Talking Points: Matt McIlwain

Because his father moved a great deal in his work for General Electric, Matt McIlwain grew up in a variety of places, from Miami to Singapore. With a master’s in public policy and an MBA from Harvard, and experience in both industry and on Wall Street, he has emerged as one of the Northwest’s savviest venture capitalists.

Work Experience: I did some work in Wall Street on the capital markets side. ... then I did strategy consulting at McKinsey & Co. for big service companies where technology was a differentiator. For operating experience, I went to work for Genuine Parts in an era when the dot-coms were starting up and there was a question whether they would be customers or competitors.

As a Venture Capitalist: I joined Madrona in 2000 when it was clear the fall [dot-com bust] was happening. Even in the bust we did some good deals. Performant, my first investment in 2000, was bought in 2003. Isilon Systems was literally two guys with a PowerPoint presentation and a little bit of code when they came to us. Today, it [Isilon] has $120 million in revenues.

The Four Pillars: There are four components to venture capital: sourcing deals, structuring deals, helping companies grow and getting a good exit.

Sourcing and Structuring Deals: In the course of a year, we will meet with at least 500 companies and do maybe five investments. It’s about finding a team that has judgment and insight into the market, and an ability and vision to build a differentiated offering. The [Isilon founders] were working at RealNetworks operating servers. The servers were not able to handle these big volumes of image files. Isilon developed a software system built on commodity hardware and scale-out storage. It was innovative and met a need that was just beginning to develop. That’s why Isilon was the storage company for the last four Olympics, for the movie Avatar and is used for biotech research applications where it takes 60 gigs of storage to store the data around the analysis of one drop of blood. 

Growing Companies: Having banking and strategy consulting experience was helpful [in structuring deals]. But the hardest part is about rolling up your sleeves and helping a company grow. For that, my operating experience was tremendously helpful. When my kids say, “Daddy, what do you do?” I tell them, “I help build companies.”

Exit Strategies: The top 20 to 25 percent of funds generates the disproportionate returns. You have to be able to invest in the ones that have a track record of getting returns. Venture capitalists need to take advantage of the time when the market opens up for selling opportunities. But it’s also true that too many types of investors want to invest in venture capital. There has probably been too much money in the sector.

The Future: One opportunity is shopping as an online entertainment experience. We are thinking about how to apply some of those themes to the travel industry. On the technology side, there is a shift in how enterprise IT is run [as a result of cloud computing]. You can buy services from someone else, or you can use your IT to deliver services to others. We also think the computing capabilities of mobile devices and the loosening chokehold of mobile operators unlocks a lot of opportunities.

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