Yesterday I had a nice chat with Lucinda Stewart, a managing director at Kirkland-based OVP Venture Partners. A fast-rising star, Stewart focuses on investments in software, digital media, and security, and she serves on the board of directors of several area companies including Talyst, Vantos, and most recently Lucid Commerce, which announced a Series A round last week. Our chat was a good introduction to what OVP is up to, and added some much-needed context to my picture of the venture scene.
Here’s what I took away. First, the deals you don’t do are as important as the ones you do. Stewart gave me a recent example of a hot area she had been looking into: open-source software. Over a period of two years, OVP went deep into the field, going to conferences, forming its own expert panel, and examining loads of business models. In the end, Stewart and her team decided not to invest. They felt that open source was more of a method, a strategy for software development, than something to build companies around (though Portland, OR-based Collaborative Software Initiative is in OVP’s portfolio).
OVP, which celebrates its 25th anniversary this year, seems to have a good sense of humor about this sort of thing—after all, how many venture firms have a “Deals Missed” page? (Well, OK, at least two as you’ll see from Bob’s piece about Bessemer Venture Partners’ Anti-Portfolio—but the Starbucks story from 1986 is my OVP favorite.
My second take-away is that it’s not always about flashy gadgets or consumer Internet sites. “We do hard technologies, or hard-to-build technologies, not the next thing teenagers will download on their phone,” says Stewart. Take her latest investment, in Lucid Commerce. It’s a Seattle company that does “business intelligence on demand.” What that means in this case is helping, say, 1-800 companies pushing hair-loss treatments or scalp medications (these firms have surprisingly large revenues, e.g., $500 million) to automate and direct their TV and radio advertising by making sense of the huge reams of online data available about their customers. “Most of what we do is infrastructure, from software all the way down to chips,” says Stewart. “We’re enablers in a number of different markets.”
Third, and last, I wanted to get Stewart’s broader take on the Seattle VC scene—its strengths and weaknesses. “It’s a really good place to invest,” she says. “It’s not that competitive.” By that she means the area’s venture firms tend to be collaborative and work in a complementary fashion. “We do six to eight deals a year, and it’s super rare that we lose a deal to another firm.” In terms of talent in the area, Stewart calls it “decent,” but adds that sometimes it’s hard to find just the right match (this is a common thread I’m hearing). On the plus side, she says, there is a steady stream of people leaving places like Microsoft and Amazon who already have true GM or CEO experience.
An interesting note: the area’s VC firms seem to go primarily for early-stage investments. “Here, we all like Series A,” admits Stewart. “Sometimes for C or D, we go to the Valley to raise money.” This is probably a function of the relative youth of local venture firms, few of which are anywhere near as long in the tooth as OVP. But as the region matures further, expect to see more later-stage investments, she says. “It’s an opportunity locally.”
