Seattle Week in Review: Failure is Likely, But Not Guaranteed
Entrepreneurs know it, the angel investors and venture capitalists who back them know it: Building a business from scratch is difficult, and the odds of it becoming a runaway success are long. Xconomy Seattle’s Week in Review looks at new research on angel investing outcomes and the winner of the latest Seattle Angel Conference, the latest in machine learning and artificial intelligence, and a ranking of tech cities that might irk some folks in Seattle.
Also, we’re linking to coverage in Xconomy and elsewhere of issues including Amazon’s new research team focused on “sense and avoid” techniques for Prime Air delivery drones, the tech industry’s impact on sex trafficking, revelations about e-waste recycling, profiles of Seattle entrepreneurs, and Expedia’s 20th anniversary.
—“Failure is the most likely outcome” for angel investments, according to new research on returns for private, early-stage backers of startup companies. The Angel Resource Institute at Willamette University released results of a study of angel investing returns based on a sample of 136 completed investments—90 percent of which occurred between 2010 and 2016—from 20 U.S. angel funds.
More than two-thirds of investments studied resulted in loss of capital for the investors. That’s compared to 52 percent of less-than-1x exits in the 2007 version of the study, carried out by Willamette professors Robert Wiltbank and Wade Brooks.
(The comparisons to 2007 should be taken with a grain of salt, as the methodologies and data sets were substantially different. The researchers say they’ve established a new approach to tracking angel returns that will allow for annual reporting in the future.)
The researchers found that the average investment holding period was 4.5 years, but “bigger wins commonly took nine or 10 years to complete.”
—In local angel investing news, Hubb, a startup based in Vancouver, WA, that makes cloud-based event management software, won the ninth Seattle Angel Conference pitch competition and a $155,000 investment. The Seattle Angel Conference was established in 2011 with the explicit goal of helping novice angel investors gain experience backing startups.
Meanwhile, Chris DeVore, of early stage venture firm Founders’ Co-op and Techstars Seattle, looked at some startling results from Seattle’s tech pillars, Amazon and Microsoft, and wondered where the new angel investors are.
— Chris DeVore (@crashdev) May 10, 2016
—It’s good to see the state’s tech industry association taking on the issue of sex trafficking. The Washington Technology Industry Association convened a conference on the topic this week, pointing out some startling links between prostitution and the tech industry. Journalist Ruchika Tulshyan reports on the conference for Crosscut.
—What can cows, dogs, and parrots tells us about machine learning? Read our coverage of Madrona Venture Group’s machine learning and artificial intelligence event summit this week to find out. We also covered a new Madrona-backed startup, Integris.io, which aims to help companies manage their use of customer data.
—Of course, Seattle is not the only city where strides are being made on this frontier of computing. Xconomy’s Jeff Engel, who is based in the Boston area, digs into what’s happening at Amazon’s growing research lab in Kendall Square, including work in support of Alexa speech recognition, and Mitsubishi Electric Research Laboratories, which is trying to “crack the cocktail party problem.” He’s not referring to running out of tonic.
—Last week, we reported on Bellevue, WA-based Echodyne’s new lightweight, high-performance radar designed to give drones the ability to “sense and avoid” other objects when flying beyond the operator’s line of sight. This week, Amazon revealed that a research team in Austria is working on computer vision technology for the same purpose. Components of Amazon’s planned Prime Air drone delivery system are being developed at research centers around the world.
“Our new team in Austria will support all aspects of our ‘sense and avoid’ system, which we compare with getting our vehicles to behave less like cars and more like horses,” writes Paul Misener, Amazon’s vice president for global innovation policy and communications. “Like smart animals, the drones must know when they are getting into trouble, and avoid colliding with things, without a human intervening. They must be independently safe.”
—We reported on the innovative investigation into e-waste recycling practices undertaken by Seattle-based Basel Action Network. The nonprofit, which is focused on international flows of toxic materials, planted broken monitors and printers outfitted with custom GPS trackers to follow their movement through the recycling chain. The findings are troubling: Of the 200 devices deposited at e-waste collection sites around the country, at least 65 wound up overseas. That’s despite assurances from many recyclers that they don’t send waste to places with weak environmental and labor regulations.
—We’re No. 1! Oops, typo: We’re actually No. 11. That’s according to yet another ranking of cities on this or that set of tech-related metrics. The latest one, “Innovation That Matters” from the U.S. Chamber of Commerce Foundation and incubator 1776, ranks cities on their “readiness to capitalize on the inevitable shift to a digital economy.”
Seattle, which just missed the top 10, arguably already has shifted to a digital economy. But the same can be said for many of the cities that ranked higher (many of which are covered by Xconomy): Boston came in first, followed by the Bay Area, Denver, Raleigh-Durham, NC, San Diego, Austin, TX, Los Angeles, Philadelphia (?!), Washington, DC, and New York.
Sour grapes notwithstanding, there’s plenty to quibble with here. In a summary of Seattle’s startup scene, the report’s authors give credit for a thriving talent base, but say a “lack of engaged corporations, citizens, cheerleaders, and mentors remain weaknesses.” Does that ring true to you?
—Rachel Lerman of The Seattle Times gets personal with area startup founders on their motivations, struggles, and successes in a feature story for Pacific NW Magazine. “More than 1,000 entrepreneurs in Seattle are running startups — sacrificing financial stability, family time and often reputation to start ventures that have a 90 percent chance of failing,” Lerman writes. Do you think any of these people considered rankings like “Innovation That Matters” before taking the startup plunge, and doing it in Seattle?
—Finally, Expedia, the online travel giant, is marking its 20th anniversary. As far as I can tell, the coverage of this milestone (at least in The Seattle Times and GeekWire) did not dig into Expedia’s real reasons for uprooting itself from Bellevue and taking over the former Amgen campus on Elliott Bay in Seattle. [Dons tinfoil hat.] As I’ve said before, there can be only one reason for a travel company to want biotech lab space. Why travel when “you can buy the memory of your ideal vacation”? That was the pitch from Rekall, the fictional company in the 1990 Arnold Schwarzenegger sci-fi thriller Total Recall, based on the Philip K. Dick story “We Can Remember It for You Wholesale.”