EVERETT — In a career of investing money, there are always the ones that got away.
And John Fluke Jr. remembers them vividly.
The former CEO and chairman of the Fluke Corp. in Everett recalled being pitched a start-up business in the 1980s where he could have bought in at a price of $50,000.
“You buy a membership in this buy-in club and you go to this place to buy the merchandise essentially at whatever their total cost is, which was the cost of the goods and the cost of transportation,” Fluke said. “I thought to myself, ‘Boy that doesn’t make any sense.’ That was the origin of Costco.”
He passed and lost out on turning that initial investment into many millions of dollars.
Then there was the not-so-much of a start-up company in the 1990s selling books on the Internet. Fluke recalled the pitch: “I think you really ought to invest in this company called Amazon. It’s going to be a howling success someday.”
Fluke’s due-diligence manager thought the cost to buy at what was called the mezzanine level of financing was too high. So they passed.
“I understand why he said no, but on the other hand, I wish he hadn’t,” Fluke said. “On Costco, that unfortunately was my choice alone.”
Fluke talked about investing in start-ups at a meeting of the NW Innovation Resource Center in the Weyerhaeuser Room at the Everett Transit Center on Monday. Just under 50 people attended including some entrepreneurs looking to expand their businesses and some people looking to invest.
The meeting was to gauge interest in people in Snohomish County to consider becoming angel investors for early-stage businesses, said Diane Kamionka, executive director for the nonprofit, which aims to help entrepreneurs. A similar group of investors is already established in Whatcom County.
“We’re talking with individuals such as yourself about your interest level, capacity and risk tolerance for actually building more bench strength for investors in our community,” Kamionka said. “So we’re not having to drive people to go to Seattle or California for investments and miss out on really building a vibrant entrepreneurial area ourselves.”
Fluke’s family knows something about start-ups. His father, John Fluke Sr., started his industrial testing equipment company on the East Coast in the family basement before eventually moving the company to Everett.
John Fluke Jr. worked at the company, rose through the ranks and became the CEO in 1983 and chairman of the board in 1984 after the passing of his father. He sold the company to the Danaher Corp. in 2008. (Danaher is splitting this year into two companies with one half called Fortive to be headquartered in Everett.)
In 1982, Fluke launched what is now called Fluke Venture Partners to invest in entrepreneurs and start-ups. Fluke said his company has been risk-averse and has missed out on some opportunities. But it’s also helped get off the ground many successful businesses.
Fluke, who lives in King County, noted that most new businesses fail. His company has invested in about 120 businesses over the years and he said only 25 percent of those businesses could be called failures.
The other 75 percent have made good returns and some have made spectacular returns. For instance, his company invested early in Aldus Corp., a Seattle company which made Pagemaker, one of the first digital desk-top publishing programs. The company eventually sold to Adobe and made investors millions.
Fluke noted that the first rule of angel investing is there are no rules: “It’s amazing the scope and variation from one company to another in how these companies were funded.”
He said it’s hard work to identify the successful start-ups.
“The first thing that comes to mind is the investor and his money are soon parted,” Fluke said “There are a lot of things that you can invest in that are just a waste of money. On the other hand, there also these opportunities that come around, you can’t tell.”
He’s taken an active role in businesses where he’s invested. He called starting a company a noble endeavor even though, “it is a long and difficult process to get a business to come into existence.”
“Venture capitalists have no better insight into what will succeed or fail than many entrepreneurs,” Fluke said. “If you are an entrepreneur, it’s going to take a lot of hard work, it’s going to take some capital and it’s going to take some convincing of investor parties and then things are going to go wrong.”
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