When home-improvement giant Lowe’s bought ATGStores, the e-commerce company Gary Rubens founded in 1999, friends started telling the Woodinville resident it was time to take his haul and get into the investing game.
“I was like, what would I have to share?” Rubens recalls. He now shares plenty. ATG grew to encompass 500 websites and employed 300-plus. Rubens has dispensed his company-growth expertise, and $17 million, to more than 80 companies over the last three years, making him one of the most prominent angel investors in the area. He also purchased i1 Biometrics, a Kirkland-based maker of connected football mouthguards.
Rubens sat down recently with 425 Business to discuss investing strategies, what makes a good founder, and philanthropy.
How has your investing strategy changed since you first began?
Early on, I was focused on some of the wrong things. I thought, well I like to golf; it’d be fun to invest in a golf startup (Golf Pipeline, a tee-time booking app, was Rubens’ first investment). That’s the wrong thing to do. Now, I look at the founders.
If they don’t have passion, if they don’t have drive, if they don’t have a lot to lose and aren’t risking everything for their dream, then I probably won’t invest in them. A good set of founders will take a mediocre idea and turn it into something good. A mediocre set of founders with a great idea will fail every time.
Give us a scope of your portfolio — what types of companies do you invest in?
My companies are around technology typically. I usually don’t invest in products unless they’re driven by a technology. Marketing, analytics, and data companies are what I usually invest in. … I also do real estate investing, and then I have a foundation.
The Rubens Family Foundation gave $20 million to the Washington State Opportunity Scholarship in 2015. Why did you make that gift?
It boils back to who I am as a person. I grew up poor. My family was on food stamps, getting food from the food bank. Neither my mother or father went to college. Neither my older brother or sister finished high school — they both dropped out. So the path I saw was education wasn’t important, just go to work. But I also associated that with us being poor, and I didn’t like that outcome, so I decided to do something different.
I did really well in school, and I got accepted into Washington State University, but I quickly realized my family had no money for me to go to college, so I never had an opportunity to go to college. When I did well, I felt like I had to work harder than educated people. I didn’t have that formal training; I just had to learn and read and ask and figure it out.
So when I sold my company and did well, I thought about what, to me, is most important in society, and I think it’s education. A lot of low-income, underprivileged kids just don’t have the same opportunity that the rest of society does. Their parents don’t have college degrees. Sixty-nine percent of the kids that get scholarships through the Washington State Opportunity Scholarship are first-time college attendees in their family; their parents don’t know how to navigate the system. Over 50 percent are a minority. There’s a sector of our society that will remain poor, and we have to break that cycle by giving money to kids who have done well in school but, through no fault of their own, don’t have the money to pay for college. That was me. So I want to help them.
Do you look at angel investing through a similar lens?
It’s not a charity. My time is a charity to founders, but I get a lot of benefit out of this. I’m a capitalist. I like to make money, but I’m making money so I can give back. I have to see an exit there so I can go give more kids scholarships.
But do you seek founders in similar situations to yours, those who have a sense of urgency and lack a safety net?
I was sacrificial and hardworking. I worked 18 hours a day, at least, and had a family. There are a lot of people who remind me of myself. There are also some I see who don’t have anything on the line. Maybe they were a midlevel manager coming out of Microsoft, and they say, “I made some money; I’m going to be an entrepreneur,” but I’m not convinced you can just decide to be an entrepreneur. They’re comfortable; maybe they’re only going to work eight hours a day and want to remain in the Pro Club. I probably wouldn’t invest in them. I don’t think they’re going to work hard enough to make it.
I’m more interested in the founder who knows they have to work 18 hours a day, who will stay up and see their family and then go back to work. And do they have any money of their own in the company? You want my money, but you haven’t put your own money in it? That’s kind of crazy.
What’s your assessment of the area’s roster of founders?
I thought I would run out of startups to look at. I was at one point doing 25 pitches a week. I barely had time to go to the bathroom between pitches. There’s a ton of talent here. What’s lacking is an understanding of what it takes to be an entrepreneur.
Why is that?
People just look at the successful entrepreneurs, but they forget that 95 percent of businesses fail. Go ahead and look at what makes people successful, but look at what caused these other really good ideas to fail, and don’t do that.
What are some trappings that your companies struggle with?
It’s sometimes difficult to get the funding they need, and they spend too much time fundraising, which takes their eye off their goals. They sometimes have not done enough market validation on their idea. They also sway in the wind of people’s opinions too much. They’ll meet with one investor who says, “You should do this,” and they go off and change their mission. And then a lot of people struggle to put together a decent pitch deck.
What did you see in i1 Biometrics that led you to buy it outright?
I wanted to invest in sensor-based technology and data, and I love sports. I heard about this company that was making sensor-based mouthguards, and I wanted to see if they were taking investments. I found them, and discovered they hadn’t finished the product and they were running out of money. So I went to invest and was like, oof. I loved what they were doing, and they had the most amazing vision for their product. But the management team wasn’t the best, and they had burned a lot of money.
So I said I could walk away … but I did some due diligence and knew I could get some people in leadership seats, so I decided to buy it.
I told the team, we’re not a mouthguard company; we’re a data company. What are we going to do with the data? We have to tell coaches and trainers what the data means. This was in April 2014, and I said you’ve got to finish the product and get on the field with a reputable college football team by August. We got on the field with Louisiana State University, then commercialized in March 2015. We’re used by 25 big Division I colleges and top-tier high school teams.
You’re noticeably more excited talking about i1 than your other investments. Do you have the itch to start your own company again?
I’m helping out at i1 through 2016. I’m building a team, then I’m leaning out in December. Yeah, I’ve got an itch to start a company, but I’ve got to figure out what it is. It’s gotta be something that will keep me up at night because I’m so passionate about it. Otherwise I’ll go sit on a beach with a Corona.
That’s a decent alternative.
Honestly, I think I’d get bored.