How Tom Alberg bet on Seattle and Amazon, shaping the region’s tech industry and building a legacy of understated influence

Table of Contents1 Deep-seated Northwest roots2 A ‘cauldron of the future’3 Amazon ‘could be relatively big’4 Bigger, bolder, more visionary Tom Alberg addresses the crowd at Madrona Venture Group’s 20th anniversary celebration at MOHAI in October 2015. (GeekWire Photo / Kevin Lisota) It was the mid 1990s, and Tom Alberg […]

Tom Alberg addresses the crowd at Madrona Venture Group’s 20th anniversary celebration at MOHAI in October 2015. (GeekWire Photo / Kevin Lisota)

It was the mid 1990s, and Tom Alberg had a decision to make.

Jeff Bezos had arrived in Seattle and was looking for investors for his nascent virtual bookstore. Alberg, who had been a leader at telecom pioneer McCaw Cellular Communications, was already a devout technology enthusiast. But these were early days for the online world, back in the days of Netscape and AOL. Microsoft’s internet browser was just being unveiled. Bricks and mortar still ruled the retail world.

“I didn’t know a lot about the internet in ’95,” Alberg said, “but I knew some because of McCaw, and I did think it was a big deal.”

He sent a copy of Bezos’ business plan to his son, John Alberg, who was recently out of college and working as a software engineer on the East Coast. The younger Alberg recalled perusing it while on his train commute. He was impressed. The senior Alberg took the risk, investing in Amazon’s seed round and joining the company’s board.

“Tom saw something in Amazon before most people did. I think it was because he shared my vision that the internet was a disruptive force that could improve businesses and people’s lives,” Bezos wrote in a recent letter, reflecting on Alberg’s decision to invest.

But Alberg didn’t stop there.

He believed there was more untapped internet potential in the Pacific Northwest. Alberg talked with friends about creating a firm to support the region’s economy and make financial bets on internet-focused startups. He and three others — Bill Ruckelshaus, former head of the U.S. EPA twice over and former acting director of the Federal Bureau of Investigation; Jerry Grinstein, former CEO of Burlington Northern Railroad and Delta; and Perkins Coie partner Paul Goodrich — came together to create what they called Madrona Investment Group.

The audacity of the move still surprises Alberg.

“I don’t know why we were willing to take this risk,” Alberg said. The four had financial means, but not vast resources. “That was the first time in my life I was going to go do something where I didn’t have an income. And somehow we were thinking, well, we’d make these investments and five years later they might be worth something.”

Madrona Venture Group, as it’s now known, is marking its 25th anniversary this year. Not all of its bets have paid off, by any means. But Madrona has backed some of the most notable companies to emerge from the Northwest in the past two decades: Redfin, Apptio, Rover, Impinj, Qumulo, Turi and many others, as well as some startups outside the area, including the newly public data-warehousing company Snowflake.

The firm is nearly synonymous with Seattle’s venture capital scene — a powerhouse so strong that some entrepreneurs fret over the influence it holds as a funding gatekeeper.

Alberg, left, and former Concur and Docker CEO Steve Singh at a Technology Alliance annual luncheon in 2015. Singh has since joined Madrona Venture Group, the venture capital firm that Alberg co-founded 25 years ago. (GeekWire Photo / Kevin Lisota)

Alberg, who turned 80 this year, has played an essential role establishing the bedrock of the region’s tech economy. But what has endeared him to many has been his relentless drive to make his hometown a better place. He has served as a startup mentor, helped launch the Alliance of Angels investment group, and acted in leadership roles for the Pacific Science Center, the Intiman Theatre, the Technology Alliance, fundraising for the University of Washington, and created the nonprofit Oxbow Farm and Conservation Center.

Most recently, he’s involved with Challenge Seattle, an organization of local top CEOs that’s tackling knotty regional issues.

 He’s a man who sees only the vision.

“He’s a man who sees only the vision,” said Challenge Seattle CEO and former Washington Gov. Chris Gregoire. “He doesn’t let people say ‘no’ to a vision. And believes that if you empower them by making them think about a vision of the future, there’s probably not a whole lot we can’t accomplish.”

Alberg is not a firebrand style of visionary. He’s silvery-white haired and soft-spoken. He’s cautious in his speech, perhaps in a carryover from his decades practicing law at a top Seattle firm. His understated approach and lack of flashiness aligns with his Scandinavian heritage, but it’s a rarity in the VC arena where big egos tend to dominate. It’s likely a reason that nearly every person interviewed for this story had only positive things to say about him.

“Tom is an amazing mix of being humble and being driven, which is very hard to do, but that’s just the essence of who he is,” said Steve Singh, a founder of Concur, former Docker CEO, and managing director at Madrona. “So it’s just natural and it produces amazing results, not just in the companies that he invests in, but also in the communities he’s a part of and relationships he’s a part of, because it helps bring out the very best in who you are.”

Deep-seated Northwest roots

Tom Alberg traces his entrepreneurial bent to his Swedish paternal grandfather, Julius Arvid Johansson, who changed his name to Alberg after immigrating to the U.S. at age 16 around the turn of the last century.

As a young man, his grandfather lost a leg in a logging-related accident, but landed a $10,000 settlement for the injury that he used to pay for accounting and business classes at what is now Pacific Lutheran University. He went on to start a sawmill and then multiple shingles mills. The first two burned down.

A young Alberg on a successful day fishing. (Photo courtesy of the Alberg family)

“He was in a very risky business,” Alberg said, crediting his grandfather for his own willingness to take bets on uncertain enterprises.

Alberg’s father, Tom Sr., who grew up during the Great Depression and graduated from the UW, was somewhat more fiscally cautious. He started a real estate brokerage, invested in the city’s first Chinese bank and purchased hundreds of acres of land, including property on the Snoqualmie River near Duvall and in Eastern Washington in the Columbia Valley. Alberg’s parents had five children, and the family lived in Seattle.

As a kid, Alberg was steeped in Washington state’s natural beauty, hiking remote trails with his Boy Scouts, going on far-flung drives with his dad as he sought out property investments, and joining his high school ski team. He didn’t love every aspect of the outdoors; when he was young, he spent time working on the Duvall farm, mending fences and other chores when he says he would have rather been home reading.

Alberg rowed crew for Harvard University, from which he graduated in 1962. (Photo courtesy of the Alberg family)

Alberg was already seeking leadership roles as a teen, serving as class president his sophomore and senior years at Seattle’s Ballard High. He left home to attend Harvard University, initially planning to study math, but switching to international affairs. He met his first wife while an undergraduate. He went on to law school at Columbia University and held the prestigious title of editor of the Columbia Law Review. After graduation in 1965, he became an attorney at a New York law firm. It was a fine job, but Alberg wasn’t satisfied.

Decades had passed since his grandfather was drawn to the Northwest’s wild frontier and its vast potential. For Alberg, the nation’s upper-left corner still represented a land of opportunity.

“In New York, it felt like if you put in your time long enough then usually you could succeed,” he said. “But we were all young and eager to get going.”

A ‘cauldron of the future’

Returning to Seattle, Alberg began practicing at the law firm that’s now known as Perkins Coie. The role gave him a seat at the table with Seattle’s aerospace and tech sector, acting as principal counsel for the Boeing Company, Alaska Airlines and early technology companies.

Alberg had the first three of his five children while at the firm, and strengthened his community connections through multiple volunteering roles. He served as president of the Intiman Theatre in the early ’80s, and his son John and daughter Katherine Anderson remember the cast holding their holiday celebration at their house, performing scenes from “A Christmas Carol.”

While Alberg was becoming an increasingly prominent legal and civic leader, his family remained a priority.

“What’s always impressed me is his focus on his family. There were lots of times where we were super busy and he focused on and prioritize getting home to see his kids,” said Michelle Wilson, who interacted with Alberg in her roles as a partner at Perkins Coie and general counsel for Amazon.

Alberg’s children cherished his fatherly, down-to-earth quirks. Their dad was an eager early adopter of all the latest devices, including a VCR and Apple II computer.

“The den of our house,” said John Alberg, “was like a cauldron of the future with all the gadgets.”

Anderson recalled her dad showing up for her track and cross country meets — and for taking his support a step further.

Alberg, pictured at a marina, became an avid sailor and loves sailing to the San Juan Islands and Desolation Sound with his family (Photo courtesy of the Alberg family)

“He used to try to go running with me in middle school and he would go running in his Levi’s,” she said, “which to this day I think is hysterical.”

The family settled in one of Seattle’s toniest neighborhoods, the gated community of Broadmoor on Lake Washington. Among the fastidiously landscaped homes, Alberg planted a vegetable plot in his yard — to the likely dismay of some neighbors. But it delighted Anderson, who eventually went on to open Marigold and Mint, a self-described “organic farm and floral studio” that survives as part of London Plane, a Seattle restaurant and shop.

The Alberg family took annual sailing trips to the San Juan Islands and the pristine waters east of Vancouver Island. The papery-barked madrona tree that’s the namesake of Alberg’s investment firm is iconic to these islands.

“I remember those summers very well where we would anchor between this little archipelago, the Curme Islands, no bigger than a small house. And we would tie the boat between three islands and you could just swim in the water and fish,” John Alberg said. At night, their father told made-up stories about “Huckleberry Bear” before bed, Anderson said.

Back in the metropolitan hubs, the Northwest’s economy began shifting in the late ’80s and early ’90s. Microsoft was building its dominance from its campus east of Seattle. McCaw Cellular was growing its communications empire, launching the first nationwide cell network in the U.S. The biotech sector was starting to take off.

After 20 years in law, Alberg was restless and again ready for a new challenge.

Amazon ‘could be relatively big’

When Alberg first connected with Craig McCaw, the communications CEO was looking for general counsel — a role that no longer interested Alberg. But the two clicked and settled on an arrangement in which Alberg joined the company in 1990 as an attorney, and his first job was finding a replacement for himself.

Once that was finished, Alberg became executive vice president and took on a variety of projects, serving as president of the LIN Broadcasting Corporation after McCaw’s acquisition of the company and working on Teledesic, an ultimately unsuccessful effort by McCaw and Microsoft’s Bill Gates to create a global broadband satellite network.

The Madrona team in a 2017 photo. Alberg is fourth back on the left. (Madrona Photo)

Also in the early ’90s, Alberg became the founding board chair for the Discovery Institute, a Seattle-based conservative think tank perhaps best known for its rejection of evolution in favor of intelligent design. It also addresses education, taxes and transportation. Alberg remained on the board for 13 years.

In 1994, McCaw merged with AT&T, and Alberg wasn’t keen to join a giant, bureaucratic company. After his experiences in telecom and serving on boards for tech and biotech companies, he was eager to stay in an entrepreneurial space.

Alberg was able to do just that, thanks to his investment in Amazon and Madrona’s launch.

“We were selling books but were a tech company at heart, and had the opportunity to use a revolutionary technology to create a better customer experience,” Bezos wrote in his recent letter, published as part of a book celebrating Madrona’s anniversary. “So [Tom] wrote us a check. That leap of faith led to a long-term partnership as Tom continued to collaborate with me over more than two decades on Amazon’s board.”

Over the years, Madrona has invested in 160 early-stage companies, primarily based in the Northwest. While some fizzled, 21 have gone public and more than 47 have been acquired. The firm manages $1.8 billion.

Alberg recently reflected on his and Madrona’s approach to investing.

“On the one hand you have to have skepticism, but you want to be open to new ideas and have curiosity. And maybe we go overboard in believing in the power of tech, but that helps when you’re making investments,” he said.

“You can change businesses with tech and innovation. A lot of what attracted me to Amazon was if the internet looked like it’s going to be a big deal, that could change commerce,” Alberg said. He doesn’t pretend to have foreseen that the company would reshape American commerce, becoming valued at well-over $1 trillion, conceding that he did have “some instinct this could be relatively big.”

By the late-’90s, Alberg’s bullishness toward his hometown and technology was even greater than Madrona could support.

So Alberg teamed up with another roster of heavy hitters: Bill Gates Sr., father of Microsoft’s Gates and a long-time civic booster, and Tom Cable, an investment banker and founding investor in Immunex. They sent a letter to friends and colleagues urging them to consider investing in startups. The trio hoped to create a “virtuous cycle” in which wealthy individuals recycled some of their largesse back into local entrepreneurs, further igniting the startup community.

Seaplanes
Microsoft President Brad Smith, left, laughs with Alberg at an event in April 2018 celebrating a new seaplane route between Seattle and Vancouver, B.C. (GeekWire Photo / Kurt Schlosser)

The ask — while rather novel at the time — was well received and the Alliance of Angels, or AoA, was born. The investment group has since funneled $125 million into more than 220 startups.

“Tom’s biggest contribution to Seattle has been this creation of an ecosystem around entrepreneurs, founders and the ability to get funded and build companies,” said Matt Williams, CEO and founder of Pro.com, a home improvement specialist platform and startup backed by Madrona.

 He’s everywhere. He’s got his fingers in every pie.

“He’s really shaped this region in so many ways and you can’t point to a single thing,” said Ed Lazowska, a revered UW computer science professor. “He’s everywhere. He’s got his fingers in every pie.”

While Alberg was working at a high level, helping funnel millions into the tech economy, many in the sector praise his individual mentoring and long-term support.

It was only last year that he retired from the board of Amazon, on which he served for 23 years — the company’s longest-standing member. At the time, Alberg owned more than 15,000 shares, including a fraction held by a charitable trust that he directs. The holding today would be worth more than $50 million.

“I’ll miss his sound judgment, deep well of business and life experience, and his quick wit. He’s a smart business person and even better human,” said Bezos in a tweet at the time of Alberg’s retirement. 

For two decades, Alberg has been on the board of Impinj, an innovator in RFID, or radio-frequency identification, that is used to tag and track goods. Founder and CEO Chris Diorio said he’s grateful for Alberg’s vision and unflappable guidance in good times and bad.

“The fact that we had Tom on our board and that steady hand, that calm confidence and the understanding that we will eventually get there and that there’s this gigantic opportunity in front of us actually allowed us to grow the company, and build it to where we are today, with incredible promise for the future,” Diorio said.

Bigger, bolder, more visionary

Little known fact about Alberg: he loves wild huckleberries, as displayed here with his granddaughter. (Photo courtesy of John Alberg)

Alberg, who became an octogenarian in February, remains focused on the future.

Now a grandfather, a physically trim Alberg still enjoys gardening and sailing, including trips on his family’s 77-foot sloop Cascadia that was built in Ballard, a historically Scandinavian neighborhood of Seattle.

In recent decades, he has played a larger role in managing some of the land originally purchased by his father. His family began planting wine grapes on their Columbia Valley property and teamed up with renowned winemaker Mike Januik to start Novelty Hill Winery (now called Novelty Hill Januik). In 2009, he and his second wife, Judi Beck, turned the Oxbow Farm into a nonprofit that hosts school kids and grows sustainable crops and native plants.

Alberg remains captivated by technology. He’s become passionate about driverless vehicles and is co-chair of ACES Northwest Network, an organization of businesses and researchers promoting the use of autonomous, connected, electric and shared vehicles.

Alberg is active with Challenge Seattle, whose members include the CEOs of Microsoft, Starbucks, Alaska Airlines, Zillow and others. The organization is tackling some of the region’s thorniest issues: affordable housing, transportation struggles and educational inequities.

While few will speak critically about Alberg, some note that his characteristic optimism can go too far.

“There are times when I find some of his vision puzzling, [when] trying to figure out pragmatically how do we get there from here,” Gregoire said. “But he doesn’t let that get in his way… he doesn’t get us stuck in today’s thinking. He makes us think bigger, bolder and more visionary.”

Alberg’s daughter echoed elements of that idea.

“Almost everything he does is about what is going to be — whether it’s planting a tree that won’t be mature for 80 years to investing in driverless cars, which he’s so excited about,” Anderson said. “He just believes in what hasn’t happened yet.”

Video production by Kevin Lisota, and videography by Tiffany Grunzel.

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