By guest authors Irina Patterson and Candice Arnold
Irina: Are there any other character traits besides leadership that you think are important for entrepreneurs?
Jason: I don’t know how to put it, but a nose for making money. I guess what I love is a quantitative orientation with brand sensibility on top of it. It’s very hard to find people who are metrics driven but also have the ability to understand the essence of a brand. We’re looking for people who can pull that off.
Irina: What do you do with the entrepreneurs you don’t invest in?
Jason: If it’s not a fit for us, I’ll tell people on the spot. If there’s an introduction that makes sense, I’ll make it. I want to make sure there’s value added for both parties.
Irina: What about capital requirements?
Jason: Typically, we love capital-efficient entrepreneurs. I think that plays out in the types of businesses we like. I like e-commerce businesses where there’s no inventory. I prefer digital businesses versus four-wall businesses where you have to plop down money to build retail outlets. I love entrepreneurs who, for a million or two, can prove the unit economics of a business.
I look at a couple of our businesses, both Zulily and Altius Education – our two businesses that I’ve been involved with since the early days – and in both cases, with less than $3 million in, the unit economics of the businesses were proven to the point where we knew that additional investment and marketing spending would lead to profitable growth.
We’re looking for that kind of capital efficiency from the entrepreneurs we invest in. If the unit economics are working, I am much less concerned about burn that goes into profitable marketing spending than I am about burn that comes before product–market fit.
Irina: Can we go over your sector preferences again?
Jason: I think, for us, three areas: Web-enabled consumer services, so transaction-focused Web businesses. A couple of examples [are] Shutterfly, eBay, Zulily, which is, essentially, a Gilt Groupe for kids, and Trupanion pet insurance.
Within that category [are] a couple of subsectors. E-commerce would be one, marketplaces, financial services. Those would be some examples. Education’s another area where we invest. Post-secondary, anything focused on the international markets, anything that’s direct to the consumer that doesn’t go through the school as a channel is what we’re interested in in education . . . and then wellness.
Irina: How about mobile and social media applications?
Jason: I think mobile’s a form factor. Mobile’s going to become increasingly important and could become the basis of many businesses that are in commerce. We don’t view mobile as a separate sector. We view it as a channel through which to reach consumers that’s no different from other channels, whether it’s a traditional Web, online channel, direct TV, etc.
Look at the mobile commerce stats that came out from eBay in terms of the revenue. I don’t want to quote the number, but it was very large. We’re seeing that increasingly within our portfolio companies, where the percentage of visitors coming from mobile and e-commerce is often more than 10%, if not an order of magnitude higher than that. Clearly mobile’s a trend – it’s not a trend it’s a reality – and it’s going to become the basis of many more businesses. We’re on it, but we don’t view it as a separate sector. We view it as a component of the sectors we’re already investing in.
Irina: Where are your offices located?
Jason: We have an office in Seattle and an office in San Francisco, but we invest nationally. Domestically but not internationally. We have not invested internationally, to date. Might we be open to it? Maybe, but it’s far from core. Our typical investments are domestic. We’re all over the country, and we’re sector focused and geographically focused.
Irina: Can entrepreneurs pitch to you if they decided to do so?
Jason: Yes, just e-mail me.
Irina: What should they put in the e-mail?
Jason: Send me a PowerPoint. Typically, I like to review a deck, and based on that, determine if what the entrepreneur is working on could be a fit with our investment strategy prior to taking a phone call.
Irina: What is your preferred investment type?
Jason: Preferred shares. We’re open to a note, but we don’t love it.