Pioneer Square Labs’ mission to speed up the process of conceiving, testing, staffing and launching a startup has resulted in three spinouts — and 18 nonstarters — over the first year.
It’s pretty hard work to develop 23 companies in one year, even when you kill 18 of them before they’re fully formed.
Pioneer Square Labs spent its first year doing just that.
The Seattle startup generator launched last year with a head start of sorts. Its co-founders are well-known entrepreneurs and venture capitalists from the area. It raised its first funding round from heavy hitters such as Maveron, Madrona Venture Group, Bezos Expeditions, Rich Barton …the list goes on.
Pioneer Square Labs
Founders: Geoff Entress, Mike Galgon, Ben Gilbert, Greg Gottesman
Investors: Maveron, Madrona Venture Group, Bezos Expeditions, Vulcan Capital, Voyager Capital, Trilogy Equity Partners, Rich Barton, Rudy Gadre, Steve Singh and more
Spinouts: LumaTax, Jet Closing and an undisclosed third company
The idea was to speed up the arduous and often lonely process of starting a company by making it a team activity. Pioneer Square Labs’ managers, engineers and designers brainstorm ideas for technology companies, then quickly develop and test a product to see if it has the potential to stick.
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The founders of the so-called “startup studio” predicted last year that it would fail, or kill off ideas for companies, about 90 percent of the time. Their guess was pretty accurate. It has launched 23 ideas, spun out three companies and put a stop to 18 more. A couple are still being vetted.
Those that make it through get a CEO, a team and administrative resources to build a company.
“We are doing this because the most fun for us is being a part of the earliest stage of company formation,” Pioneer Square Labs co-founder Mike Galgon said.
A year later, the Pioneer Square Labs team has grown to 14, moved out of the co-working space where it launched and tweaked its model a bit.
When Labs started, the founders thought the venture was the perfect way to bring in executives adept at growing companies to pair with those who love to start businesses. That has happened, but the team also found that would-be executives come to them with ideas.
It happened with the Labs’ first spinout, LumaTax, a sales-tax software company that came via Robert Schulte, a longtime entrepreneur and tax expert. Schulte knew he wanted to create the service, and Pioneer Square Labs was there to provide the resources.
Within three months, LumaTax had a product and $2 million in funding.
Labs says it can cut the amount of time it takes a company to introduce a product by a third, basically by removing some of the non-technology hurdles that startups face. It provides the legal pros to incorporate a business, the human-resources department, tax-filing services and even engineers and designers.
“Hiring can take a long time,” co-founder Greg Gottesman said. “Here, as soon as we have an idea, the next day we’re building products.”
Dan Greenshields was attracted to that idea. The CEO of spinout Jet Closing, which builds real-estate-closing technology, officially came aboard in July.
Greenshields is an investor in Seattle with a long history in the financial-technology business, including serving as chief financial officer and CEO of ShareBuilder. The Pioneer Square Labs team provides the office space, administrative help and designers to Jet Closing.
Greenshields brings years of experience growing companies. “I get to totally focus on the business initially,” he said.
Before landing on Jet Closing, Greenshields helped to vet a couple of other ideas among Pioneer Square Labs’ projects that will never see the light of day.
One project Labs considered was a coaching platform for the rising e-sports industry, in which video-game players compete, often to wide audiences. The company provided digital coaches to help players improve their game.
“We thought we could take coaches who are the very best at these games and have them watch, in real-time, players and give them tips,” Gottesman said.
But the economics just didn’t work out. It was costing $30 to get a new customer, and Labs’ 20 percent cut of each coaching period wasn’t paying off until after the 10th session.
The thing is, someone else may successfully build that company. Co-founder Geoff Entress, Galgon and Gottesman think it’s coming in the not-so-distant future. And if such a startup focused solely on e-sports coaching, it probably could keep chipping away until it found a way to make money.
But that’s not the point of Pioneer Square Labs. If it can’t be done quickly, it likely won’t be done at all.
“Deciding whether or not to kill something isn’t always black or white. There’s always some gray in there,” Gottesman said.
He insists the startup studio wouldn’t have worked 10 years ago. Technology wasn’t moving at the speed it is now, and being an entrepreneur wasn’t a widely accepted job title.
Now, the team is poised to work with serial or new entrepreneurs that wouldn’t mind a bit of risk taken out of the equation.
Pioneer Square Labs plans to spin out more companies in its second year and is exploring ideas ranging from augmented reality to e-sports to trying to help high-worth millennials manage their money.
“Our dream is to develop multiple products in parallel,” co-founder Ben Gilbert said. “That takes a long time, and we’re just now hitting our stride.”