Geoff Entress, the Go-To Startup Investor, Weaves Himself Deeper Into Seattle Tech Community With Founder’s Co-op
How did Geoff Entress become Seattle’s go-to tech investor and startup guru? For those outside the local technology community, Entress is an angel investor who has put his own money to work in more than 35 startup companies, most of them software-based and in the Northwest. They range from firms that are now well-established like Isilon Systems (NASDAQ: ISLN), Seadragon Software (bought by Microsoft), and The Coffee Equipment Company (bought by Starbucks), to fast-rising stars like Bonanzle, Cheezburger Network, Dashwire, Swype, and Elemental Technologies.
But that only scratches the surface of the impact Entress has had in the business community. He is a trusted advisor to scores of local entrepreneurs. He’s also well-known and trusted by the VCs on the other side of the table, having worked as a venture partner at two of Seattle’s premier tech VC firms, Madrona Venture Group and Voyager Capital.
Just yesterday, Entress, 46, found another way to weave himself deeper into the fabric of the Seattle startup community. He announced he has joined Seattle-based Founder’s Co-op as a managing partner. This means he will help run the seed-stage investment fund and startup mentorship program as an equal partner along with co-founders Chris DeVore and Andy Sack. Entress had been a limited partner of the firm for the past couple of years. As if his new role won’t keep him busy enough, Entress is also retaining his position at Voyager Capital, where he will continue to advise startups and evaluate investment deals.
Overall, the move solidifies Entress’s standing as one of the most connected and successful early-stage tech investors in the country. He has been called the “Ron Conway of Seattle” (after the Silicon Valley early-stage angel investor in Google and PayPal) often enough that the comparison feels like a cliche. But to understand what Entress’s move to Founder’s Co-op really means—and what the long-term impact could be on the startup and venture capital ecosystem—you need to know more about where he came from, and where he’s going in life.
Entress is one of those guys whose track record as a boy wonder boggles the mind. He grew up in Pittsburgh, the son of an oral surgeon with the U.S. Navy who “pulled the wisdom teeth of all my friends in high school,” he says. He went to college at the University of Notre Dame, and returned to his hometown to do a master’s in industrial administration at Carnegie Mellon University. Fresh out of business school in the mid-1980s, when he was in his early 20s, he ran a hedge fund with his father. The fund was successful enough that its sale to Duquesne Capital Management helped launch Entress’s career as an angel investor.
But before he found his golden touch for startups in Seattle, he had to complete a couple more steps in the journey. He learned the ways of Wall Street in various jobs in finance, sales, and trading in New York and New Jersey, including stints at Salomon Brothers and The Prudential Home Mortgage Company. Then he went back to school and got his law degree from the University of Michigan.
In 1998, Entress made his trek to the Northwest. He took a job in Seattle with Perkins Coie as a securities lawyer, where he worked on IPOs and other corporate transactions on the verge of the most lucrative, and bubbly, moment in stock market history. Given what was happening in the world, it seemed like a good time to start a company. In 1999, he was bitten by the tech startup bug and co-founded UrbanEarth.com, a digital music company where he served as chief financial officer. The firm went belly-up during the dot-com bust, but the experience taught Entress a couple of important lessons that were valuable to him over the ensuing years.
First, setting up basic servers and Web technologies took his team months in 1999, but can now be done in days—that’s why startup costs are so much lower. Second, timing is everything. For instance, UrbanEarth had a term sheet from VCs in the spring of 2000, but the Internet bubble burst, and the money went away. “Being early will kill you,” he says. “I tell entrepreneurs, ‘I’ve seen 50 or 100 companies that were doing something similar—why was the timing wrong when they did it, and what’s different now?’”
Failure at his first startup didn’t scar Entress. On the contrary, he has studied failures carefully and learned a great deal from them. And in fact, he forged one of his close friendships, with Alex Algard, the founder of WhitePages.com, during that hard time. The two would later co-invest in The Coffee Equipment Company in their first deal together.
Still, Entress needed something more challenging, and found it at Madrona Venture Group, where he spent eight-plus years as a VC. But all the while, he never stopped making independent angel investments in a few companies, like PDA Verticals and World Wide Packets in the early days. His biggest hit (so far) would turn out to be Isilon Systems, the data storage firm which he invested in back in 2000, alongside Madrona. The company went public in 2006, raising $108 million in an IPO and making its early investors a lot of money.
What was the most important thing he learned at Madrona, and then Voyager? “I really love early-stage investing—at the earliest stage,” Entress says, because he can “help build something from the ground up.” Some examples from his VC days: He first met Isilon when it was two guys, he says. Redfin (originally called Appliance Computing) was three guys. And he gained a lot of perspective working with companies like BuddyTV, World Wide Packets, Seadragon, ShareBuilder, and SinglePoint. What’s more, his experience with BuddyTV opened the door to another investing partner, CEO Andy Liu, as well as Internet marketing guru Neil Patel and Ben Huh of Cheezburger fame. Later on, with Voyager Capital, he helped advise and build Ground Truth, Elemental Technologies, and most recently, Bonanzle.
DeVore, the co-leader of Founder’s Co-op, says the first time he got to know Entress was around 2007. That’s when DeVore and Andy Sack were thinking about investing in Cheezburger Network (formerly called Pet Holdings) and “foolishly passed,” DeVore says. “He was known as a VC, but what always attracted us to Geoff was what he was doing on the side…He was doing great deals on his own initiative.” As DeVore puts it, “Geoff was up to his elbows in grass-roots investing.”
That’s as opposed to the traditional venture model of putting more money to work at a slightly later stage, and swinging for home runs that can generate 10-fold investment returns. Going back to the grass roots fits with DeVore and Sack’s original vision for Founder’s Co-op as a seed-stage fund. To date, the firm has raised one small fund, of $2.5 million, in 2008.
DeVore wouldn’t comment on any new fundraising efforts, but it seems safe to say Entress is coming on board at least in part to help ramp up the firm’s investments. Presumably that will mean raising a new (and larger) fund—perhaps in the $10 million to $15 million range—something more similar to Founders Fund in Silicon Valley, or what investors from Spark Capital and Venrock are cooking up on the East Coast. It will be interesting to watch how this new breed of smaller, early-stage technology funds springs up across different geographies, and how successful they become.
Like a lot of things in business, the key to Entress’s success has been personal. Probably even more important than his deep knowledge of the mechanics of tech investing has been his approachability and generosity of spirit—in an industry not necessarily known for either. For years, he has made an effort to be out and available at startup and investment forums and conferences—not just around Seattle, but nationally—and to be closely involved with groups such as Alliance of Angels, Keiretsu Forum, Zino Society, Puget Sound Venture Club, and the Angel Capital Association. That has made him accessible not only to top entrepreneurs, but also to other investors and wealthy individuals who might be interested in leading their own deals if they get a little guidance.
“He’s a really smart, really nice, approachable guy who has a passion for early-stage investing,” DeVore says. “He became a node, a conduit, to meet other entrepreneurs and investors. He made himself available to help, without having it be about putting money in his own pocket. He gave so much of himself to so many people in the ecosystem that he became the go-to guy.”
Others in the business community seem to agree. “The key to Geoff is he’s always more willing to take meetings with people who are young, or off the beaten path, than most VCs,” says Nikesh Parekh, a tech executive, investor, and former CEO of Bio Architecture Lab who has known Entress for about 10 years (but hasn’t invested with him). “And if Geoff is willing to invest, chances are high he’ll be able to attract other people.” On the technology side, Parekh says Entress was one of the first in Seattle to make investments in social networks, in the mid-2000s—in companies like Shelfari, BuddyTV, and Cheezburger Network. “The business models have yet to be proven, but Geoff was early to the trend of social media compared to other folks in town,” he says.
As for the future of venture capital, Entress sees a “barbell” trend taking shape, with VCs moving to both later-stage, lower-risk, bigger-money deals and smaller, earlier-stage, higher-risk investments. He calls the latter “the future of consumer Web investing.” With Founder’s Co-op, Entress says, “We hope we can be the dominant player in that space in the Pacific Northwest. But the trends hold all over the country. Venture investing is a local business. At the early stage it’s even more so.”
In his usual diplomatic way, Entress also defends the traditional venture model and doesn’t try to position his seed-stage fund as a direct competitor. “I don’t think [the venture model] is completely broken,” he says. “There will be fewer VCs and less money in it. But our end of the market will still be much smaller than that.” DeVore echoes that sentiment, saying, “Venture firms aren’t obsolete. But we’re most excited about this [seed-stage] tier of entrepreneurship.”
Entress says his new position will “help me leverage myself” so he can have greater reach beyond “just being one guy.” He breaks down his investment preferences into two non-exclusive buckets. One is companies that can “bootstrap their way to significant traction” and need a little bit of capital to grow. Some recent examples would be Bonanzle in e-commerce, and Nirvaha in software-as-a-service for billing and pricing. Another bucket, he says, is “deals where I see the technology and I say, ‘Wow, this is really cool, I see a need in the market.’” Examples of those are Swype, Elemental, and Isilon, back in the day.
Being in faraway Seattle, of course, means Entress still doesn’t get as much attention as the big-name angels in Silicon Valley, New York, or Boston. But that might be changing soon. He has been doing more outreach to the innovation communities in places like San Francisco, Pittsburgh, Vancouver BC, and South Bend, IN—places where he has some personal connections.
“We have a great ecosystem in Seattle,” he says. “It’s the envy of a lot of other cities and regions around the country…They say, ‘How do we do what [Seattle has] done with the University of Washington, which has spun out a ton of great companies? How can we get some of the magic here?’” Entress says he tells university officials in other cities, “You have to keep your students there…so they can start companies there. And encourage the ecosystem, and the angel investors.”
Entress would know. On his way to helping shape the future of early-stage technology investing, he seems more dedicated than ever to building the innovation ecosystem here in the Northwest. And that’s something people will always remember, no matter how big he gets, or where he goes.
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