Startup exits—or “liquidity events” as they call them in the biz—are great. And when the exits are multiples of the amount of capital a company has raised, they’re great for both the founders and the investment community. But sometimes the impact of those exits and their impact on the Portland startup community can be a little more nuanced. So I thought I’d share some thoughts on why the recent Cozy and Radar exits are important to our community.
Two exits happened at the same time. While Portland has been home to a number of successful exits, those exits are often a solitary blip on the calendar. Followed by a long pause. And then another event. Pause. So it’s really difficult to create or maintain the momentum of those liquidity events. With two exits happening practically simultaneously, this may be the chance to see that momentum form.
Local investors likely saw some upside in these deals. Cozy had investment from Seven Peaks and Radar had investment from Rogue. I find this important because one of the keys to making our ecosystem self-sustaining is to have local companies raising money from local investors, so that when an exit happens, the money stays within the ecosystem — and is hopefully redeployed to the benefit of other venture funded companies. We’ll have to wait and see if that happens. But, at the very least, let’s hope that this has been good for local investors’ IRR — which is important for those investors as they try to raise new funds.
This happened a lot more quickly than usual. Cozy only took six years to exit. Radar only took two. The latter of which is really quick for Portland. (RFPio was another local company that got to a private equity liquidity event in short order, recently.) This is important for a couple of reasons. One, companies growing and exiting more rapidly have the potential to create more serial entrepreneurs in town. Instead of founders spending 12-15 years building one company, they may have the opportunity to build two or three in that same time period. And second, as local investors realize returns more rapidly, there is the possibility that risk aversion may start to erode — and that new players will be attracted to our ecosystem
Radar was one of those increasingly rare spinout companies. Once a strength of our region, spinouts have become more of a rarity. Will Radar’s success signal a renaissance of that sort of thing? That remains to be seen. But it would be great to see more companies partaking in this sort of thing.
The private equity firm that invested in Radar is the same firm that invested in Zapproved. Any time I see funds and investors making multiple bets in Portland, it draws my interest. Is it a trend? Maybe not. But it’s worth keeping an eye on. Especially as more of our homegrown startups approach the size that is of interest to private equity.
These companies will remain in Portland and continue to grow. While exits are beneficial, continuing to grow the talent and companies in the tech sector is even better. And will be one of the contributors to long term stability around here. While Cozy now becomes another regional office the growing number of outposts around here, they are doing so as a complete business unit. With mission critical operations. And those offices tend to be more resilient than a single function office like customer support.
And finally, lest we forget. Cozy relocated its headquarters from San Francisco to Portland. Like Jive, Puppet, Simple, and others before them, Cozy was started somewhere else before they became a local startup. And they were successful in building something of value here. That shows that Portland has potential. But it also highlights that potential to their investors — who might not be as familiar with Portland — and, of course, to other venture backed companies that may be considering moving here.