Hey, I'm Dan! I invest in startups at Madrona and write the DL, a weekly newsletter about tech in the Pacific Northwest

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PSL Studio Deep Dive

Last week, PSL published an awesome case study on how they decide when to kill a startup idea. It’s a great look at their methodology for market sizing and validation using both high level market data and data from “in-the-wild” experiments on Google and Facebook.

It also inspired me to write Part Two on Pacific Northwest / Seattle venture firms and what areas they are investing in. Part One was a deep dive on Madrona’s investment strategy, and here we’ll take a closer look at PSL…

Pioneer Square Labs (PSL) was founded in 2015 to test and incubate startup ideas before recruiting a team to lead the company and spin out from the lab. According to TechCrunch, PSL companies comprised ~14% of all early-stage VC deals in Washington in 2018, which is pretty awesome! (If you want to read more about how PSL works, this article is really good)

PSL’s website currently shows 15 studio spinouts (all listed below), and here are a few themes that jumped out at me:

⚙️ Process Automation for Boring Stuff

I hope my friends at PSL aren’t offended when I say they like boring stuff 😊, but it seems like they have a winning formula for SaaS companies: take a boring/terrible/complicated process with lots of paperwork and manual review, and make it digital and seamless. Examples:

  • Boundless – technology platform with information, tools, and support for family immigration issues
  • JetClosing – mobile-first title and escrow company modernizing the real estate closing process
  • Lumatax – all-in-one solution for sales and use tax compliance
  • Shujinko – cloud compliance software that automates environment setup, maintenance, and audit prep
  • SigmaIQ - reconciliation engine designed to automate the financial account reconciliations process
  • SingleFile - legal-tech company for automating compliance filings

🎯 Analytics, Ads, and Marketing Optimization

Having the founder of the world’s largest digital agency and marketer-side ad serving platform at PSL probably helps them identify unique opportunities in analytics and marketing tech. So no surprise they have several spinouts that use ML to optimize marketing performance:

  • Ad Lightning – ads analytics platform to eliminate bad ads and maximize revenue for publishers
  • Attunely – ML platform to optimize recovery strategies for the accounts receivable management industry
  • Gradient – digital advertising platform to optimize Amazon Marketplace performance
  • Remarkably – tech platform to help multifamily real estate owners and managers improve marketing performance

🔥 New, Rapidly-Growing Markets

The ability to quickly build, test, and validate new ideas is an important part of being there for the “next big thing.” Over the last few years, we’ve seen the rapid rise of DTC personal care, podcasting, labor shortages in healthcare, and streaming/esports. PSL has launched startups to capitalize on the growth in each of these markets:

  • Gemma – direct-to-consumer haircare company selling custom-formulated shampoos
  • Glow – membership platform for podcasters to build media businesses
  • Nextstep – platform to recruit, train, and place workers at entry-level, in-demand healthcare positions
  • Tally - web and mobile-based social platform designed to connect celebrities with their fans
  • Taunt - gaming companion platform for esports fans to engage in interactive challenges

Hope you enjoyed this look at PSL spinouts! I’m going to slowly work my way through the list of PNW venture firms, so stay tuned!

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