Executive Q & A: Sally Jewell, President and CEO of REI

| FROM THE PRINT EDITION |
 
 

EXERCISE: I always start the day with a workout. When things get busy, I have to get outside. On [a recent] Saturday, with my husband and dog, I climbed Grand Prospect [on Rattlesnake Mountain]. It feels so nice to get a little mud on your feet, a little mist in your face.

YOUTH: My father was a doctor who came over from England in 1959 when I was 3 to take a teaching fellowship at the UW Medical School. My father asked what people did here. They said, “You join REI, you buy a tent and you go camping.” So that’s what we did. Our first trip was to Mount Rainier National Park.

EDUCATION: It was a different era for women when I graduated from high school in 1973. My college [aptitude] test showed high scores in mechanical reasoning and spatial ability, but my recommended professions were nursing and teaching—the same as all my female friends. At UW, I was going to be a dental hygienist, but my roommate said, “You’re smart enough to be a dentist,” so I did pre-dental. When I started dating Warren, now my husband, his engineering homework looked a lot more fun than mine, so I transferred to engineering. Turns out I’m a natural engineer in terms of how my brain is wired.

CAREER: In engineering school, I worked for General Electric for a total of 18 months over a period of three years. It was a good time for engineers. I had 15 offers for jobs coming out of school and ended up working for Mobil. I came back in 1981 to work for Rainier Bank as an oil and gas expert because I loved Seattle. Oil and gas isn’t found in the most pleasant places in the world and, being a woman, there were things I had to put up with that would be considered illegal now, and it just became tiresome. I also wanted to raise my children around grandparents.

REI: When I began as COO, our growth was stagnating. We invested in the internet, but we underinvested in our retail stores, the core of the business. We were good at colder climates but not so good at southern climates. We developed great, innovative products, but I felt we had an enormous opportunity to analyze our member data better to understand what our customers wanted. We’ve since relocated a lot of our stores to more convenient places where people could find us. Now we’re learning how to reach younger customers. We’re also seeking racial and geographic diversity.

NEW CUSTOMERS: We love it when an outdoor product becomes a hot thing for people who otherwise wouldn’t be coming in our door. We’ve been quite successful in selling jogging strollers after mommy blogs said, “This is the best jogging stroller and REI is the best place to get it.” That probably brought families in that wouldn’t otherwise have been there. Once you walk into an REI, it’s hard not to get a touch of inspiration about going out and playing in the great outdoors.

GETTING PEOPLE OUTDOORS: Studies show children are spending more time in front of a screen. Children have an affinity for playing outdoors, but it’s up to us as adults to help facilitate that. What are the critical points of entry to introduce someone to outdoor activity? College is one point. School groups, YMCAs, and Boys and Girls Clubs are others. We had a store catch on fire a year ago in Eugene, Oregon. A lot of the merchandize was smoke damaged but serviceable. Our insurance carrier agreed to allow us to donate it all to YMCAs in the L.A. area to help get kids there into the outdoors.

CHALLENGES: You don’t want people to use your stores just as showrooms [and then buy online]. How do you compete with that? You have to think about the value you add when someone shops at REI. There are benefits to being a member. Our stores are staffed by incredible colleagues who know the products. And we have to look at how we are doing in terms of price, service, breadth of assortment and convenience relative to our competitors if we want to be in business for the long term.

TAXES: One thing that’s frustrating is to be providing employment in a state and then be penalized with a 5 to 10 percent sales tax that the online retailer is not collecting but that the consumer still owes. The state of Washington estimates there’s about $438 million a year in uncollected sales taxes from out-of-state direct purchases.

DESIGN: In a world where product is ubiquitous, REI apparel is unique. We have invested in our own designs continuously over the time I have been here. We have a top tent designer. We have taken more design in house to make sure we have a compelling value proposition. If you take the top brands in the industry, we want REI products to represent equivalent quality for a lower price or a better product for the same price.

CIVIC ENGAGEMENT: Community service has been very important to me for decades. Whether it’s board work or volunteer work, you learn to lead through influence and not through power. I try to help share that ethos with my colleagues here. In a job like mine, you have a title that commands a certain amount of power, but when you are on a nonprofit board or you are volunteering, your title doesn’t really mean anything other than perhaps your ability to have influence.

INITIATIVE FOR GLOBAL DEVELOPMENT: The initiative was launched after 9/11. As we looked at the attacks on the United States, we thought, “Why does the world hate us?” We saw an opportunity to bring a business voice to the issues of global poverty, the idea that you are never going to solve global poverty if you don’t create economic opportunity in those communities. I was the first chair of the board. We’ve become a pretty effective national organization with people like George Mitchell, Madeleine Albright and Colin Powell involved. I’ve met with CEOs of African companies with sales of more than $100 million. One company produced retroviral drugs in Uganda while another had a seed and vegetable oil business in Zimbabwe. One of our group, the CEO of Cummins Engines, is investing $75 million in Africa. He wouldn’t have done that without those relationships. We would like to go beyond Africa to Latin America and South Asia.

EDUCATION: As a regent at the University of Washington, I’ve seen the university do some amazing things in a difficult environment. It has prioritized cuts in administration first and has worked hard to make sure that access is high regardless of socioeconomic background. Twenty-five percent of our students pay no tuition. The state wants us to create more graduates in high-demand fields like engineering and computer science, but that’s hard when the budget keeps getting cut. One possibility is to charge higher tuition in fields like engineering where you have high potential for earnings and it costs more to educate you.

ENVIRONMENT: Last year, we made $4.2 million in direct donations to nonprofits. We’ve facilitated over 3 million hours of volunteer work on public lands. And that’s not just picking up garbage. That’s swinging a Pulaski and an ax and building trails.

Three Investors Who Believe in the Innovative Capabilities of Local Entrepreneurs

Three Investors Who Believe in the Innovative Capabilities of Local Entrepreneurs

Meet Matt McIlwain, Nick Hanauer and Dan Levitan.
FROM THE PRINT EDITION |
 
 

As much as we’d like to think otherwise, Seattle is not yet a hotbed of venture capital activity. Zillow CEO Spencer Rascoff said as much in an interview earlier this year with The Seattle Times. While discussing the healthy state of the region’s tech business, Rascoff observed, “From a technology landscape standpoint, I’m pleased with the vibrancy of the startup community, [but] I still think … Seattle needs more institutional venture capital. The fact that we have really only a handful of venture-capital firms based here is going to hold the region back from fulfilling its potential.”

Still, without capital from local investors, many of the companies that now form the backbone of the Puget Sound economy — from Amazon to Zulily, from Julep to Juno Therapeutics — might not exist, or might exist elsewhere.

So here’s to the venture capitalists who call Seattle home and who find promise and potential profit in betting on companies like Apptio and Avvo. Dato and Drugstore.com (acquired by Walgreen’s). Front Desk and FanNation.com (acquired by Sports Illustrated). Isilon Systems (acquired by EMC) and Insitu (acquired by Boeing). Moz and Modumetal. Redfin and Rover.com. Shippable and Spaceflight Services. Trupanion and Talyst. And plenty more.

On the pages that follow, we feature three prominent members of Seattle’s venture capital community who believe in the region’s ability to create viable, sustainable businesses here. Two have made Forbes magazine’s annual Midas List of the top 100 venture capitalists in the world. The other has become a civic activist dedicated to addressing — and solving — economic inequality.

DAN LEVITAN
Dan Levitan cofounded Maveron with Howard Schultz in 1998. Since then, he has been the key player on many of Maveron’s home runs, including Zulily. In 2014, Forbes magazine named him to its Midas List of the top 100 VCs in the world. Levitan is a graduate of Duke University and has an M.B.A. from the Harvard Business School.

Investment you’d characterize as your biggest success.  Zulily and eBay 

Company you passed on and now wish you had invested in. Blue Nile

Most important things to look for in a startup. The entrepreneur and his/her team; the size of the market; and a differentiated product/service

Best location for closing a deal. The CEO’s office

Kinds of companies you’re looking for and why. We specialize in identifying, financing and mentoring highly disruptive and immersive, consumer-facing companies. We love — and invest in — companies that integrate into the lives of consumers and make the world a better place.

The most effective entrepreneur you’ve encountered. Howard Schultz [of Starbucks], because he built one of the most respected brands in the world. 

Top two deal makers. Awesome entrepreneur, insanely driven to succeed

Top two deal breakers. Anything outside of consumer or anything too small

What do you do for fun? I go to Duke basketball games.

What kind of car do you drive? Tesla Model S 

You might not know. Levitan has climbed Mount Kilimanjaro and Mount Rainier. He found a mentor in Duke basketball coach Mike Krzyzewski, who taught Levitan the central lesson of Maveron’s consumer-focused success: Always ask, “Do you love your team?” 

NICK HANAUER
Nick Hanauer is an entrepreneur with a broad range of experience across manufacturing, retailing, e-commerce, digital media, advertising, software, aerospace, health care and finance. In 2015, he also founded Civic Ventures, a small group of political “troublemakers” devoted to ideas, policies and actions centering on significant social change. He holds a degree in philosophy from the University of Washington.

Investment you’d characterize as your biggest success. For sure, aQuantive. I founded it and funded a big part of it and sold it [to Microsoft] for $6.4 billion. Also, Amazon as a first-round investor.

Company you passed on and now wish you had invested in. Rich Barton asked me to invest in Glassdoor, but I was too lazy to do anything. That was a screw-up.

Most important things to look for in a startup. My first screen is “Nick’s rule of transformational value.” Every great business is predicated on a product or service that creates what I call transformational value — that is, it is either 10 times better or 10 times cheaper or, ideally, both. Second, of course, the quality of the people. Bad people can kill a great idea but great people can evolve a mediocre idea.

Best location for closing a deal. My office.

Kinds of companies you’re looking for and why. My partners and I look for very early-stage-ideas companies. We try to be hard core about them being headquartered locally, but have made exceptions for entrepreneurs we already knew and trusted. We are somewhat agnostic to industry, reasoning that it’s the stuff you have not considered before that may be the biggest opportunity. For example, one of our best and most exciting investments was Insitu [acquired by Boeing for $400 million], and they made drones before anyone knew what drones were. 

The most effective entrepreneur you’ve encountered. It’s hard to beat [Amazon’s] Jeff Bezos. My pal Rich Barton [of Zillow] comes close.  

Top two deal makers. Simplicity and focus

Top two deal breakers. Complexity and confusion

What do you do for fun? What don’t I do for fun? I believe that one of my finest and rarest qualities is my ability to efficiently convert money into fun.

What kind of car do you drive? Tesla Model S P90D

You might not know. Hanauer is a co-author (with Eric Liu) of two best-selling books in the political genre, The True Patriot and The Gardens of Democracy. He has been featured in two documentary films on economic inequality — American Winter and Inequality for All.

MATT MCILWAIN 

Matt McIlwain joined Madrona Venture Group in 2000 and focuses on a broad range of software-driven firms. Current investments include Apptio, Envelop VR and Smartsheet. A graduate of Dartmouth College, he holds an M.B.A. from the Harvard Business School and a master’s degree in public policy from Harvard’s Kennedy School of Government.  He was named to the Forbes Midas List in 2008, 2009 and 2011.

Investment you’d characterize as your biggest success. Isilon Systems [acquired by EMC for $2.25 billion]

Company you passed on and now wish you had invested in. Airbnb

Most important things to look for in a startup. Customer-driven problem/need; differentiated and technology-driven solution; compelling founding team that can build a great company

Best location for closing a deal. Coffee shop or a great restaurant

Kinds of companies you’re looking for and why. Virtual reality/augmented reality companies and “application intelligence” companies that leverage machine learning to make apps smarter

The most effective entrepreneur you’ve encountered. Sunny Gupta [of Apptio] is world class at customer focus, attracting great people and product-market fit.

Top two deal makers. Great judgment, passion for the opportunity

Top two deal breakers. Not focusing on the customer’s problem, lack of transparency

What do you do for fun? Travel, play (and watch) sports, discuss policy issues

What kind of car do you drive? 2011 BMW 535i

You might not know. McIlwain came to venture capital investing from an unlikely place: the Genuine Auto Parts Company in Atlanta, Georgia, which owns NAPA Auto Parts. He ended up spending a lot of time with venture capitalists and venture-backed companies that were interested in investing in the sector. He worked with Madrona on some projects and joined the firm in 1999.