Seattle Tech Investment Trends and Themes, From Madrona’s Tom Alberg (Part 2)

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believe strongly in all things related to the Web. There are a lot of challenges trying to figure out what could grow big and make money. We think there are opportunities in advertising still. Though advertising is down at the moment. Focused ideas around local advertising, targeting. We’ve got this company called AdReady, a self-service focus on banner ads. Banner ads have not been considered a hot area, but this company is already doing well. They’re growing every quarter.

X: People have been saying the consumer Internet space is dead. Do you agree?

TA: That’s the other point. We’re dealing in five to 10 years. We think this is the moment to invest in things that could pay off in five years. I think there’s opportunities in the consumer space. There are targeted things, maybe in the music area still. It’s interesting. You get these areas that look like they’ve become solidified because of big players, or because of technology, and then there’s suddenly, “Oh, we’re going to allow you to do your own music slideshow.”

Some of these things can be big, or not. I think the search area is a challenging thing because of the power of Google, but there’s vertical search. We’ve done vertical search in travel [and other areas]. TripAdvisor, with all the hotels, that’s a search tool. And not super well done—maybe somebody can do a better one. We’re very interested in some technologies out of the University of Washington that are search-related or trying to do more sophisticated algorithms. The UW continues to be a prime source of opportunity.

X: What are some of your other sources?

TA: We sponsored with Amazon a couple of years ago a little networking event in a loft on Capitol Hill. They wanted to proselytize their new Web services. We invited a lot of people, and 200 people came—CTOs and presidents, mostly of companies I’d never heard of. It really turned out to be little tiny companies. We met two entrepreneurs there and were impressed just talking to them. They’d come out of F5 Networks and a year later we invested in one of them [ExtraHop Networks], so that’s how you uncover them.

They were probably smart enough to figure out they should come over and talk to us, as opposed to us being smart enough to go talk to them. But we might never have discovered them. I bumped into them, and Matt McIlwain bumped into them, and afterwards at our meeting here, we said, “Did you meet anybody interesting?” I said, ‘Well, these two guys seemed really interesting.” Matt thought so too. So let’s follow up. You have to be out there.

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