Pioneer Square Labs
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Facebook buys game studio BigBox VR
Facebook has bought several virtual reality game studios over the past couple of years, and they added one more to their portfolio Friday with the acquisition of Seattle-based BigBox VR.
The studio’s major title, “Population: One,” was one of the big post-launch releases for Facebook’s Oculus Quest 2 headset and is a pretty direct Fortnite clone, copying a number of key gameplay techniques while adapting them for the movements unique to virtual reality and bringing in their own lore and art style.
As has been the case for most of these studio acquisitions, terms weren’t disclosed. BigBox raised $6.5 million according to Crunchbase, with funding from Shasta Ventures, Outpost Capital, Pioneer Square Labs and GSR Ventures.
“POP: ONE stormed onto the VR scene just nine months ago and has consistently ranked as one the top-performing titles on the Oculus platform, bringing together up to 24 people at a time to connect, play, and compete in a virtual world,” Facebook’s Mike Verdu wrote in a blog post.
It’s not unusual for a gaming hardware platform owner to build up their own web of studios building platform exclusives, but in the VR world things are a little different, given that Facebook has few real competitors.
While many of the developers inside Oculus Studios continue to build titles for Valve’s Steam store, which are accessible with third-party headsets, most non-Facebook VR platforms seem to be a shrinking piece of the overall VR pie, having been priced out of the market by Facebook’s aggressive pursuit of a mass market audience. Facebook’s Oculus Quest 2 retails for $299 and the company has said that it outsold all of its previous devices combined in its first few months.
In April, Facebook acquired Downpour Interactive, maker of the VR shooter “Onward.”
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In the shadow of Amazon and Microsoft, Seattle startups are having a moment
Venture capital investment exploded across a number of geographies in 2019 despite the constant threat of an economic downturn.
San Francisco, of course, remains the startup epicenter of the world, shutting out all other geographies when it comes to capital invested. Still, other regions continue to grow, raking in more capital this year than ever.
In Utah, a new hotbed for startups, companies like Weave, Divvy and MX Technology raised a collective $370 million from private market investors. In the Northeast, New York City experienced record-breaking deal volume with median deal sizes climbing steadily. Boston is closing out the decade with at least 10 deals larger than $100 million announced this year alone. And in the lovely Pacific Northwest, home to tech heavyweights Amazon and Microsoft, Seattle is experiencing an uptick in VC interest in what could be a sign the town is finally reaching its full potential.
Seattle startups raised a total of $3.5 billion in VC funding across roughly 375 deals this year, according to data collected by PitchBook. That’s up from $3 billion in 2018 across 346 deals and a meager $1.7 billion in 2017 across 348 deals. Much of Seattle’s recent growth can be attributed to a few fast-growing businesses.
Convoy, the digital freight network that connects truckers with shippers, closed a $400 million round last month bringing its valuation to $2.75 billion. The deal was remarkable for a number of reasons. Firstly, it was the largest venture round for a Seattle-based company in a decade, PitchBook claims. And it pushed Convoy to the top of the list of the most valuable companies in the city, surpassing OfferUp, which raised a sizable Series D in 2018 at a $1.4 billion valuation.
Convoy has managed to attract a slew of high-profile investors, including Amazon’s Jeff Bezos, Salesforce CEO Marc Benioff and even U2’s Bono and the Edge. Since it was founded in 2015, the business has raised a total of more than $668 million.
Remitly, another Seattle-headquartered business, has helped bolster Seattle’s startup ecosystem. The fintech company focused on international money transfer raised a $135 million Series E led by Generation Investment Management, and $85 million in debt from Barclays, Bridge Bank, Goldman Sachs and Silicon Valley Bank earlier this year. Owl Rock Capital, Princeville Global, Prudential Financial, Schroder & Co Bank AG and Top Tier Capital Partners, and previous investors DN Capital, Naspers’ PayU and Stripes Group also participated in the equity round, which valued Remitly at nearly $1 billion.
Up-and-coming startups, including co-working space provider The Riveter, real estate business Modus and same-day delivery service Dolly, have recently attracted investment too.
A number of other factors have contributed to Seattle’s long-awaited rise in venture activity. Top-performing companies like Stripe, Airbnb and Dropbox have established engineering offices in Seattle, as has Uber, Twitter, Facebook, Disney and many others. This, of course, has attracted copious engineers, a key ingredient to building a successful tech hub. Plus, the pipeline of engineers provided by the nearby University of Washington (shout-out to my alma mater) means there’s no shortage of brainiacs.
There’s long been plenty of smart people in Seattle, mostly working at Microsoft and Amazon, however. The issue has been a shortage of entrepreneurs, or those willing to exit a well-paying gig in favor of a risky venture. Fortunately for Seattle venture capitalists, new efforts have been made to entice corporate workers to the startup universe. Pioneer Square Labs, which I profiled earlier this year, is a prime example of this movement. On a mission to champion Seattle’s unique entrepreneurial DNA, Pioneer Square Labs cropped up in 2015 to create, launch and fund technology companies headquartered in the Pacific Northwest.
Boundless CEO Xiao Wang at TechCrunch Disrupt 2017
Operating under the startup studio model, PSL’s team of former founders and venture capitalists, including Rover and Mighty AI founder Greg Gottesman, collaborate to craft and incubate startup ideas, then recruit a founding CEO from their network of entrepreneurs to lead the business. Seattle is home to two of the most valuable businesses in the world, but it has not created as many founders as anticipated. PSL hopes that by removing some of the risk, it can encourage prospective founders, like Boundless CEO Xiao Wang, a former senior product manager at Amazon, to build.
“The studio model lends itself really well to people who are 99% there, thinking ‘damn, I want to start a company,’ ” PSL co-founder Ben Gilbert said in March. “These are people that are incredible entrepreneurs but if not for the studio as a catalyst, they may not have [left].”
Boundless is one of several successful PSL spin-outs. The business, which helps families navigate the convoluted green card process, raised a $7.8 million Series A led by Foundry Group earlier this year, with participation from existing investors Trilogy Equity Partners, PSL, Two Sigma Ventures and Founders’ Co-Op.
Years-old institutional funds like Seattle’s Madrona Venture Group have done their part to bolster the Seattle startup community too. Madrona raised a $100 million Acceleration Fund earlier this year, and although it plans to look beyond its backyard for its newest deals, the firm continues to be one of the largest supporters of Pacific Northwest upstarts. Founded in 1995, Madrona’s portfolio includes Amazon, Mighty AI, UiPath, Branch and more.
Voyager Capital, another Seattle-based VC, also raised another $100 million this year to invest in the PNW. Maveron, a venture capital fund co-founded by Starbucks mastermind Howard Schultz, closed on another $180 million to invest in early-stage consumer startups in May. And new efforts like Flying Fish Partners have been busy deploying capital to promising local companies.
There’s a lot more to say about all this. Like the growing role of deep-pocketed angel investors in Seattle have in expanding the startup ecosystem, or the non-local investors, like Silicon Valley’s best, who’ve funneled cash into Seattle’s talent. In short, Seattle deal activity is finally climbing thanks to top talent, new accelerator models and several refueled venture funds. Now we wait to see how the Seattle startup community leverages this growth period and what startups emerge on top.
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Startups Weekly: Will the Seattle tech scene ever reach its full potential?
Greetings from Seattle, the land of Amazon, Microsoft, two of the world’s richest men and some startups.
I’m always surprised the Seattle startup ecosystem hasn’t grown to compete with the likes of Silicon Valley — or at least Boston and New York City — since the dot-com boom. Today, it’s the strongest it’s been due to the successes of companies like the newly minted unicorn Outreach, trucking business Convoy and, of course, the dog walking startup Rover. But the city still lags behind, failing to adopt the culture of entrepreneurship that defines San Francisco.
I spent a lot of time wondering why it hasn’t reached its full potential. Is it because Microsoft and Amazon pay their employees so well they don’t have the same urge to build something from the ground up? Is it a lack of access to capital? Is the city not attracting top talent? If you have thoughts, send them my way.
“We think part of the issue is a lack of capital and a lack of help,” Rover and Pioneer Square Labs co-founder Greg Gottesman told TechCrunch earlier this year. “If we can provide a little bit of both of those things, we can really put Seattle where it deserves to be, should be and will be.”
Despite its shortcomings, there is still some action in the city I want to highlight this week. A same-day delivery business, Dolly, is on the rise. The startup told me on Thursday it had raised a $7.5 million round from Unlock Venture Partners, Maveron and Jeff Wilke, the chief executive officer of Amazon Worldwide Consumer. Maveron, if you remember, is the VC fund co-founded by Starbucks founder Howard Schultz.
In other Seattle news, Madrona Venture Group, a well-regarded fund, raised an additional $100 million this week. Typically, Madrona focuses on companies based in the Pacific Northwest, but this fund will deploy capital throughout the entire U.S. Hmmm, that’s not necessarily a good sign for Seattle founders, but great progress for the ecosystem nonetheless.
If you’re interested in learning more about Seattle tech, I’ve covered it a bit because it’s my hometown! Start with this story, which dives deep into a Seattle accelerator that’s working hard to encourage entrepreneurship in the city. Alright, on to other news.
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WeWork: The co-working giant now known as The We Company submitted confidential IPO documents to the SEC, the company confirmed in a press release Monday. Is this the next massive startup win or a house of cards waiting to be toppled by the glare of the public markets? TechCrunch’s Danny Crichton investigates.
Slack: The business is in its final steps toward a much-anticipated direct listing, with one source telling TechCrunch the listing will be complete within 45 days. The WSJ reported this week that Slack will make an online presentation to potential shareholders on May 13. This week, we dug deep into Slack’s S-1 and decided to evaluate just how well the tech press, us included, did in covering the company. For the most part, the tech press did decently well, except for one curious, $162 million gap.
Uber: Finally! That ride-hailing company is going public next week. That latest news? Uber co-founder Travis Kalanick won’t be ringing the opening bell. Uber would not be where it is today without Kalanick, but him being there would surely be a reminder of Uber’s rocky past.
Beyond Meat: Shares of the company surged up 135 percent in their market opener last week, valuing the company as high as $3.52 billion. Volatility was so high on the company’s stock that the Nasdaq had to pause trading of “BYND” shares.
Ofo has run into its fair share of issues, laying off hundreds of workers, shutting down its international division and more. Now, you can buy a piece of the startup’s history.
Now you can buy a piece of startup history… Ofo bikes for ~$60 https://t.co/LLJbDOXm0C
— Jon Russell (@jonrussell) April 29, 2019
In other micro-mobility news, Lyft’s head of scooter & bikes Liam O’Connor, who was hired to help transportation company Lyft build its bike and scooter operations, has left after seven months with the newly-public company. TechCrunch’s Ingrid Lunden has the scoop. Plus, Bird, the electric scooter unicorn doing its best to overcome regulatory barriers, has made its way back to San Francisco. Bird is using its business license in San Francisco to introduce monthly personal rentals in the city. The program enables people to rent a scooter for $24.99 a month with no cap on the number of rides. We’ll how that goes.
For some reason, people are giving Magic Leap more money. The company has secured another $280 million in a deal with Japan’s largest mobile operator, Docomo. Do you know what that means? The developer fo AR/VR headsets has raised a total of $2.6 billion. We’re just as confused as you.
Brand new venture capital funds:
Unshackled Ventures raised $20 million.
Exclusive: @UnshackledVC has a new $20M pre-seed fund to invest only in immigrants. Why? Because immigrants are “inherently more entrepreneurial:” https://t.co/ZLiZ1UczJV
— Kate Clark (@KateClarkTweets) May 2, 2019
Jungle Ventures closed on $175 million.
And Toyota AI Ventures launched a $100 million fund.
- UiPath nabs $568M at a $7B valuation
- Utah’s Divvy raises another $200M to eliminate expense reports
- Glovo, the on-demand app, raises $169M Series D
- Awair raises $10M to help companies like WeWork monitor their office environments
I have the inside story on Menlo Ventures early Uber stake and TechCrunch’s Connie Loizos goes deep with early Uber backer Bradley Tusk.
This week, we offer TechCrunch Extra Crunch subscribers exclusive tips on building extraordinary teams. Plus, the final piece in TechCrunch’s Greg Kumparak’s series on Niantic, the fast-growing developer of Pokemon Go. If you recall, we’ve captured much of Niantic’s ongoing story in the first three parts of our EC-1, from its beginnings as an “entrepreneurial lab” within Google, to its spin-out as an independent company and the launch of Pokémon GO, to its ongoing focus on becoming a platform for others to build augmented reality products upon.
If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and TechCrunch’s Danny Crichton chat about updates at the Vision Fund, Cheddar’s big exit and more of this week’s headlines.
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Boundless gets $7.8M to help immigrants navigate the convoluted green card process
Two years ago, former Amazon product manager Xiao Wang stood on the stage at TechCrunch Disrupt San Francisco and made the case for a platform meant to help couples apply for marriage green cards, a complex process made worse by bureaucracy and red tape.
Called Boundless, the startup had spun out of Seattle startup studio Pioneer Square Labs and raised a $3.5 million seed round. Now, Foundry Group’s Brad Feld has led a $7.8 million Series A in the startup, with participation from existing investors Trilogy Equity Partners, PSL, Two Sigma Ventures and Founders’ Co-Op.
“Families have really only had two choices, they could spend weeks or months trying to figure this out on their own, or they can spend thousands and thousands of dollars on an immigration attorney,” Wang, Boundless co-founder and chief executive officer, told TechCrunch. “What we are trying to do is basically give everyone access to the information, the tools and the support that was previously only available to those that could afford high-priced attorneys.”
Boundless charges $750 for its online green card application support services, which includes ensuring families correctly complete applications and have access to an immigration lawyer to review those applications. The fee comes at a major discount to the costs of an immigration lawyer and streamlines a process that can be delayed months when errors are made. The startup also offers a recently launched $395 naturalization product meant to assist eligible green card holders with their U.S. citizenship applications.
Wang founded Boundless in 2017 after helping build Amazon Go, the e-commerce giant’s line of cashierless convenience stores. Wang is an immigrant, having relocated to the U.S. from China when he was a child.
“We spent almost five months of rent money on an immigration attorney because the stakes were so high and we only had one shot,” Wang said. “We wanted to make sure we were doing it right. This is a story that is echoed by millions of families every year; this is such an important part of them starting a new life in a new country.”
Wang, after three years at Amazon, realized he could use his technology background and data prowess to build an information platform supportive of these millions of families.
“This is exactly what tech and data is meant to do,” he said. “I believe there is a moral obligation for tech to be used in meaningfully improving people’s lives.”
Boundless plans to use this investment to expand its team and product offerings, as well as build out its content library, which Wang said is rapidly becoming the go-to place for immigrants navigating the legal labyrinth that is the U.S. green card and citizenship process. Its resources page, which includes straightforward guides, a number of forms and more, counts 300,000 unique visitors per month.
“We hold their hand through the entire process,” Wang said. “We want to be the single source of information and tools for all family-based immigration.”
Wang and his team also hope to shine a brighter light on immigration policy. In late 2018, as part of its effort to be louder advocates for immigrants, Boundless, alongside Warby Parker, Foursquare, Foundation Capital and more, published an open letter to the U.S. Department of Homeland Security opposing its proposed “public charge” immigration regulation, which would allow for non-citizens who are in the country legally to be denied a visa or a green card if they have a medical condition, financial liabilities and other disqualifiers.
“The stakes for making sure your application is correct have never been higher; the government has far more leeway to be able to deny applications,” Wang said. “While we can’t speed up the government processing times, we can make meaningful improvements to helping families gather all the materials they need to send in the right information.”
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Pioneer Square Labs is invigorating Seattle’s startup ecosystem
Three miles from Seattle’s South Lake Union neighborhood — better known as Amazonia to locals — sits Pioneer Square. The original heart of the city, the area has managed to hold on to its decades-old charm as other parts of town are besieged by Amazon-contracted architects.
On a mission to champion Seattle’s unique entrepreneurial DNA, startup studio Pioneer Square Labs has not only adopted the neighborhood’s moniker but established its fast-growing HQ at its center.
Pioneer Square Labs, or PSL, cropped up in 2015 to create, launch and fund technology companies headquartered in the Pacific Northwest. Operating under the startup studio model, PSL’s team of former founders and venture capitalists, including Rover and Mighty AI founder Greg Gottesman, collaborate to craft and incubate startup ideas, then recruit a founding CEO from their network of entrepreneurs to lead the business. The team uses an innovative method of rapidly ideating, testing and, if necessary, scrapping ideas, dubbed its “validation engine.”
The model differs from an accelerator or incubator. Y Combinator, for example, admits existing business into its months-long program, deploying its expertise and capital to bolster early-stage startups. PSL, on the other hand, creates startups and provides would-be founders with a derisked platform for company building.
“It’s a dream job,” PSL co-founder Greg Gottesman told TechCrunch. “If someone would say to you ‘hey, you can come into work every day, think about all the problems that are interesting to solve, all the tech that’s available and you have the resources to build companies,’ that’s just a dream come true … It’s just been a very fun ride.”
Xiao Wang, the CEO of Pioneer Square Labs spin-out Boundless, pitching at TechCrunch Disrupt SF 2017
The startup studio model is working for PSL. To date, it has raised $27.5 million in equity funding to build out its platform, in addition to an $80 million fundraise for its debut venture fund, which invests in PSL companies and other Pacific Northwest businesses. Of the 13 companies to emerge from PSL in the last three years, all have raised follow-on rounds from venture capital firms at an aggregate valuation of $200 million. According to PitchBook, PSL companies comprised 14.3 percent of all early-stage VC deals in Washington state in 2018.
Among PSL’s portfolio companies are cloud security compliance platform Shujinko, which closed a $2.8 million seed round from Unusual Ventures, Defy Ventures, Vulcan Capital and more last year. Plus, Boundless, a platform that facilitates the process of applying for immigrant status in the U.S., and Tally, a sports-prediction app spearheaded by football star Russell Wilson. Other recent spin-outs include Remarkably, a marketing and analytics software provider, and Attunely, a debt-collection-tech platform.
Meet the team
Pioneer Square Labs’ growing team of former operators, VCs, data scientists, engineers and more
Greg Gottesman, a former managing director at Seattle VC fund Madrona Venture Group, and the founder of its startup studio Madrona Venture Labs, leads PSL alongside a team of seasoned Pacific Northwest investors and entrepreneurs.
Rounding out PSL’s team of managing directors is Julie Sandler, a former investor at Madrona; Geoff Entress, a former venture partner with Voyager Capital and Madrona; Mike Galgon, the founder of the Microsoft-acquired digital agency aQuantive; and T.A. McCann, a serial entrepreneur behind Google-acquired Senosis and BlackBerry-acquired Gist. Ben Gilbert, who runs product at PSL, is another Madrona alum.
After nearly two decades investing in early-stage startups at Madrona, Gottesman made a peaceful exit with ambitions to launch a scalable startup studio independent of any existing VC firm. Madrona, alongside an additional 13 venture firms and Seattle angel investors, like Jeff Bezos and Zillow -founder Rich Barton, bolstered PSL with seed capital right off the bat.
The validation engine
Pioneer Square Labs’ network of entrepreneurs
To differentiate itself from competing company builders and maintain a high level of efficiency, PSL uses a proprietary strategy of rapidly testing and validating business ideas dubbed its “validation engine.” Its special sauce, PSL leverages digital marketing to validate customer demand before they begin real work on any of their ideas.
Long-time marketer Peter Denton leads the effort. Denton, who joined PSL in early 2017, manages day-to-day market validation, growth strategies and market research for the firm’s portfolio companies.
“We joke in some ways [Denton] is the grim reaper,” PSL’s Ben Gilbert told TechCrunch. “He’s responsible for much more kills than anyone else.”
Among the validation engine’s strategies is to build a website for a “company” to test demand for a potential product. Denton and his team market the website to target customer segments through a variety of digital channels, then measure customer resonance with the messaging. They ask potential customers if they are interested in learning more about a new concept or product when it “becomes available” to help understand how much interest a potential business might have before PSL allocates additional time and resources to a project.
To date, PSL has killed more than 100 ideas.
“A lot of studios ultimately won’t be successful because they don’t kill things fast enough,” Gottesman explained. “We kill nine out of 10 of the companies we start. Most of our ideas don’t make it to the promised land.”
In a sense, they are catfishing potential customers, luring them in with a new idea that more than likely will never come to fruition. But the strategy saves PSL the heartache that comes with investing a lot of time into a business idea that never finds its market.
This way, when an idea does pass the tests posed by the validation engine, PSL and its team of engineers and data scientists are ready to build with knowledge of market demand in tow.
By the numbers
A glimpse of Seattle’s Pioneer Square neighborhood where Pioneer Square Labs is headquartered
In three years, PSL has spun-out 13 companies, ideas for six of which came from the PSL team and seven originated from founders in the PSL network. All of those companies have secured venture funding — $71 million in total for an aggregate valuation of $200 million.
“The most important lesson we learned is it’s all about the people and the talent,” Gottesman said. “If we have an A-plus idea and partner with a B team, the company isn’t going to be successful. On the other hand, if we partner with the best talent, we are likely to be successful even if we fail on other dimensions.”
PSL’s goal is to invigorate the Seattle tech ecosystem and given the aforementioned stats (PSL companies comprised 14.3 percent of all early-stage VC deals in Washington state in 2018) they are well on their way. In 2019, PSL hopes to spin out between six and nine additional businesses.
“We believe we are building the center for early-stage tech innovation in the Pacific Northwest,” PSL’s Julie Sandler told TechCrunch.
Seattle, home to two of the most valuable businesses in the world, has not created as many founders as anticipated. Amazon’s entrepreneurial culture has succeeded in keeping top talent from pursuing their own businesses. PSL’s derisked platform, the firm hopes, will entice those founders, like Boundless CEO Xiao Wang, a former senior product manager at Amazon.
“The studio model lends itself really well to people who are 99 percent there, thinking ‘damn, I want to start a company,’” Gilbert said. “These are people that are incredible entrepreneurs but if not for the studio as a catalyst, they may not have [left].”
Venture capital investment in Washington state is increasing year-over-year, reaching a high of nearly $3 billion in 2018 across roughly 400 deals, per PitchBook. The Seattle tech scene, given its proximity to tech heavyweights and a growing number of satellite engineering offices, only has room to grow.
“We do think Seattle is the most exciting market in the country because of the amount of technical talent you have,” Gottesman said. “You have to believe that if engineering is at the heart of these startups then Seattle will ultimately be a key city in the world in terms of creating great technology startups.”
“We think part of the issue is a lack of capital and a lack of help,” Gottesman added. “If we can provide a little bit of both of those things, we can really put Seattle where it deserves to be, should be and will be.”
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