Flynn's Harp: Does Seattle v.c lag Silicon Valley? (6-2-10)

Microsoft, once the “Beast From Redmond” that loomed over any venture-capital deal discussion in Silicon Valley, “isn’t even a part of the conversation these days,” says Jon Staenberg, onetime Microsoftie and a venture capitalist with involvement in both Seattle and Bay Area venture communities.

The Seattle entrepreneurial and investment communities need to think about that as they discuss the state of innovation in the Puget Sound region, suggests Staenberg, whose involvement in both region’s venture activity extends back well over a decade. “Otherwise, we might be in trouble in the future.”

Ironically, Staenberg’s comments came in an interview about a week before a Kauffman Foundation report on entrepreneurism that ranked Seattle last in entrepreneurial activity among 15 metropolitan areas and launched a round of hand-wringing and defensive conversation in the local entrepreneurial and venture communities.

“The Bay Area has recognized, though it’s a process still in progress, that there needs to be change and transformation, to reconsider what it takes to be a successful venture community,” says Staenberg, a partner in California-based Rustic Canyon Partners and has his own Seattle-based Staenberg Venture Partners. He’s viewed as one of the more experienced venture capitalists in the Northwest.

“The Bay Area is undergoing that necessary transformation and as that happens, Seattle is less a part of discussions there,” he adds.

With respect to his comments about Microsoft, Staenberg recalled a recent presentation in the Bay Area on behalf of a company that focused on an application of Microsoft Sharepoint, the content-management system with integrated search functionality that’s being touted by Microsoft.

“Before we could begin to explain the investment-value of the company, we had to first educate every v.c. there about Sharepoint. It was an example of the fact Microsoft just isn’t part of conversations there now,” he said.

“The reason Microsoft isn’t part of discussions in Silicon Valley anymore is the same reason that IBM isn’t part of the discussions,” Staenberg said. “Enterprise software isn’t what entrepreneurs are doing. Google is the new Microsoft.

“Cloud computing has allowed start-ups to create innovative products very inexpensively and with incredible efficiency,” he added.

Staenberg summarizes the difference between Silicon Valley and Seattle as the difference between “maniacal entrepreneurism” and a focus on lifestyle.

‘It’s simply in the blood there,” he says. “When I go there I find as many as half a dozen networking events I could go to every single night.”

“The unfortunate thing,” he says, “is that we’re a natural second market for Bay Area venture folks. Seattle should be a major part of the Silicon Valley ecosystem because there’s such a natural affiliation. We have good v.c.’s here but there just aren’t very many of them.”

Staenberg is also complimentary about the manner in which those who have had financial success in their ventures in the Seattle area are seeking to put back into entrepreneurial undertakings.

“Some of the best investing work being done locally is being done by angels, many of whom are alums of Microsoft, Amazon and Avenue A,” he says, adding “this is a critical part of the venture eco-system and it gives me hope that we can ride out this storm and be a relevant and strong start-up community.”

And he also hopes for greater focus on cooperation between the markets as a key to staying entrepreneurially competitive.

“I have always felt that bridging the two communities, taking the strengths of each, would create a sum greater than the parts,” Staenberg said.