Downturn fails to snuff startup hopes

Like a lot of people nowadays, I'll be glad if I can pay my mortgage next year, much less the payroll at a startup company.

So I'm amazed that people keep starting new businesses, now that the economy is in full meltdown.

While banks were failing, Wall Street was crashing and Boeing striking last month, 9,974 people started the process of licensing a new company in Washington, according to state records. That's down from 11,622 in October 2007, but it still makes you wonder.

Who are these people and what are they thinking?

For answers, I dropped in to Entrepreneur University last Thursday. It's a daylong event for people starting new companies, held every year in Seattle by the Northwest Entrepreneur Network.

I was expecting sparsely filled rooms. The crowd did seem thinner than in past events, and there was a lot of talk of tough times ahead.

But there were still 250 people there at the Washington State Convention & Trade Center who paid up to $350 apiece to learn how to tune their business plans, pitch to investors and hire employees.

Apparently there's a kind of person who just can't be stopped, once he or she gets a big idea. Politics aren't the only place to find hope and optimism nowadays.

Here are a few of the audacious people I met:

John Dietz and Rob Perrier

Background: Both are 40 and living on the Eastside.

Startup: Adometry, a company that will measure the effectiveness of online display ads.

Their story: Both worked on advertising platforms at the Seattle offices of the Disney Internet Group. They left to start the company Oct. 17, just as the economy was crashing.

"The advertising dollars are still going to be there in a down economy," Dietz said. "But there's going to be pressure on how you spend it."

Are they scared? "I prefer to use the words 'highly motivated,' " Dietz said. "There's no option to fail at this point."

What about timing? "If it was a good idea eight months ago, it's a good idea now," Dietz said. "I wouldn't have done this if I didn't feel fairly confident. I'm nervous but not panicked."

Their funding: "It's called home equity," Dietz quipped. They'll eventually seek funding, but "we're trying to be very realistic and not overly optimistic."

Three years from now? "Hopefully running this company."

Angel Madrigal

Background: 21-year-old from Everett.

Startup: A heating and air-conditioning company.

His story: After working four years at two heating, ventilation and air-conditioning companies, Madrigal decided to start his own. He said he's been encouraged by people he's worked for, most recently Ballard Natural Gas.

He also has a girlfriend and a 2-year-old son to support.

Why attend the event? "I'm in the process of learning who to talk to, how to get loans, how to hire, who to hire," Madrigal said.

Three years from now? He hopes to have a few trucks and a few employees.

What about the economy? "I'm worried about the financial (situation) and getting loans and help from the government. But at the same time, heating and air conditioning is something people need all year around — people are going to have to buy heaters and air conditioners whether they want to or not."

Outlook: "So far so good."

Ashwin Unnikrishnan

Background: 27-year-old Ph.D. candidate in molecular and cellular biology, studying at Fred Hutchinson Cancer Research Center.

His story: He's thinking about starting a company in his native Singapore, which is pushing hard into biotechnology after largely missing the information-technology boom.

"For the longest time, I've thought I'd be an academic," he said. "But as I explore my options, this seems like an interesting avenue. ... I've started to realize I'd like something that has more immediacy and affects public health."

What about the economy? Unnikrishnan thinks conditions will improve within a few years, and he still has another year to complete his doctorate.

"Things change," he said. "It's never too early to start."

Kelly Smith,

Background: At 40, Smith is a serial Web entrepreneur in Seattle.

His story: Smith sold his last startup, online art vendor Imagekind, in July and started a new venture called PressPlane in September.

Before the market crashed, he secured $1.7 million in funding from venture capitalists Second Avenue Partners and a group of veteran Web executives.

The business: Details are secret for now, but PressPlane looks like it will be an online marketplace for design and print services used by companies.

At Entrepreneur University, Smith lectured on startup hiring practices and the importance of good design.

Early years: Smith's approach and business instincts go way back: During college, he used a $4,000 student loan to buy a used Jetta from a wholesale auction. He waxed and detailed the car until it gleamed, then sold it for a profit even though it wasn't mechanically perfect.

"I kept doing that over and over, making it look beautiful. I did that with about 30 cars over the course of my career," he told a group at Entrepreneur University. "I learned that things that look good are valued higher."

Staff: Among the PressPlane's four employees is a top-notch designer Smith has worked with before.

What about the economy? "I'm not scared ... because we raised a sufficient amount of money to carry us out through two years," he said afterward.

He's mostly concerned about market assumptions he made in PressPlane's business model, when pitching it to investors.

In the short run: PressPlane will hire fewer people and spend less to make its funding last.

"We're running very lean," he said. "Twenty-four months on $1.7 million — that's a long time."

Start another company? "If I were raising money, I'd be extremely concerned," Smith said. "People have to take a careful look at their situations" before taking the plunge.

Venture capitalists may still provide funding, but they're doing things to lower their risk, he said. For instance, they might have loaned $1 million and taken 10 percent of a company before the crash; now they'll take 20 percent.

The outlook: "The projection is we can get to the critical mass we said we can," he said. "We'll know in three or four months."

Brier Dudley's column appears Mondays. Reach him at 206-515-5687 or bdudley@seattletimes.com.