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The DL - An inside view into Pacific Northwest Tech

Welcome to The DL, a weekly newsletter about tech, startups, and investing in the Pacific Northwest.
September 3 · Issue #11 · 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 data on trends in PNW seed deals, a $9B business idea, and an alternative to spending $200K on a finance MBA.

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

Seattle seed deal trends
Pitchbook data for seed deals in WA, OR, and BC
After seeing this great visualization from Tom Tunguz, I worked with the PitchBook team to replicate the analysis for seed trends in the Pacific Northwest. Here are some highlights and areas where I’m excited about new investment opportunities:

Overall, the PNW is tracking national seed trends quite closely
Sectors like AI, healthcare, and blockchain have all seen significantly more seed deals than five or ten years ago while sectors like social and fashion have slowed (big surprise in Seattle 😜). Next time, I’d want to pick categories a little bit differently because I think the PNW is probably ahead of the pack in categories like cloud and gaming.

Contrarian bets on social and marketplaces will pay off
It’s not impossible to compete with Facebook and Amazon, but next generation social platforms and marketplaces won’t look like today’s existing competitors. For example, Peloton is an example of a social platform for fitness because the magic of Peloton isn’t the bike - it’s the experience of exercising as part of a community. Social networks and marketplaces are some of the stickiest, most profitable businesses, and there is still a lot of opportunity to build new businesses in these spaces.

It would be great to see more retail and ecommerce startups
I’ve written a few times on why Microsoft is a great place for future startup founders, and Geekwire has done some interesting analysis on how many of the top startups in Seattle are led by Microsoft alums. But there is a lot of talent and expertise in ecommerce and retail at Amazon, Starbucks, Costco, Nordstrom, Zulily, Lululemon, and other PNW companies, and investors would love to see more of those folks start companies.

The DL’s First Survey
Inspired by @gorkiegork on Instagram
I’ll publish results next week! 📊

Equifax's other database
Happy people whose data belong to Equifax
Last week, someone pointed me to The Work Number, which is an amazing business I had never heard about before. The Work Number is a database for employment and payroll data, and customers primarily use it to verify someone’s employment.

Employment verifications are often required when leasing a new apartment, updating immigration status, or applying to a new job, and each time someone wants to check the Work Number database, they can purchase an individual’s employment and income information for ~$20.

However, the really interesting part of this business is that Work Number’s clients (including Microsoft, Facebook, Amazon, Wal-Mart, and 75% of the Fortune 500) actually pay Work Number for the privilege of sending weekly data on their employees’ work and wages to Work Number’s database.

The idea for these clients is that by having Work Number manage this data, their HR departments will not have to respond to calls and inquiries from lenders or potential employers, so they are saving a lot of time and money.

It also means that Equifax has a massive amount of data on one-third of the working population in the US, and this database is worth a lot. In 2017, the CEO of Equifax said that The Work Number is worth ~$9B.

What are other markets where you could build this type of business… where customers pay you to take their data, and other customers pay you to access the data? Let’s talk about your ideas! 😊

Other stuff I've been talking about
📚 The Tattooist of Auschwitz - I started this book Sunday night and finished it on Monday. Incredible story you should definitely read
💭 TL;DR: - Save yourself $200K for an MBA and just read these (surprisingly good) one sentence summaries of the 20 best finance books
🔄 Learning Loops - Blog post from Matt McIlwain on the entrepreneurial journey with stories from the early days of Smartsheet, Apptio, and Isilon
🚴‍♀️ Striking! - In honor of the Peloton IPO, here is one of the best Twitter threads ever. Amazing photos and commentary 😆

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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