Andy Sack’s favorite coffee drink is a 12-ounce, single-shot, non-fat latte. But if you’re meeting with him to pitch your latest technology startup idea, be advised that he’s probably on his second or third cup already. These days, his schedule is filled with meetings and networking—most of it pretty informal. “I’ll have coffee with anyone,” he says.
On Tuesday morning, he sat down with me at Louisa’s Cafe near Lake Union in Seattle. It’s where Sack hosts his weekly “open coffee” hour, drawing a regular crowd of entrepreneur types looking to network over coffee and pastries. (“They don’t have the best coffee, but they have the best blueberry scones,” says Sack—and he’s right.) I wanted to get the full story of Founder’s Co-op, the startup fund run by Sack and fellow Web entrepreneur Chris DeVore, as well as hear feedback from the community. Back in June, I reported on the background and motivation behind the half-year-old venture. Then, just a week ago, Luke reported that Sack and DeVore have raised a new round of funding and announced 14 limited partners in the fund, all of them tech entrepreneurs who are well-known in Seattle innovation circles.
It’s a unique model, and Sack began by clarifying the terms of the new financing. The fund is $2.5 million, with each limited partner (LP) putting in $150-200K, which buys each of them a stake in all of the startups to be funded. They will meet as a group six to eight times a year. “It’s a peer-to-peer, seed-stage fund,” says Sack. “Chris and I are the decision makers—it’s not a democracy. As a group, the LPs provide deal flow and help guide our investment strategy.” Crucially, they will also provide mentoring and connections for the portfolio companies, which Sack says will typically be made up of small teams of young, first-time entrepreneurs (usually just two people).
The peer-to-peer aspect is a big part of what makes Founder’s Co-op different from the Y Combinator and TechStar incubators of the world (we’ve covered those here and here). The firm’s limited partners include Ben Elowitz and Kevin Flaherty of Wetpaint, Andy Liu and David Niu from BuddyTV, Adam Brotman from Corbis and Barefoot Yoga, and Geoff Entress, formerly of Madrona Venture Group. I asked a few of them about their involvement in the fund, and what’s special about it. “The model is special because it really helps entrepreneurs jump start their businesses,” says BuddyTV’s Niu. “They don’t have to worry about some associated startup infrastructural costs like phones, Internet, etc. if they move into the co-op’s office. In addition, they can access a wide range of ideas and experiences from Andy [Sack] and other LPs who have successfully started their own companies and want to give back to other local entrepreneurs.”
As for why he joined, Niu touts “the opportunity to work with Andy and the other LPs. I have a great amount of respect for what they have accomplished individually, and I think pooling their collective experiences will be a formidable asset that portfolio companies can tap…Of course, there is much less certainty and a higher chance to see failure when you invest in something early stage and unproven. At the same time, you can have an outsized positive influence and guiding hand to hopefully channel them towards success.”
Kevin Flaherty of Wetpaint echoes the sentiment about Sack and the other partners. “They all have miles of experience in the startup world. Being able to experience how they evaluate potential investments is a great learning opportunity for me. From a purely financial standpoint, there is a great need in the Seattle startup community for this type of investment. Matching that need with good insight provides a great opportunity for a solid rate of return,” Flaherty says. “We’ve already seen less venture interest in certain types of businesses and renewed focus on certain business metrics that for a while were undervalued. That being said, I expect there to be significant startup activity that is uniquely suited for Founders Co-op. Two folks in a garage are perfect for the fund.”
I also gathered some reactions from people outside the co-op—local angel investors and
