Matt McIlwain (Madrona) on lessons from 20 years of VC investing, traits of top entrepreneurs, and building a bigger pie

It takes humility because usually you go in asking those questions thinking you have a point of view on the answer. And if you really hold too tightly to your answer, you're going to get yourself in trouble. So it's a curiosity that's grounded in humility that I think really sets the best entrepreneurs up for the highest potential for success.

Hey, it's Adam Schoenfeld. Welcome back to the Built in Seattle Podcast, where Seattle's top entrepreneurs, investors, and leaders share their stories and their lessons from behind the scenes. If you like this show, then you'll love my short weekly email, the Pike Street Journal. Subscribe at PSJ.email. Each week I send some bonus nuggets from these interviews, stuff I get when the recorder's off, and some more insider takes on Seattle people and companies. That's PSJ email. My guest today is Matt McIlwain. Matt's a managing director at Madrona Venture Group. He's been a VC for 20 years and has led investments in companies like Smartsheet, Isilon, and Apptio, just to name a few of the billion-dollar-plus companies. Matt talked about his lessons from the last 20 years, from the dot-com bubble to what's next. We talked about Madrona's values and how they invest for a bigger pie. And finally, he gave a behind-the-scenes look at the unique traits that define the best entrepreneurs. I hope you enjoy the conversation with Matt. I'm here with the one, the only, Matt McIlwain. Hey, Matt, thanks for being here.

Good to be with you.

I'm really excited about this conversation. I got to spend a little bit of time with you over the years and, um, really excited to, to dig in on what you're up to and Madrona and 20 years of doing this.

It's a lot of years, 20 years for myself at Madrona. And of course, it's Madrona's 25th anniversary this year. So it's a fun celebration for us where we thought back on the last 25 years and we're thinking ahead to the next 25.

I really respect what you're doing in Seattle and on a national level. And one of the things that stands out is just the reputation that you have amongst entrepreneurs. And I've been really curious if there's anything about the values of the Madrona organization that you think has contributed to that reputation in the community.

It's really kind of you to say. I think that one of the interesting things about Madrona over the years is that there's been a fair bit of multi-generational team. If you think back to the founders of Madrona, Tom Ahlberg and Paul Goodrich and Jerry and Bill, Tom and Paul still come to Monday meetings all the time. They're not really making new investments actively, but they're still adding a ton of value. And then as we had the subsequent generations and different folks, I think that there's been a lot of attention to folks on the team that are thinking about the long-term, are thinking about what we call internally the bigger pie, which is this idea that, you know, particularly with our strategy, which for many years has been focused only on early-stage technology-driven companies in the Pacific Northwest, that with that strategy, we're trying to build a much bigger pie of success in the Pacific Northwest that could ever possibly be just Madrona-backed companies. And with that mindset comes a real strong drive for community impact. What's happening in our ecosystem that's going to let, you know, 1,000 flowers bloom and a lot of entrepreneurs and angel investors in offices outside of headquarters, including big companies like Google and Facebook and Apple and others contribute to our ecosystem. I think that's always been a really big part of who we are. I think there's other words that we, that, that get shared a lot at Madrona around an expression we call day one for the long run, which is if we're going to get involved really early, sometimes at the very founding of a company, which is day one, that we're, we need to roll up our sleeves, add value every day, every week. And take a long-term perspective to help build significant and lasting companies. So I think there's some phrases like that just come along and become a part of who you are. And then of course it's lived out through the people in the team. And I don't think that's only the Madrona employees, but we've talked about it, the Madrona family, which includes people, you know, like yourself, Adam, and so many others that we've had a chance to, to partner with in one way or another. And it's especially close with entrepreneurs that you've worked with. And so I think that's a bit of who we are as Madrona.

Have those ideas, day one for the long run and the bigger pie concept, have those been there since the beginning or where did those come from?

I think we had to learn our way into day one for the long run because we were novices at company building from a venture back, you know, kind of perspective 25 years ago, or certainly still 20 years ago when I joined Madrona. And I think we learned sometimes from companies that weren't successful, sometimes from companies that were successful. What does it take to look around the corner at each stage of the journey? That kind of earliest stage when you're looking for what we think of as founder market fit. Is this founding team? We can talk a little bit more about that later, but what do you look for in a founding team that might be right for a market opportunity? Then you go into that product market fit. Can you actually build the product that solves the problem that the customer has? And then there's a rapid scaling, what we call accelerating growth. Generally, that's when you're a company that's found that product market fit. Maybe you got $5 to $10 million in revenue and you're just trying to accelerate that. And then there's ultimately trying to see if you can evolve into some kind of a platform. And over now 25 years, I think we've learned about that journey. And part of it's been giving good advice. Sometimes we didn't give the best advice to our companies, trying to help them out. I think the other one about the bigger pie, I think that's always been there. That was one of the things that attracted me to Medtrona. Was even before we had initiatives like Techstars that you and I both know, and we're partnering with others to build that here, or we're doing things like the Madrona Prize at the University of Washington Computer Science School, which we started over 10 years ago, or things like Madrona Labs or AI2 Labs or other labs in town that we partnered with. These things that again are a part of the broader ecosystem. It was, Tom was involved with founding the Tech Alliance in Seattle over a couple of decades ago. And I could go down the list there of ways that, you know, not just in the tech community but in the broader community. The founding team at Medrona, and I'd very much include Greg Gottesman in that and his ethos of how do you give back to the community, was all a part of, I think, the, our sort of founding culture and ethos.

Yeah, it's so interesting because you could have taken a competitive stance on some of those things and said we want to own the market and be the source of capital, but instead you've funded or supported or partnered with all these other things that came around to make the pie bigger. And it's so— it's fascinating to hear that was intentional from the beginning.

Yeah, but we used to in the early days, I remember we thought a lot about that. And this is no knock on them. I don't know them all that well, but we heard a bit about like Austin Ventures approach in Austin and we're like, but we don't— that's not who we want to be because they seem to be a little bit more focused on getting everything in the pie versus expanding the pie.

Yeah, that list is incredible when you started rattling off all those things. And I think about, wow, all those things. If you picture our community without those things, it's a much different world out there for entrepreneurs, for people who want to work in startups.

One of the things I might do, Adam, is send you— we just put this together and finished it this summer, but we created a 25th anniversary book to look back. And one of the fun spreads in it is this thing we call the family tree. And it's all these different parts of the ecosystem, the University of Washington, Microsoft, Amazon, the McCall parts of the ecosystem, et cetera. And it's an interesting way to illustrate some of it. But we also really think about all the different players in the tech community, including we're very fortunate to have these significant family offices like a Vulcan and Gates and Trilogy and Bezos Expeditions. And they're a really important part of this ecosystem too. That's been quite good to have as partners over the years.

We'd love to see that. And I'd love to link to that in the show notes and share that with the, with listeners. That sounds fantastic. So maybe we could rewind the clock a little bit. I'm curious, you started investing at Madrona 20 years ago. What did the Seattle startup community look like back then?

It was pretty different. It was a very interesting time in some respects because it was a heyday that had just about hit a wall. I joined in May of 20— or 2000. And so the dot-com bust was just about unfolding. Of course, I'm not sure we realized it fully at the time, But the NASDAQ, it hit a high of slightly north of 5,000 in March. It took over a decade before it ever regained that level. And there were a bunch of successes, Expedia and Amazon, of course, Aquaniv, Real Networks. So there was this first generation post-Microsoft of successes. There was also, I think people don't always remember how incredibly strong and broad the cellular, as it was called back then before it was really called mobile, ecosystem was with McCaw and then Western Wireless and VoiceStream and Nextel partners. There's quite a bit going on there. But here was still— here was the challenge, is that there was a gap between a few big companies and not too many of those kind of emerging successes and the rest. And so what was particularly hard was to recruit people to Seattle. From other places. There was a lot of questions of what happens if this, especially to recruit them to the startups, what happens if this doesn't work out? And even though it was a little bit of a frothy time when I first joined Medrona, it was still very hard to recruit folks. And then of course, that frothy time led to a really challenging couple of years there in 2001, 2002, and didn't really start to pick up momentum until the middle of 2003. And I think what that meant was that we went from 2000 having a fair number of Bay Area firms back in the day, more Davidow and Atlas Ventures and some other ones that aren't even around anymore as venture firms actually had offices in Seattle. And that's never really come back in the last 20 years. Yet I think access to capital in Seattle's never been better here today in 2020. So I'd say capital was at a peak and then it went through a tough period. Talent, which has dramatically changed over the last 20 years. Nobody asks you anymore what happens if it doesn't work out in Seattle. And then I just think also just the magnitude of the success of the region. And let's start with the fact that 2 of the 3 largest by market cap companies in the world are now based in Seattle, and Microsoft and Amazon. You know, the one other thing I would say is that I came to learn that there's this really refreshing competence, but understated competence in the culture of Seattle. And I think that leads to more collaboration. Maybe that was a helpful kind of cultural thing around us that inspired and encouraged Medrona to take that bigger pie approach. But it was certainly a dynamic that I think mostly was in our favor to let's get to be grounded, let's focus on the customer, let's build something that's a real solution to the problem. And not get, you know, too much hype and promotion and fanfare. You know, there's some need for that, and I think sometimes we've been understated to a fault as an ecosystem, and I think we've gotten a little bit better at getting that balance. You know, we're not trying to be other places like Silicon Valley or LA. We've got to be able to promote our people and companies and innovative products and services. And, and I definitely got that sense back in those early days that it was like, wow, there's even more talent here and more capabilities here, and it's not being promoted maybe as much as it's earned the right to be.

Yeah, we definitely have kind of the under-promise, over-deliver, understated mindset. Not as much glamor and pizzazz, perhaps. Looking back, you mentioned some of the darker times in 2001 to 2002. Were there any, you know, lessons that came out of that you think you continue to draw on today? For you personally being early on as an investor or for Madrona as you've built your culture and your value system?

I think one, one lesson was that the categories can get too hot and you've— so you've got to not only have conviction that, you know, the market opportunity is right and that you've got a great team that could go after it, but that there is some compelling reason why they can bring the differentiated winning solution to a market. I, I love to remind people that when I first came to Madrona, there were actually 8 B2B seafood marketplaces. And you might be surprised to learn, and maybe not so because Seattle has a, you know, a long history in the, the seafood industry, but 2 of the 8 were actually in Seattle. And we actually merged them pretty quickly thereafter. It was Fishmonger and World Catch, in hopes that somehow the merged entity could survive. It didn't. It did survive for a little longer, but it didn't end up becoming a big success. And so the point there was like, gosh, okay, maybe B2B transformation in the internet, which in the fullness of time is, I think, and we're seeing now again in a whole resurgence in this digital-first world we live in 2020, is really transform things and change things. But it was going to take longer. There was lots of inertia and it was hard. So I think that that was one of the lessons. I think another lesson, and I'll give you two more just quickly here. One was every dollar does expect a return, every dollar invested. And sometimes for the founders, that doesn't show up until an awkward point in the life of the company. And so while I probably was a little too frugal in how I thought about that, given some of the operating background and all that I came out of into venture, I think that holds you well to have that healthy culture of frugality and understanding that every dollar demands a return. Because you want that to ultimately inert to aggregate value creation for a company. And then that leads to my third piece was that in those tough times, some of the best companies and the most amazing entrepreneurs are formed. And for me, that was Isilon Systems, which Sujal Patel and Paul Mikesell at the end of 2000 left RealNetworks, these two 26-year-old engineers, and said, we are just in pain with this way that the storage works for our streaming music content. And we think there's a better way to build a storage system for big files and big volumes of files that get read by multiple people. In other words, a bunch of us are listening to the same song on our real players, which was the experience that they were trying to solve for. And they believed that there was gonna be a more standardization of hardware that they could build and distribute their file system on. And they also believed there's going to be a lot more content that was out there for different kinds of use cases, not just media entertainment, but biotech and industrial applications and oil and gas and etc. And they had some gleaming of those market understandings. So I'm a little bit lengthened this story because I think it forms this triangle of how I learned to assess companies. And, and this is this concept of founder-market fit. Here were Sujal and Paul They had lived the problem. They knew the problem intimately around how legacy storage was more transactional and not for these kind of big files and big volumes of files. They saw some of these macro trends I was just talking about, and they had the technical skills and the kind of inspiration to be able to attract other really talented people to that team at a very early stage and go about building a product and ultimately a very successful company.

That's super interesting, the idea of founder market fit and that as an X factor, because it sounds, in hindsight, you can look at Isilon and we all know the story, a great success. But was it hard to make that bet on them in the context of what was happening in the broader market? Or, you know, is that kind of how you discovered the founder market fit factor? What was going on behind the scenes in making a decision like that when times were hard?

I think what's interesting is that the most, sometimes the most talented people, one of their gifts is being able to explain clearly to others what they're trying to do. And Sujal in particular had an ability to synthesize all those things I just was talking about and communicate it to other people. And I had seen that pattern some when I was working at this big operating business in Atlanta. And we had different businesses in different industries, which is part of how I met the Madrona team and others in the venture world and the companies they backed. I had seen quite a few startup CEOs and the VCs that worked with them over the course of the 5 years prior to— in fact, the time at Madrona was through some things we looked at with Madrona and Amazon and Napa Auto Parts, which was one of our businesses. And so I had a sense for when somebody like Asujal comes in the door, it can explain the problem and the ideas around the solution clearly. That there could be something special there. I think another piece was I was nowhere deep enough in distributed file systems to know if these guys really had the technical, technological acumen, but was able to reach out to a few folks that I'd quickly made friends with in Seattle, like a Mike Metzger, who had worked with them at RealNetworks, or Len Jordan, who subsequently became one of my partners at Madrona. And they could attest to the kind of talent of this founding team. And then similarly, reached out to Hank Levy, who was a systems professor in the computer science school and then went on to be the chair of the computer science school, the Allen School, for many years at UW. But at the time, I said, hey, can you meet with them and give me a technical perspective? And so we did our diligence, and that all was checkmarks that were coming back positive. In fact, Hank ended up joining their technology advisory board. So it was an instinct around the team and what they were trying to solve. And then it was this triangulation through some other mechanisms to say, wow, this is one of those few things that really should try to go build something for the long term.

That skill of being able to articulate the problem and the solution and sort of the why and the why now, do you see that translating into company building and success in subsequent stages? Like, obviously it's important in helping you and your team understand what they're trying to go do, but does that have a downstream effect that you've seen show up with entrepreneurs?

Oh, I think it does. One of the ideas that I think is super important, and this is regardless of your personality, whether you're an extrovert or an introvert or however you want to categorize those kinds of things, the founders are almost always the chief sales officers for the company. And what does that mean? They've got to be able to tell that story clearly so they can inspire and attract talent, other people to join the team. That of course applies as well to being able to attract capital like we were just, just talking about. But it also applies whether it's an enterprise company where it's maybe a little bit more kind of face-to-face. How do you attract those early customers? How do you attract those early partners? We had certain hardware inputs into those early Isilon appliances, boxes, and there we were trying to go to some of the bigger equipment folks and say, hey, give us a better deal. We're a young startup. Here's our clear vision of the future. Take a chance on us. So I think it really matters across all the different constituents that you're effectively trying to convince to lean into your highly risky and uncertain business. And hopefully over time, you de-risk more and more elements of that, and capital raising gets easier, and recruiting gets easier, and customer acquisition gets easier, and all of those things. But you're always trying to clearly articulate the story. And in fact, I, I think that you are also trying to do it at the next levels. You go from being a founder and a manager of a very few number of people to a larger group of people, and then hiring managers that work with you. And then so you've effectively become a manager of managers, and that's a different skill set, and that's another set of learnings. And how you communicate to the team when it's a broader group of people changes, and you got to build those skills as well. I think yes, the answer is that you're always, you're always looking to How do I build your skills and particularly your skills, but how do I simply tell the story? There's a, if you ask some of the CEOs that I work with, one of my favorite analogies when I was in college, when I was public high school kid from Miami that was first in my family to go to any kind of fancy college. But I spent a winter working at the Breakers Resort in Palm Beach and the top chef there would take us and teach us stuff. And he taught us how the process is of making beef consommé. Well, beef consommé seems very simple and elegant, But the process is very mucky and messy, and you want all the muck and the mess to be understood, and you want to turn from that and make a beef consommé. And so one of my favorite expressions to entrepreneurs is, are we communicating at this level of simple elegance, even though we know there's a lot of mess behind it?

That's a great analogy. I love that story. What do the really great ones look and feel like when they're in the act of simplifying and telling the story? I'm guessing it's not some Glengarry Glen Ross kind of hardcore salesman persona, but what is that persona like and what does it look and feel like when you're on the other side of it?

Yeah, I do, I do think that there can be different personality styles and dispositions on this, but I'll— I wrote something a couple of years ago on this concept of the learning loop. And there's some attributes in this that I think are relevant to your question. So I do really do think it starts with curiosity. Somebody who just loves asking questions and then when they get an answer, drilling down into a next question and a next question. So this big hunger and curiosity, which maybe counterintuitively really takes humility. It takes humility because usually you go in asking those questions thinking you have a point of view on the answer. And if you really hold too tightly to your answer and don't really listen to the potential customer and what you're learning in the market and all, you're going to get yourself in trouble. So it's a curiosity that's grounded in humility that I think really sets the best entrepreneurs up for the highest potential for success. Now, here's the trick. When you go ask those questions and you're being curious, you're going to get a bunch of different points of view. And so there's another art who I I've had the opportunity to work with on 3 companies, most recently Aptio. He is a great triangulator. And so that's that skill of triangulating what you're hearing in the market to try to synthesize it to what is your best sense of what you think is the most true, and therefore the thing that you actually want to go build and test and try, which is the next phase of the learning loop, which is at some point you got to get out there and try something. You got to put your weight down on something. And build it and try it. It's obviously easier to be iterative on that in software than in hardware appliance like the Isilon example we were talking about. But even still, it's important to make some best-informed choices, then get out there and try it. And you're going to learn from that too, what you try, your experimentation. And then that loops you back around to asking more questions and you're back around to curiosity. There's a set of things that I really listen for, and I think we try it the Madrona to listen for that are along that learning loop line, even in a very first meeting. And one way to illustrate that is it's, I think it's less effective to come in talking about technologies. There's a bunch of interesting technology trends over the last 15 years, the shift to cloud computing and software as a service that, you know, in the last 8 to 10 years and growing the use of machine learning to interpret and leverage data and build predictive models and predictive systems. Yes, all that is true, but I think it's got to start much more often with what was the customer problem that you were trying to solve, and why do you, through technology and societal trends and market factors and all, think that you can solve it better than it's ever been solved before? And that tends to be a— you get me more leaning in when we start talking about the problem set first and why this founding team in particular is really passionate about solving that problem in a compelling and innovative way.

When people are describing problems that you don't know or understand at the start, how do you have that conversation? That just sounds so hard to me to go deep into a problem space that I have no experience. Is that a muscle that you have to build, or how have you been able to, you know, inspect their understanding of the customer problem to validate it early on and have that discussion when it's stuff that might be a little out in left field for you?

No, it's a great question. And I, again, I think that part of it is that you as the investor and partner in journeys of building companies, you've got to keep being curious. While there is a set of pattern recognition and heuristics that we build up over time as being that company building partner, you just got to always be voraciously trying to learn new things too and keep an open mind in any one of those presentations. And also, I, I think one of the techniques— it's a great technique— is to ask the quote-unquote dumb question. I don't believe really any question is a dumb question. There's just— because sometimes somebody does start to go down a path and they've got a, a bunch of lingo and a vocabulary for that domain area that they've got expertise piece on, and I don't know, I don't know what they're talking about. And I'd much rather say, well, gosh, can you— what exactly do you mean by that? Now, by the way, that's another good example of, can they explain clearly to me what they mean by that? That's a little bit of a— if they can, that's— I'm impressed, right? Because they're trying to explain it at, quote unquote, a layperson's kind of level. And then if we got really excited about something— and I'll give you an example of a category that we've gotten a lot more excited about— then we've got to go learn either ourselves or bring in other experts around us that have much deeper knowledge. And that's That's a thing I've definitely learned in the last 20 years is in almost any area of life, there are people that have such deep knowledge and such passion for subject matter that it's great to leverage that and find those people. So the example is if you'd asked me 5 years ago, what's a field that I would just stay away from? I would have largely said healthcare broadly defined and life sciences, which is a little more narrowly defined. The whole world of trying to discover some cure for some disease state. And, you know, wow, just don't want to— I don't know, that's scary. It's got all kinds of risks we don't understand. It's got regulatory risks, it's got human health conditions and side effect risks, it's got capital styles of risk that are different from what we do. And so we did generally stay away from it. But about 4 years, we started wading into it a little bit. More on the, first on the side of just how do you use computer science and data science techniques to improve healthcare for people? So that led to an investment in a company called Accolade, which is now a public company. And Raj Singh and Mike Hilton, who were some of the founders of Concur, have really built that company in an amazing way over the last set of years. But even more recently, that intersection of computer science and data science with the biological sciences, chemical sciences, has changed our thinking in a theme we call the intersections of innovation between those worlds. And we've invested in companies like Nautilus, which is doing some really cool things in proteomics that, by the way, Sujal Patel from iSalon we were talking about earlier is the founder, co-founder, and CEO of with a professor down at Stanford of biochemistry. Or TwinStrand with Jesse Sauk and what amazing things they're doing, much more deeply understanding the outputs of genomic sequencing for a whole set of purposes. And then there's some others that we're also working on. So I think you've got it. The summary of this is that you've got to be a continuous learner. You've got to not be afraid whether it's to ask the question that you don't know the answer to or to get extra resources that can help you understand it. And gosh, at the end of the day, your genome is the code of your life. There's a powerful analogy to the software code that we write to build applications, but it's actually the proteome and other things that are produced through the genome that are actually the applications that do the stuff in your body. And I could unpack that more maybe at another time, but as you start to analogize and see symmetry, once you get past some of the, the vocabulary and lingo that you may not understand as well about another domain, you can pick a few spots. And, and for us, this life science area has become very interesting.

That's interesting. I wonder, would you have still gotten over the— into those markets if it wasn't for great second-time, third-time founders that you'd backed before, like Sujo Patel and Raj Singh, bringing those deals? Like, how much did that play into your excitement about the category and these entrepreneurs that maybe you'd want to work with in anything that they bring across your desk?

I think that's a great question. And I think it certainly helped because they were also getting curious as well in their own ways for different areas. And we knew they were smart, talented, curious entrepreneurs. And I think it helped pull this in. I also have had the opportunity now for 7 years to be on the board and for the last couple of years be chair of the board of the Fred Hutch Cancer Research Center. So I had this whole other world where I was learning a ton about kind of biological and chemical sciences, mostly as it relates to finding cures for cancers. And the big innovation that happened over those 7 years, one of the big innovations was new understandings about how our immune system or so-called immunotherapies can work to help prevent or cure cancers. And the other thing that's super interesting, which is very contemporary, is we have a whole division at the Hutch called for vaccines and infectious diseases, partly because viruses are one of the major causes of cancer. And we've learned a lot about how to stop viruses and prevent the spread of viruses as partly because it's obviously it's not good in and of itself, but it's also not good in terms of the spread of cancer. So you just learn a ton in these different areas. I think finally that there's been some other examples out there. An amazing company that we're not investors in is called InCITRO, and, and Daphne Kohler is the CEO. And I learned a little bit from her through her friendship, uh, mentorship of Carlos Guestrin. And Carlos is the Amazon Professor of Machine Learning at the University of Washington. And we founded a company that came to be called Turi in 2013. And Daphne had actually been his thesis advisor when he got his PhD at Stanford. So anyway, so what we were doing was around some of the earlier days of machine learning and making it more accessible and approachable to teams. But indirectly through that, got to know Daphne and some others, and then Daphne started building InCITRO, which is just an amazing company. I think that's another way that we learned, because we're at the leading edge of a lot of other areas of innovation, which is why this term intersections of innovation seems to apply quite well to this connection. But I think your question is a good one because I think it is people ultimately that are— you have a trust-based relationship with that are accessible to you and vice versa that you keep learning from.

And it took me back to what you were saying about the bigger pie theory, right? Because your learning loop that you're doing in parallel with these entrepreneurs and the founders is enabled or accelerated by the whole bigger pie idea, right? The partners, the entrepreneurs, the community that you're tapping into, which I feel like there's such a good principle there for anybody that's operating any kind of business.

Yeah. And I think that while they're— Silicon Valley is quite good at being open and sharing, I think there's a sort of an extra level of how can I help in the Seattle culture? Not just I'm going to share something or maybe make a quick introduction, but do a little bit more. And the pay it forward expression, as it were. And I think we have that mindset, and I see a lot of people in our community that have that mindset too.

One of the great parts about our town. I want to make sure that I ask you about Smartsheet before we end, because I'm a big fan of what they've done over there and Mark Mader and just following the story. And it's obviously been this huge headline win in the public markets recently, but I know that it took a long time.

Mm-hmm.

So I'm curious, can you talk a little bit about the early days of that and the doubts and the hard times of knowing if that would be a success and what the earlier stages of that business looked like?

Sure. I think every company that I've ever been involved with, and I think probably every, you know, kind of company that ends up being successful someday has had its near-death experiences. And Iceline certainly had those and every— again, we can go down the list, but Smartsheet had them as well. And Mark, Mater and Brent Fry and Eric Brown, founding team there, they had a lot of passion about, hey, an online software as a service offering, which was again novel back in 2007, 2008, that allows teams to collaborate to get stuff done, was the core. That there was a lot of opportunities to fill in the cracks apart from these more structured systems of record like an ERP system or a CRM system. And so they had a pretty clear view of what needed to be built. They were a little bit more backend software folks, and they'd be the first to tell you that they didn't build the frontend in a sufficiently modern way, especially since— oh, by the way, as they were building the first generation of their frontend, this thing called the iPhone came along, and then Android came along. And so before, it wasn't just, I can use this software as a service on PC, but it was starting to get to the point by 2009 that you could use it on these other devices. They had just not built the right front end, both the design metaphor for it as well as how it functionally worked. Here was the challenge. It was 2009, which was a pretty tough year. And there was big debates inside Medrona because they weren't selling that much of it because given these limitations and what do we do? And they were debating themselves. Do we triple down on this? Ultimately, we decided to put a small— I think it was like a $1.5 million round together where some of the founders put some of their own money in alongside it. I think we wrote a million dollar check or so to keep the company alive and build this front end. And by the time they got that out and launched, it was better and they started to get more traction. Interestingly enough, they didn't really have that much money to go do something with it. So it basically, for the next couple years, it was just search engine marketing and search engine optimization, which were a little easier to work with. There was less competition out there. And so for a couple of years, we started to build some momentum and maybe got ourselves up to approaching $5 million in annual recurring revenue in 2011. So now this is a 4-year-old, 5-year-old company already. So it's, it's a late bloomer as it were. But then I still remember we had one of these Madrona offsites where Mark and Brent came to present to us. Paul actually, Paul Goodrich, asked the question, he's like, what would you guys, what do you think would happen if you hired one inside sales rep? They're like, we were thinking about that too. And let's give it, we were going to give it a try. And so they gave that a try and that kind of worked. And we started to build some momentum and things just kept growing and the inside sales team kept growing. And then 3 years later, we raised some extra money. We had some great partners that joined us from Insight Ventures and Sutter Hill. And they started to show that not only does that inside motion work, and mind you, even today, Smartsheet's average revenue per customer is around $4,000. And they've got north of 80,000 paying customers today. But, you know, I don't think we could have even expected back 4 years ago that we were going to be able to then build this next capability set, which was at its core, the enterprise selling motion. That Mike Arntz came in to be the chief revenue officer in late 2016 and really just over the course of 2017 started to prove out that we could even do that. And then fast forward to today, the company's north of $300 million in revenue and they've got, I think publicly disclosed, they got over 10 customers paying them over $1 million a year. There were lots of uncertain moments in between that, that time in 2009 and you know, where the company is today. And of course, funnily enough, now you've got all kinds of next-gen players in, quote, modern collaboration, whether that's the AirTables or Notions or Asanas that I think Asana is going to do its direct listing next week. So there's a bunch of interesting other players that solve somewhat related but somewhat different problems. And Smartsheet has done a very good job of continuing to stay close to their customers and solve next generation of problems. And increasingly, as is evidenced by some of those numbers, move up into the enterprise and solve some more kind of sophisticated enterprise problems while still being very true to their ethos of we want somebody who doesn't have to write a line of code to be able to take Smartsheet and use it. It's truly a no-code solution before no-code was cool.

That's right. Yeah, they are. They were no-code before. Now everybody talks about no-code. I hadn't thought about it in that light. That's amazing that they were on the brink there and just scraping together a million or a million and a half bucks to to like rebuild the UI without that, it doesn't happen the way it did.

It is just, just amazing. And again, I really think this is consistent for, for, for every company that we've ever worked with in different forms. Aptio's prior company for Sonny and Kurt and that team was a company called iConclude. And we put a little seed money in 2005 and couldn't convince anybody to write another check with us. 9 months later when they needed some more money. And, and then they had, they had a few of their challenges along the journey. So I, I think that this gets back to your earlier question about entrepreneurs. There are some other attributes, of course. There's this willingness to listen and be curious and learn, but you've also got to have conviction, and you've got to be a believer in the direction that you're headed. At least you got to be open to refinement and have that conviction and be able to persevere it's a very hard job being a founder. You know that, Adam. And it's, and it can be quite lonely at times. The opportunity to, to be there as a sounding board and to be hopefully a useful coach and, and also be there to kind of, kind of help folks persevere when you have those tough cycles.

It's such a tightrope to walk. I'm smiling because yeah, no, the balance of having the confidence to move forward versus humility to, to challenge yourself and question everything. I love these stories. I know we have to be mindful of your time. So I want to wrap up with the Supersonic Six.

Okay.

Number 1, how much coffee do you drink, Matt?

I'm a 1 cup a day guy. Occasionally, I'll have a second cup.

Number 2, what's one Seattle company that you're following or studying right now? And I know this might be tough because you have such a great portfolio, but would love to hear about one that company that you're really following closely right now?

Outside the— I'll mention to you one outside the portfolio, which is I have a ton of respect for Nick Fat and the team at Against Gravity. The AR/VR explosion in the positive sense has taken a lot longer than we expected. I think that he and his team are doing an incredible job navigating that. And so very impressed by that team and how they're approaching approaching what we do believe in the fullness of time will be part of how we have multi-sensory user interfaces as consumers and, and AR and VR, XR, whatever you want to call it. Another company that is a relatively new investment for us called OctoML. This is how do you take all your different deep learning models and train them and optimize them so you can run them anywhere. And this is a great team out of the University of Washington computer science school. Luis is the CEO. They built this open source project called TVM, which has got a lot of virtual machines, which has gotten a lot of traction. And they've in their first year and a half, not even year and a half, just really done amazing things that plays into this theme of intelligent applications and enabling machine learning, deep learning models to run anywhere. And I, so I'm excited about that one.

Awesome. Number 3, who's one Seattle person that you're following or learning from right now? And since you gave outside the portfolio company, maybe we can do another person outside the portfolio.

Yeah, yeah, somebody that jumps right to mind is David Baker, who runs the Institute of Protein Design at the University of Washington. He is just a fantastic talent, and really thinking about how you combine all this understanding of the chemistry of how proteins work with more and more sophisticated types of just raw computing and again, machine learning. He and his teams highlight this intersections of innovation theme. And we haven't worked directly on a company with David. We're so grateful that lab exists and there's a lot to learn from him and his team.

Number 4, what's one thing that Seattle needs to improve as a startup hub?

I think that, and this may surprise you coming from me and my affiliation with Madrone and all, but I think we still need more company builders at an early stage. And by that, by company builders, I mean like investors not just putting their capital in, but are going to really roll up their sleeves in those early years and help build companies. I don't think the gap is as much in capital. I think talented teams that have a vision can get the capital. More indigenous company builders based in the Pacific Northwest helping with these companies is still, I think, uh, something we could use some more of.

Number 5: What's one piece of advice you'd give your 20-year-old self?

I really believe even more now at my older age that making choices based on what you're passionate about and people that you connect with and trust is really the best way to make decisions. And a lot of times in life, we have these key forks in the road, these key moments in the decision tree of life. And if you've got two options that have their own kind of pros and cons and compelling nature. Go with the thing you're passionate about. I did this. I, coming out of college, I had two great job offers in investment banking. One was at Goldman Sachs, one was at First Boston. The Goldman was in real estate. The First Boston one was more in public sector financing. And people were like, oh, it's obvious, Goldman real estate. But I like the people in this particular team, and I like the area because I love this intersection of, you know, public policy and, and business. And so I went with the other path and I was really glad I did.

Number 6, what can this community do to help you? Is there an event or something you want people to go read or something you want them to put their attention on right now?

I do think this is a pivotal time for the future of Seattle. And what I mean by that is the post-COVID world is going to be a digital-first world. It's going to change the nature of what we need and expect. What we expect from our community. I think it's also a time where specifically in the city of Seattle, Amazon is signaling that they are going outside of the city of Seattle for much of their growth in the future. And so I think that it is important for people to be engaged in the community from a public policy perspective and really think through areas like public safety, areas like alignment between all of our people and members of our community and the business community that in many respects can be additive So it's— I'd say it's get engaged and people will have different points of view from mine or yours, but it's a good time to be engaged because there is some— I think we have so much potential in Seattle and it's at risk if we're not all trying to figure out together how to sort of maximize that potential for the whole community. It really should be an opportunity for all society.

I love that, bringing it right back to the bigger pie.

Yeah.

Matt, thank you for your time here today. I really enjoyed it.

It was my pleasure, Adam. Thanks so much for having me on your show.

Is it on? I think it's on. Hey, it's Adam again. Quick note before you go. Thanks so much for listening. I hope you're enjoying the show as much as I am enjoying making it. If you do like it, please leave a rating or review. I would help other people find it in Apple Podcasts or wherever you listen. And if you have any feedback, send me an email. Adamseattlepodcast@gmail.com. No underscores, no periods, just adamseattlepodcast@gmail.com.