Business

Pioneer Square Labs Aims To Turn Ideas Into Businesses

By Rachel Lerman
The Seattle Times.

People skilled at running companies might not be the best at coming up with ideas to start them. On the other hand, those who are great at thinking up business ideas might not be the best at running companies.

That’s the thinking behind a new startup studio in Seattle, which will develop and test ideas for businesses and then hand them over to experienced leaders to run and grow.

A small group of Seattle entrepreneurs and investors, backed by a hefty list of venture-capital firms and angels, has launched Pioneer Square Labs and raised $12.5 million to get the machine moving.

The studio is the brainchild of Greg Gottesman, a Madrona Venture Group venture partner; Geoff Entress, a Voyager Capital venture partner; Ben Gilbert, co-founder of Madrona Venture Labs; and Mike Galgon, co-founder of aQuantive.

While working with Madrona Labs, which has developed and spun out companies such as quick-task app Spare5, Gottesman started wondering what he could do with the model at a larger scale.

“We’re going in with the understanding that if we could match a really interesting idea with traction and an incredibly talented team, great things could happen,” Gottesman said.

This is far from the first attempt at such an idea for Gottesman. He co-founded dog-sitting site Rover.com, and handed it over to Aaron Easterly to run. He helped develop Spare5, now run by Matt Bencke. Entress and Gottesman helped revamp online real-estate company Redfin in its early days and brought in CEO Glenn Kelman.

Gottesman freely admits that he is not the best one to grow companies. But he is undeniably adept at coming up with successful ideas.

“I think it’s unusual you find people who would be a great long-term CEO and who also came up with a great idea,” said Bencke, CEO of Spare5. “Greg is the guy who is always coming up with great ideas.”

Led by Gottesman, Entress, who has invested in more than 150 companies, Galgon and Gilbert, the eight-employee company has had little trouble finding funding. Backers have another advantage; they will get the first look at the companies to spin out of Pioneer Square Labs.

The founders hope to add to the number of startups popping up all over Seattle, while strengthening the region’s tech scene. Most startups will still be started the “traditional” way, they say: An individual or pair have an idea, find funding and start a company.

But Pioneer Square Labs is looking to draw other people out of the woodwork, including some who may have been working in the region’s tech network for years but who aren’t ready to take the risk of leading a startup.

“I don’t think I’m alone in terms of people who have a lot of startup experience and love startups, but may or may not be the person who had the initial idea,” said Easterly, the Rover.com CEO.

The new studio offers somewhat of a prepackaged option — ideas, backers and co-founders come with the business.

“Standing at the edge of the cliff is terrifying,” Entress said of the decision to found a startup. “We want to make it less terrifying. We can make the cliff lower.”

Pioneer Square Labs is prepared to fail — about 90 percent of the time, in fact. The team has been at it for about a month and has already killed two ideas.

That’s why the plan is to test ideas that can be tried quickly, usually consumer technology and business applications that can be developed and tested with customers within four to five months. When an idea sticks, the team will bring on entrepreneurs and executives to run it as a stand-alone company.

The studio hopes to spin out between two and four companies each year, Gottesman said. And the team won’t grow much. Gottesman thinks it will hit 15 people at its peak.

The company is launching in the Galvanize co-working space and plans to eventually fill much of the fifth floor with its own team and spin out companies. Pioneer Square was important, Gilbert said, because it is the neighborhood that kick-started Seattle as a city — an ultimate form of entrepreneurship.

The studio raised some funding from people who are intimately acquainted with the model.

Pioneer Square Labs’ backers include nearly a long list of venture firms in the region, including Maveron, Madrona, Bezos Expeditions, Vulcan Capital, Voyager Capital and Trilogy Equity Partners. Angel investors also jumped on board, including Expedia founder Rich Barton and serial entrepreneur Rudy Gadre.

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