VC Update

With offices in Kirkland and Portland, Olympic Venture Partners has built a reputation of being a uniquely Northwest firm. recently caught up with two of Olympic’s partners, William Miller and Charles Waite, Jr., to talk about what makes the Pacific Northwest venture community so unique.

Both partners are quick to point out Seattle’s advantage in regards to biotechnology and communications.
“These markets have all the right local seed companies to provide enough 2nd generation entrepreneurs that can actually be the people to build a successful company,” says Miller, a former Microsoft employee.

The partners say that although seed companies like Microsoft, McCaw Cellular, and Immunex have produced a number of developed entrepreneurs, the Northwest still does have a shortage of experienced upper level officials.

“It’s a challenge in everyone of our companies to get Senior Management and even Junior people,” says Miller. “It takes a good deal of time to develop experienced management.”

Waite agrees, commenting that maturation of this community is well under way in the Northwest.

“It needs to percolate for about 10 or 15 years to where you get enough people coming out of seed companies that you have a vibrant start-up machine, and I think we’re there now,” says Waite. “We’re where the valley was 10 or 15 years ago, which means we have a great future ahead of us.”

There are other advantages to the Northwest, however, that may make up for some inexperience.

One such advantage, Charles Waite notes, is that there is a unique deal flow. “We get the appropriate amount of time to make up our minds whether or not to make an investment, which is good for both the investor and the entrepreneur.”

Without the presence of so-called ‘Valley Term Sheets,’ where you drop a term sheet within the first hour of a meeting, Waite feels you get a good chance to know the people and their plan. “There’s no shotgun marriage, and those can end up not working in the long run,” jokes Waite.

The long run has definitely become the focus of many venture capitalists, as many short-sighted investments have deteriorated over past months. The partners, however, say that their eyes have always been focused down the road.

“When we make an investment we’re looking at an average of four years, and when you’re taking that kind of horizon, what happens in the last four months doesn’t have a lot to do with what will happen tomorrow,” says Waite.

According to the partners, they have made some minor changes to accommodate the shakeout of the past few months. “We are adjusting the dials a bit in terms of how fast a company will grow versus how we move forward about getting cash flow positive,” says Miller. “But we’ve always focused on Gross Margins.”

With approximately 2000 business plans coming across their desks per year, the partners say it’s simple to sift through those that won’t turn profit.

Waite says it’s a matter of asking three simple questions: who’s the customer, what’s the problem, and are they willing to pay for your solution?

In addition to having a clear solution that people need and are willing to pay for, Miller emphasizes the need to create a good market barrier. “You’ve got to be early in the market with what looks like a pervasive way of solving the problems in that market.”

“We want to be involved with the market leader,” says Miller. “If you’re not investing with the top two players in a particular market, it’s just not worth it.”

Olympic Venture Partners have been around the Northwest since 1983 and are currently in their 5th fund.

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