“Giving back” to the community is among the noblest of virtues. When the community in question is a territorial space of 64 squares covering not only Seattle, but the entire USA (if not the world), it becomes an investment of royal proportions.
That’s what happened when Seattle investment all-stars Erik Anderson and Scott Oki, along with Hutch cancer crusader Dr. Jim Roberts (call them The Three Kings of King County) put their personal capital into saving the United States Chess Championship, locking in Seattle as the host city for the next ten years. The rest, as they say, is history — recent history.
This week’s ShopTalk interview with Matthew G. Norton Co. CEO Erik Anderson isn’t about chess. Although, it did take place during just such a world-class event, the recent US vs. China Chess Summit held downtown at the Norton Building. The topic of this conversation was the strategic thinking of Norton Financial. Here’s the gambit…
Seattle24x7: Erik, how should we think about the Matthew G. Norton Company?
Anderson: We think of ourselves as an investment company. There are four areas we work in. We have real estate, which is where a lot of people know us because of our Northwest Building Corporation subsidiary. We own the Norton building (on Second Avenue) and own industrial properties, mostly in Tacoma. We do private equity venture capital. And we do public equities and international equities. Some know our name in relation to Laird Norton, with whom we are affiliated.
Seattle24x7: What is the size of the company?
Anderson: We’re small. We have about thirty, between here and our real estate work down in the Tacoma area. Because of our size, we work closely with the leading venture firms here. Often times, we’re partnered with them. We have a very active co-investment strategy. So we have our own idea of what spaces we’d like to be in.
Seattle24x7: What are some of Norton Financial’s portfolio companies?
Anderson: Well, to name a few, we’re in Pacific Edge Software, Lisa Hjorton’s company, which develops world-class project management software. We’re in Talisma and we’ve been in Excite Therapeutics, it’s an Arch Company. We’re very excited about a company called Quarry Technologies in Boston which is [designing] “routers on a chip.” We’re actually very excited about a company called PacAm which is high-speed Internet access via satellite. We’re seeing a lot of traction in that one.
Seattle24x7: You’re invested nationally and also internationally?
Anderson: We’re one of the long term investors in the Credit Bank of Japan which is the recapitalization of that bank. We’re very excited about about that.
Seattle24x7: What is your background in the investment world?
Anderson: I have a general background in investment banking consulting in New York with Booz Allen Hamilton and Goldman Sachs. I was also involved with Frasier and Company here as a founding partner with Alan Frasier.
Seattle24x7: How have your portfolio companies done in these turbulent times?
Anderson: We’ve done okay. We’ve had some which have plunked. Most have not. We’re very realistic investors. We don’t try to put an unnecessarily rosy face on things. We’ve got a lot of companies that are fully-financed and that we feel comfortable with as well. The vast majority of our portfolio is in good shape.
Seattle24x7: Do you have a post-mortem on the Internet’s market’s recent upheaval?
Anderson: Well, it’s the same market acting strangely now as opposed to acting strangely last March. Was it a bubble? Yes, I think you’d have to say it was a bubble. There’s been a lot of stuff written on the psychology of manias, whether you go back to tulips, or whatever you want to look at. Anytime there’s a paradigm shift or a disruptive technology, it is not unusual to see capital markets react overly aggressively.
Seattle24x7: So it’s symptomatic of a disruptive force in technology?
Anderson: Warren Buffet was talking about this a year and a half ago. He took out the yellow pages from the early 1900’s and there were four hundred car companies, now there are six. The Internet is not unusual from that perspective. I think people were thinking, if I put a dollar down, I’ll get ten dollars back whether or not I know what I’m doing.
Seattle24x7: You also feel the foundation wasn’t in place?
Anderson: Some people were buying lottery tickets of companies that were thinly traded so there was not a lot of stock. You get day traders and individual investors. If you look at the ownership of different companies it wasn’t strong institutional ownership, it was a lot of retail ownership and small trade size, 300-share blocks, average blocks. So if you start to look at it, you start to see individuals aggressively pursuing some idea, and not without some help from various pundits. Henry Blodgett from Merrill Lynch probably being everyone’s favorite one right now.
Seattle24x7: But you’re excited about the Internet space in the long term?
Anderson: The Internet is real, and a very powerful idea. It’s being adopted all the time, and there still is a lot of growth. I don’t think it’s a question of whether the Internet is an intelligent space to invest, or something that’s going to be meaningful. I think the valuations have to be rational.
It’s not a question of whether the Internet’s real or whether Amazon’s an interesting company. It’s very interesting. There are a lot of fundamentals there that are pretty interesting. The inventory returns and some of the value propositions of the customers in terms of breadth of products. So it’s a valuation problem, not a “has Jeff Bezos built an interesting company” problem.
Seattle24x7: What is your read on the Seattle market and the venture community here. A year ago, a lot of money was accumulated here, much of which was earmarked for this region?
Anderson: The opportunities are obviously two-fold right now. Not only new companies, but obviously there’s a significant backlog of existing companies that felt that they were going to be able to pursue the public markets, so the additional private round financings are fast and furious, and of course, the valuations are significantly adjusted.
Seattle24x7: Do you think we’ll ever see a strong investment banking presence here?
Anderson: There isn’t a lot of on-the-ground investment banking presence. There’s a lot of private wealth management coming here. Goldman Sachs is opening an office. JP Morgan, Chase and someothers. But it’s not heavily banked on the ground. f you look at the two to three significant areas in this field — M&A, IPO, high-yield debt, I don’t know if it justifies a critical mass of bankers here.
Seattle24x7: Thanks for chatting with us.
Larry Sivitz is the Managing Editor of Seattle24x7.
====================================== Matthew G. Norton Co.
(some information withheld upon request)
Employees: 30
Portfolio Companies: (partial)
Pacific Edge Software, Talisma, Excite Therapeutics, Quarry Technologies, PacAm, Credit Bank of Japan, RidgeRun Inc., Applied Inference, VoteHere.net, Arch Venture Fund
