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The DL - An inside view into Pacific Northwest Tech

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Welcome to The DL, a weekly newsletter about tech, startups, and investing in the Pacific Northwest.
 
August 19 · Issue #9 · View online
The DL
Welcome to The DL, a weekly newsletter about tech, startups, and investing in the Pacific Northwest.
This week’s issue has a deep dive on the Sounders deal, stats on startup success outside of Silicon Valley, and a link to this year’s AP Pokemon exam.

If you have thoughts, questions, or comments, hit reply - I’d love to hear from you! 👋 Referred by a friend? Sign up here.

Investing in the Sounders: Q & A with Terry Myerson
Anatomy of a ⚽ deal
Sports teams are 🔥! Every NFL, NBA, and MLB franchise is now worth at least $1B, and there are 52 teams across all sports worth at least $2B, up from one (Manchester United), in 2012.

Last week the Sounders announced 11 new families are joining the team ownership group, and Terry Myerson, who was the driving force behind the deal, wrote a great blog post on the 15 month long deal process.

The graphic above dives into the Seattle networks that pulled this all together (I love the loop from Microsoft, to Madrona, to PSL/Tally, to Macklemore, and back to the Seattle Foundation), and here is a Q & A with Terry on the deal process:

How many people did you meet with to find the 11 families that ended up investing? Were they all warm intros?
They were all introductions. There was no cold calling 😊
I had over 100 discussions, mostly on the phone, some over coffee or breakfast or lunch, some at half time of a Sounders game, and many on the sidelines of Eastside FC or ISC Gunners soccer games.

What was the biggest surprise during the investment process?
Last September, I had a bike trip planned in Laos and Vietnam. I thought the deal might close while I was gone, so I rented a satellite phone and carried it everywhere on the trip. The deal ultimately closed 9 months later. There were more moving parts than I ever could have imagined when we started.

Sports team valuations seem to be skyrocketing over the last few years. What type of returns do people who invest in teams expect?
We didn’t invest with a specific return in mind. We all felt it was important that the Sounders be owned in Seattle.
That being said, team valuations are typically driven by viewership which drives media rights. Soccer in the US has not had the highest viewership, but I think there is great potential for this to change for several reasons (youth playing trends, increased diversity in our community), but primarily because soccer is just awesome!

What’s been your best investment ever? Favorite investment?
Best investment – Starting a company, Intersé Corporation, which Microsoft acquired in 1997. Starting a company with friends, leading it through all the twists and turns of a startup, and then ultimately being successful with it is an amazing experience I’d recommend to anyone with an entrepreneurial itch.
Favorite investment – Microsoft. Great mission, great leadership, great products and services.

Can you get some DL subscribers into the owners’ box?
I’m sure we’ll be hosting many Madrona entrepreneurs there over time!

Startup success outside of Silicon Valley
Founder Collective put together an interesting analysis on the last ten years of software M&A and IPOs by geography (Jan 2009 - Aug 2019). Seattle got a nice ☕ emoji, and $50B of exit value over the last decade. That’s pretty good at $8B higher than NY, but $10B behind Boston and LA.

However, as we saw in Version One data a couple weeks ago, power laws define venture returns, which means the biggest winners return significantly more than the median investment. In fact, $525B of the total Bay Area value comes from Facebook alone (almost 2x every other city combined).

Let’s make sure the next Facebooks gets founded in the PNW! ⛰️

Other stuff I've been talking about
My wife Sarah makes fun of me for not using Instagram, so this week I made my first Instagram post in three years and educated myself on Gen Z social. Here are some articles to get you up to speed, too:

📸 Insta-worthy? - According to the WSJ, emojis, bitmojis, and Tinder photos are making their way into Gen Z resumes. We just launched Madrona’s Instagram, so send your insta-worthy resumes my way!
🍦 $200M - The Museum of Ice Cream just raised $40M at a $200M valuation. From what I can tell, they actually do sell ice cream, they are not really a museum, and their Instagram looks really good
👯 Twinfluencers - As an only child, I can’t take advantage of this one, but apparently, 1 in 30 kids born in the US today is a twin, and they’re taking over social media
⚡ AP Pokemon - Someone on Reddit created a 42 page AP Pokemon exam, and it is really good. Unfortunately, no emoji for Pokemon (yet)

Please hit reply! (Or subscribe or forward!)
About me: I work as an investor at Madrona Venture Group, a Seattle-based venture capital firm that has been early partners with companies like Amazon, Smartsheet, Apptio, and Redfin.
I’m writing this to connect with other people who are interested in what’s going on in PNW tech, so if you have thoughts, questions, or comments, hit reply - I’d love to hear from you! 👋

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