot customers since their formation at the beginning of 2020.

This team is going after a large and significantly growing opportunity to serve a sharp pain point for B2B businesses. Strike Graph defines what we call an intelligent application, one that is using smart technologies to define the workflows and risks, and then automating the tracking and collection of evidence to support the ever changing environments. We are excited for Justin, Brian, and the team for their success ahead. And we are just getting started.

Welcoming Zeitworks To The Madrona Family!

Today, we are thrilled to announce a $4.5 million seed financing in Zeitworks, a company incubated at Madrona Venture Labs, that is automating process discovery, mapping and measurement. We are also excited to partner again with Ryan Windham – who previously was the CEO of Cedexis in our portfolio – and welcome our new co-investors JAZZ Venture Partners, and entrepreneur Spencer Rascoff, founder of Zillow.

Most investments we make at Madrona follow the time-tested model in which an entrepreneur pitches us his/her vision of how to change the world and we end up partnering because we believe that is the right team taking on an important market opportunity for which the time has come. And we also need to believe that we can directly contribute to their success. Occasionally, we have bent that model and incubated a company at Madrona via Madrona Venture Labs, that has a full fledged incubation program. Zeitworks is the outcome of one such collaboration in a space that we have a deep conviction in.

Intelligent applications have been at the core of our investing strategy for years. The proliferation of data, and the ability to process it and derive insights has changed both consumer facing and enterprise facing experiences. In the last couple of years we have seen this extend to automating tasks and we have become more involved with companies looking to change how work gets done, as evidenced by our investment in UiPath, the leader in RPA. But understanding the work and the process is a required element to actually automating.

Businesses in every industry execute hundreds of repetitive business processes for wide-ranging use cases such as claims processing, employee onboarding, order processing, returns management, etc. to name just a few. The success of such processes, and in turn of the businesses executing those, critically depend on the efficiency of those processes and the ability to improve their efficiencies. However, in an overwhelming majority of cases, the processes are not documented – or, at least poorly documented – and not measured accurately enough. As a result, businesses struggle to understand the true costs of their processes, identify the bottlenecks and make improvements that would have the highest ROI.

Traditionally, process discovery and modeling has been largely manual – serviced by consulting firms such as Accenture, Deloitte, PWC, etc. – and as a result, costly and time-consuming. However, with every business undergoing digital transformation, automated discovery and measurement of processes is increasingly becoming key to success.

Zeitworks is building a process discovery/mining product to automatically map, measure, and improve business processes across all applications, without IT integrations, consultants, interviews, or workshops. The operative word here is “automatically:” Zeitworks collects data on user activity and events via desktop sensors, applies Machine Learning to automatically discover and map processes, and analyzes and measures those processes to understand, optimize and automate those.

While process discovery and mining is not new, what makes Zeitworks possible today is the convergence of three macro trends – (a) the availability of “infinite” compute thanks to cloud computing, (b) the ability to collect large volumes of high-fidelity data, and (c) the maturity of ML/AI techniques to identify patterns and extract unique insights. Capitalizing on advanced ML algorithms and the computing ability to process vast amounts of data, Zeitworks can help identify repetitive processes and provide insights into how they are being accomplished now and how they can be completed more efficiently. Equally importantly, Zeitworks requires no deep technology integrations, enabling teams to deploy the software and realize value in a matter of hours.

From a market need standpoint, the focus on digital transformation and increasing efficiencies is driving business users’ awareness of the benefits of analyzing and understanding their own processes. We believe that Zeitworks will be a key enabler in that inevitable digital transformation of enterprises.

At Madrona Venture Labs (MVL), the founders Ryan Windham, Ben Elowitz and Matthew Holloway tested the idea behind Zeitworks extensively, with input from hundreds of prospective customers and us, while assembling a world-class team of product and technology leaders to go execute that vision. MVL continues to be core to our work with early stage founders – the MVL process includes both ideating and testing as well as partnering with a wide variety of technical and business founders – and Zeitworks is a great example of a world-class founding team taking on a market opportunity we have a deep conviction in.

We could not be more excited to partner with Ryan and team and we look forward to helping them build the next billion-dollar business in enterprise software!

 

 

 

Our Investment in Uplevel, Helping Engineering Teams Become More Effective

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

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

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

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

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

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

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

Can Your Seed Stage Investors Go the Distance?

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

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

Finding Long-Term Partners Upfront

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

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

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

Going the Distance with Capital and Value-add

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

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

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

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

Some Questions to Consider

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

Spruce Up, A Madrona Venture Labs Spinout For AI+Home Designer Service

Pictured in photo: Spruce Up + Madrona Venture Labs Team

At Madrona Venture Labs we know it’s all about the founders and we could not be more confident in Spruce Up co-founders Mia Lewin CEO and Mike Dierken CTO. Today, they announced $1.5M in funding from backers known for picking winners in marketplaces, AI, ecommerce and consumer — Two Sigma Ventures, Madrona Venture Group, Maveron, Female Founders Fund, and Petersen Ventures.

Mia is everything we dream of in a founder CEO and it is more than the fact she is a three-time founder, has design domain expertise and holds a Stanford GSB degree. Mia is deeply passionate about design at the core and it stems from her Scandinavian roots. Mike Dierken is an incredible complement to Mia with his background at Amazon and McKinsey & Co. and the full-spectrum startup experience. His hands-on experience building ecommerce platforms and machine-learning recommendation systems could not be more relevant. We love this team.

Spruce Up is the smarter way to design your home. By applying data science to the designer workflow, the shopping service bridges the gap between design inspiration to low-cost, highly personalized design implementation. Thematically, the Spruce Up concept fell right into our focus on vertical ML/AI and early on we collectively identified a unique opportunity to do for home design what StitchFix has done for apparel. The DIWM (do it with me) segment of the home design space is a massive $75B+ market and although there are competitors, most are positioned upmarket in the DIFM (do it for me) category.

Our journey with Mia started back in June of last year after a chance meeting at Madrona resulted in her accepting a CEO-in-residence role with MVL. We agreed to explore a nascent concept we were researching in the garden design space which was inspired by Ben Zulauf, engineering partner at MVL. Given Mia’s deep domain and founder experience in design and ecommerce, we quickly realized that if we are going to do anything in this category it should be with her. So we formed a strong team with design and engineering expertise, including Ben Zulauf, Ejiro Akporobaro, and Jason Flateboe (founding designer of two consumer ML, ecommerce startups). Over the course of eight months we interviewed dozens of designers and hundreds of target customers, built several light-weight prototypes to test concepts and on-boarding flows, and pivoted along the way. Jay Bartot, MVL CTO and serial ML startup CTO, rode shotgun on the investor roadshow and outlined the technical vision for the company. Early exposure to the MVL investor network resulted in a lead investor term sheet from our partner Two Sigma Ventures and an investment from Maveron and access to our talent network resulted in co-founder CTO Mike Dierken joining the team. It has been an honor to be part of the earliest of formation days with Mia and Mike and we look forward to supporting them in the future.

This is just the beginning and we invite you to be a part of the Spruce Up movement — sign up now and get a free Spruce Up (personalized interior design advice) when the company launches later this year.

Rep the Squad, the Latest Madrona Labs Spinout

Bringing innovation to the $18B sports apparel market

After a year in development at Madrona Labs, our fifth company, Rep the Squad, launched yesterday. The response was enthusiastic (ESPN, USA Today, Geekwire) – as the company aims to power sports passion throughout the country and build community in every city. The latest Madrona Labs spinout follows in the footsteps of companies where Madrona partnered from Day One with the founders (Rover, Redfin).

Rep the Squad is a new subscription service that provides fans unprecedented access to a wide variety of licensed sports jerseys for a monthly membership fee. We believe the company speaks directly to the modern passionate fan who is interested in “access over ownership.” These engaged fans number in the tens of millions and they spend thousands of dollars every year supporting the teams and players they love. Rep the Squad empowers them to rep multiple players, jersey styles, and avoid the pitfalls of player trades or even a child’s growth spurt.

We could not be more proud to partner with co-founders Brian Watkins and Alex Berg. They exemplify the best of what we look for in Madrona Labs spinout founders — passion for the market (sports), deep domain experience (ecommerce), and the proven grit and resilience needed to take an early stage startup to the next level. Brian and Alex worked together at both Ritani and Blue Nile and have brought together an exceptional team of ecommerce veterans.

Together, we have been able to assemble a uniquely Seattle startup team across the board. Local venture capital firms Madrona and Maveron were the first to commit to the $1.5M funding round. Seahawks Pro Bowler Doug Baldwin and Mariners legend Edgar Martinez, who’s number 11 jersey was retired earlier this month at Safeco Field, personally invested. Seahawks All-Pro Richard Sherman, who is a big-time jersey collector and swapper himself, signed on as the Rep the Squad brand ambassador.

One of the advantages of operating a startup studio out of a venture capital firm is benefiting from the broader team and ecosystem. Ryan Metzger, a die-hard Seattle sports fan and Madrona’s director of growth marketing, not only came up with the jersey rental concept, but he also worked with Aaron Wilson and others from our team in the early days to validate the idea and introduced us to CEO Brian Watkins, who he had worked with over a decade ago at Blue Nile. Our process consisted of market sizing, competitive analysis, hundreds of in-person interviews, ad-driven customer acquisition testing, and an in-season Seattle Seahawks minimally viable product (MVP) to test unit economics and operational assumptions. The project benefited from Madrona’s existing relationship with Seahawks players and connections to the NFL Players Association, in which Scott Jacobson serves on their OneTeam Collective board of directors.

One of the advantages of operating a startup studio out of a venture capital firm is benefiting from the broader team and ecosystem.

We are thrilled to be a part of the early days of Rep the Squad and invite you to join us. To get started simply choose your favorite jersey and sign up. NFL season kick-off is just one week away, so what are you waiting for?!

Madrona Labs Adds CTO, long time entrepreneur and big data, machine learning, computer vision technologist, Jay Bartot

New Role Brings Deeper Level of Technology Expertise to Madrona Venture Labs Team
We are thrilled to announce that Jay Bartot has joined our Madrona Venture Labs team as Chief Technology Officer. Jay has been the cofounder of four successful startups, each of which leveraged big data and machine learning to provide targeted services to consumers and businesses. These startups include Farecast, where Jay and I partnered to change how consumers purchase airline tickets by using algorithms to predict airfare price fluctuations.

Joining Madrona Venture Labs is like a homecoming for Jay, as Farecast was incubated at Madrona Venture Group and he worked closely with Madrona’s Managing Director Matt McIlwain and Venture Partner Oren Etzioni in the earliest days of the company’s formation. At Farecast, Jay and I formed a highly productive engineering and product partnership and we aim to bring that same collaborative spirit to our Labs culture.

Jay’s other startups include AdRelevance, acquired by Media Metrix, Medify acquired by Alliance Health and most recently Vhoto, acquired by Hulu. Jay brings a wealth of deep technical and engineering leadership experience to our team and in support of our spinout founding teams. With Jay onboard, we will look to explore new, innovative technical startup ideas that leverage his experience in machine-learning and data-mining.

Jay is one of the most creative and inventive engineering leaders I know and we could not be more excited about our future with his influence and leadership.