INSUBCONTINENT EXCLUSIVE:
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
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
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 2017The startup studio model is
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 teamPioneer Square Labs’ growing team of former operators, VCs, data scientists, engineers and moreGreg 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 enginePioneer Square Labs’ network of entrepreneursTo 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
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,”
“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 numbersA glimpse of Seattle’s Pioneer Square neighborhood where Pioneer Square Labs is
headquarteredIn three years, PSL has spun-out 13 companies, ideas for six of which came from the PSL team and seven originated from founders
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,'”
“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
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.”
