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Seed Capital From Angel Investors: Jason Stoffer, Principal at Maveron (Part 1)

Posted on Wednesday, Jan 19th 2011

By guest authors Irina Patterson and Candice Arnold

This is the fifty-first interview in our series on financing for entrepreneurs. I am talking to Jason Stoffer, principal at Maveron, a venture fund founded in 1998 by Howard Schultz, the founder and CEO of Starbucks, and Dan Levitan, the banker who took Starbucks public in 1991. (The name “Maveron” was coined from the words “maverick” and “vision.”)

With offices in Seattle and San Francisco, Maveron manages $750 million in capital and invests only in consumer-facing business, mainly in Web-enabled consumer services, education, and health and wellness.

Irina: Hi, Jason. Why don’t you start with your background?

Jason: I went to the University of Michigan for undergrad. I was in consulting for nine months at Deloitte.

It was the Internet bubble, and I was in Detroit working on a project for General Motors, so I decided to leave and move west. I joined a small venture capital firm and was an analyst there for three years.

I went to Wharton to grad school. I think one of the more important things I saw as an analyst at a VC firm is that to properly assess the potential of young companies with incomplete business models, I thought it was really important to be in an operating role within a growth environment. So, I joined a company called Career Education Corporation.

At the time, it was the number two player to the University of Phoenix in the post-secondary education market. Their online group grew from zero to over half a billion [dollars] in four or five years. This was a parent company [with] a $6 billion market cap at its apex.

I joined in an amorphous strategy role, the first fresh-out-of-an-MBA recruit they ever had, and turned it into a number of interesting roles. The first thing I did was implement social networking technology on top of their proprietary campus to make the campus experience more social.

I co-founded the company’s online design school, IADT (International Academy of Design and Technology), which offers associates’ and bachelors’ degrees in Web design and graphic design.

I was in charge of admissions and marketing for that and then helped to restructure a 2,000-person call center.

After being there for almost three years, I wanted to move back into an investing environment and was connected to Maveron through some folks in my network.

Essentially, Maveron is a venture fund founded by Howard Schultz, the CEO of Starbucks, and Dan Levitan, the banker who took Starbucks public. We were started in 1998 and invest only in consumer-facing businesses.

So, offline businesses, such as Pinkberry, Potbelly, Lucy, and Cranium, and online businesses, I think our best-known exits are eBay, Shutterfly, eHarmony and, more recently, Zulily, Trupanion, which is pet insurance, Altius Education, and Capella University.

We have $750 million under management, we’re on our fourth fund, and we are relatively stage-agnostic in terms of investing in everything from a PowerPoint up through a point where a company has significant revenue.

Irina: Where do you get your deal flow?

Jason: We get a good amount of inbound of deal flow from people who know of us, whether they are our entrepreneurs or our unlimited partners. Second, we have a sector focus here. We have three major sectors of interest.

One is Web-enabled consumer services. That focuses on transaction-focused Web businesses. To bring that home, it’s e-commerce, marketplaces, and financial services. We focus much less on content-oriented businesses and much more on businesses where the acquisition cost is less than lifetime value.

The second area of focus is education, which is where I come from. Capella, which is a $1 billion publicly-traded company, is our biggest success in that area. We have a number of young companies doing well.

A third focus area is health and wellness, broadly defined. Clearly, if you look at healthcare as a percentage of GDP [it was 17.6% in 2009, according to government reports], rising costs, and rising rates of obesity and diseases such as diabetes, there’s a growing market and increased consumerization of that market.

So, those are focus areas. Within those focus areas, we’ve worked to both develop a network of angel investors and entrepreneurs and proactively reach out to companies we find to be of interest. We have a good combination of proactive and reactive types of deal sourcing. I think the other thing we’ll do – and we’ve done this a couple of times – is work with a great entrepreneur and incubate a company within our offices. That’s a model which we’re increasingly turning to over the years.

This segment is part 1 in the series : Seed Capital From Angel Investors: Jason Stoffer, Principal at Maveron
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