While it’s not the usual kind startup I tend to cover around here, db clay is such an awesome Portland story that I can’t help but spread the news. Especially when it could mean the survival of the company.
When it comes to Oregon companies competing for Angel funding, I’m always going to pull for the Web-based apps. It’s just kind of how I am. And those folks are definitely starting to turn heads, whether it’s at speed pitching events like the Big Idea Bash or through competitions like Angel Oregon.
I like to tell myself that that is part of my charm.
But honestly, I thought—rather than enter with pre-conceived notions—it would be better to get the story straight from David Almodovar of CreditSuisse.
Still, I have to be honest, I did walk into the meeting expecting one of two things to happen. Either I was going to find Dave perched atop a giant treasure chest overflowing with gold coins and jewels, cackling as he screeched in a Dr. Evil-esque manner “Here’s one hundred meeeellion dollars that you’ll never see.” Or I was going to find him wide-eyed and rapt with attention, hanging on my every word about the startup community in the Silicon Forest, until he finally gathered his wits and managed to utter, “Let me grab my checkbook. Would $50 million do?”
In reality—shockingly enough—neither of those things happened. I didn’t find a maniacal villain or babe-in-the-woods filled with naivete. Instead, I found a guy simply doing the job he was supposed to do: trying to attract investors for Oregon companies.
And as I walked through the questions I had—and the questions you were kind enough to ask—what became increasingly clear was this: the OIF can’t solve the problem we’re experiencing (and by “we,” I mean you entrepreneurs who are actually brave enough to start your own thing; not me, who sits here pontificating on your activities) because they weren’t designed to do so.
But I digress. Suffice it to say, the bulk of the problem at hand is not one that the OIF is designed to solve. You see, the OIF isn’t meant to be an investor. It’s meant to be bait or mistletoe or whatever.
That is, while they do happen to engage in some co-investment from time to time, they don’t lead on investments. In fact, the OIF is actually a fund of funds.
The Oregon Investment Fund (OIF) is a fund to other funds. OIF is designed to encourage, to build and to invest in growing, innovative enterprises creating risk-adjusted returns for the Oregon Public Employees Retirement Fund (OPERF).
So while OIF has money, that money is meant to serve as a means of attracting larger sums of money. By enticing venture capitalists to Oregon. And by encouraging—nay requiring—them to spend time here, chatting with entrepreneurs and growing companies alike.
Our financial strategy is to spread our risk across several types of funds, ranging from buyouts that invest in more mature and established businesses, to venture capital, and to early/seed stage funds that invest in young, fast growing companies. As of November 2008, we’ve invested in 10 funds in the Pacific Northwest region and in turn, we encourage these funds to invest in the growing local and regional market.
To support our strategy and encourage business growth in the Pacific Northwest, we actively build relationships between our funds and local entrepreneurs.
And they’ve been very successful in that regard, attracting approximately $233 million of investment for 20 companies, resulting in more than 900 jobs for Oregonians.
As part of that effort the OIF has managed to attract investment for some smaller startup organization in our area—and in the tech realm which I tend to cover here on Silicon Florist.
Kryptiq is one example of a company which has benefitted from the assistance of the OIF. AboutUs is another. OIF helped both of these organizations by attracting a venture capital firm that was looking for opportunities. In both of these cases, Voyager wound up being the firm that took advantage of the investment opportunities.
“Voyager invested in our Series A and they are the most active VC in tech startups in the Portland area,” said Ray King, CEO of AboutUs. “I think OIF has done a better job of attracting VCs to invest in Oregon than some other pursuits.”
And that starts to get to the crux of this square-peg-in-a-round-hole disconnect between many of the ventures in the Silicon Forest and the capitalists who are seeking to fund them: side projects and garage projects don’t always make good targets for VCs looking to invest large sums of money.
“We have a definite interest in building the entrepreneurial community here in Portland,” said Dave. “But we have a very institutional mindset. We’re not pursuing incubator-level investments.”
That said, there are investors that have been attracted by the OIF—Voyager for one and DFJ Frontier for another—who are interested in participating in much earlier rounds.
The OIF, it seems, is actually doing their job. It just so happens that that job doesn’t exactly line-up with the areas where our startup community needs assistance.
And that’s not really a “problem” per se. It’s just the way things are.
By way of analogy, it’s like having a hammer and needing to drive a screw. Looking at the two, it seems like it should work. But in practice, the two are fairly incompatible.
So, it’s very interesting to have the OIF out there, attracting VCs. And they’re very open in talking to any entrepreneurs and providing advice and guidance. Whether you’re interested in pursuing major funding or not. But when it comes right down to it, there is no knight in shining armor patiently waiting to fund very early stage companies in our startup environment.
But that knight is ready and waiting when companies—like Kryptiq and AboutUs—reach a point where the OIF can lend a hand.
So despite all my years of watching Geraldo Rivera and John Stossel, this little piece of investigative journalism fell a wee bit short. No big boogeyman. No bad guy. Just a series of seemingly complementary situations that, in fact, were not complementary.
Come to think of it, it was a bit like Geraldo’s whole Al Capone’s Vault thing. But didn’t we all learn something there, too? What’s that? Oh, I see.
Long story short, there’s still a funding problem or a “how we work on these projects and still manage to eat” problem. And we’re still searching for a solution. Currently, OIF isn’t the organization designed to solve it. In fact, there may be no existing organization designed to solve it.
Why? I like to think of the Portland startup scene as an untapped natural resource. But it’s not obvious how to use it. And we can’t take the current method of running in and depleting that resource. Because that either won’t work or it will kill it completely. We have to find a new way to work with those resources in a sustainable manner. And I think that calls for a new method of funding.
I could go on and on. But that’s an argument for another time, you special snowflake you.
So where do we go from here? Maybe the Big Idea Bash
So that’s that.
Next up? Beginning conversations with the politicians, entities, and investors who hold an interest in very early stage investments and maybe, just maybe, incubation. In other words, we need to find the solutions that are designed to solve the problems. Solutions like the Startup Now Oregon pursuit.
Small businesses drive employment. Venture models have demonstrated the potential return of small growth companies. We have the opportunity to spawn high growth businesses that will deliver additional employment and high return on capital. These businesses will succeed because the crisis we face will economically reward new businesses the deliver solutions to our problems.
And if those solutions don’t exist? We may need to find a new way to make it work. But let’s at least start the conversations first.
And lo and behold, it just so happens a great place to start some of those conversations may, in fact, be an event hosted by the Oregon Treasurer Ben Westlund that the OIF is helping organize: the Big Idea Bash on April 29.
The Big Idea Bash is a social gathering created to connect entrepreneurs to the organizations that can help them flourish. This year the event will feature a speed pitching session, creating a unique opportunity to present new company ideas to a select group of Venture Capitalists who are funding emerging companies in Oregon.
I’m going to try to make it. And I would encourage you to try to attend, as well. Or don’t. I mean, it would be great to have you there, but you can also be sure that I’m likely to blather on about the event here afterwards.
One thing is for sure. Recent activity has clearly shown that I need more—arguably much, much more—education on what solutions currently exist and what they have been designed to do. And we’ve still got a long way to go in helping people understand the startup environment in which we find ourselves.
In any case, I’m looking forward to digging into this more and figuring out the ways to get you entrepreneurial types the kinds of help that will enable you to make your products a reality—and that will, in turn, make the Silicon Forest a success.
Last October, Sequoia Capital‘s “RIP Good Times” was the bubble-bursting presentation heard around the startup world. And given that one of Sequoia’s portfolio companies happened to reside in our backyard—Portland-based Jive Software—we all knew full well that the bubble-bursting was going to be happening close to home.
It came in the form of layoffs for the young—and arguably successful—company.
In the piece, we finally get a glimpse into what happened last October. And how those changes impacted one of the most successful startups in the Silicon Forest.
The changes Jive has made since the Sequoia meeting illustrate the ways in which young technology companies have slashed costs and narrowed their focus in an effort to stay alive. “Jive is the poster child. They nailed it,” said Jim Goetz, the Sequoia partner who is on Jive’s board. In the quarter ending in March, Jive booked higher revenue than any quarter in its history and plans to start hiring again.
We also get some insight from CEO Dave Hersh about the actual numbers of employees who were let go and why.
Seven days after the Sequoia meeting, Mr. Hersh laid off 25 of Jive’s 150 full-time employees and several contractors. They included underperforming salespeople and three executives who lacked the skills to build a company past the start-up phase, Mr. Hersh said. He scrapped an instant-messaging project and let go of the engineers on the team.
That same afternoon, he called the remaining employees to the office’s open meeting space that Jive calls “Whoville.” Mr. Hersh first put up a slide with the names of the laid-off employees. He figured the remaining employees would not look around the room wondering who was missing and would thus concentrate on what he had to say. He detailed everything the company had done wrong. He borrowed from Sequoia’s presentation and told the staff that Jive needed to conserve cash, make swift and deep cuts and invest based on results instead of ahead of them, as they had when they overhired.
Finally, the Gray Lady looks into some of the changes the company made to bring in experienced talent to help the company improve its course.
In January, Mr. Zingale brought on John McCracken, who had been his vice president of sales at Mercury. Mr. McCracken, who is known inside Jive as Johnny Mac, went to work overhauling Jive’s haphazard sales process. Jive’s strategy had always been to try to sell software to anyone who called. Mr. McCracken considered it a waste of money to chase customers who did not really want Jive, especially as the recession made software a much harder sell.
Salespeople were instead trained to grill potential customers with questions about their budgets and goals and turn away customers that did not fit. “One of the best things you can do as a business is to learn to say no,” Mr. Hersh remembers Mr. McCracken telling him.
As painful as it may have been, cutting early and cutting deep seems to be having a positive return for Jive—and their investors.
Given that Jive had the ability to lead by example when it came to Sequoia’s advice, I sincerely hope the next “lead by example” moment for the company is continued success and a clear path to bigger and better things. Because that’s an example I’d love to see all of the other startups here in the Silicon Forest follow.
I’m the first to admit: I don’t cover as much stuff in the Gorge as I should. There’s a ton of cool stuff happening out there. And fortunately, we’ve got a diplomat like John Metta who exposes us to it.
The Gorge Angel Conference is an educational, investment and networking event for angel investors and early stage entrepreneurs. Early stage companies will compete for a minimum pooled investment prize of $100,000. The Selection Committee, made up of the group of investors, will be reviewing and judging each application in search of the best investment opportunity. Companies must have good growth and profit potential. Early stage deals are preferred. Companies should be seeking capital within the range of $100,000 to $1,000,000 and planning to locate in the Columbia River Gorge region.
So, if you’re a startup in the Gorge—or you’re interested in relocating closer to Full Sail to the Gorge—you’ll want to take a look at this event.
The even will be held May 19 at the Hood River Inn. For more information or to download the forms, visit the Gorge Angel Conference.