Venture-capital investing in Washington state remained essentially flat during the first quarter, but expectations continue to be upbeat...
Venture-capital investing in Washington state remained essentially flat during the first quarter, but expectations continue to be upbeat on what the rest of the year will hold.
Nationwide, investing dipped slightly, falling in the first quarter compared with both fourth-quarter 2004 and the year-ago period. The data are being released today as part of the quarterly venture-capital report released by VentureOne and Ernst & Young.
In the first quarter, 16 Washington-based companies received $106.9 million, compared with 15 companies and $93.5 million in the fourth quarter and 23 and $241.9 million a year ago.
Washington ranked as the sixth most-active region in the U.S., with the perennial leader, Silicon Valley, maintaining its position. All told, 474 U.S.-based companies raised $4.6 billion, or less than first-quarter 2004 when 521 companies received $5.4 billion.
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Venture capital is a high-risk gamble, where an investor agrees to give money in return for equity in a company. Investors get a return if the company succeeds. If it shuts down, the venture capitalist typically gets nothing.
Although the amount of activity has bounced around in recent quarters, nationally and locally, it is hard to read too much into the variances when one or two deals can make the difference.
“In any three-month period, you might miss a few large deals that would skew the numbers,” said John Robertson, an attorney who works on venture-capital financing at Heller Ehrman in Seattle. He said he expects five or six deals he’s currently working on to close this month.
A longer view of state activity shows an upward trend. In the past 12 months, Washington state companies have raised $629.6 million. In the 12-month period before that, they raised about $530.6 million.
The level of investing also depends largely on the mix of companies that receive money. Recently, VentureOne said, investors have favored younger companies, which typically require much less capital.
In the first quarter, more seed-stage deals were completed than in almost four years. Likewise, the seed-stage deals received more money — $235.2 million — than they had in slightly more than five years.
“Strength in early-stage rounds reflects the positive company-formation environment that we see on the ground in Silicon Valley and other hotbeds, where proven entrepreneurs are succeeding in securing capital to launch companies,” said Robb Browne, Ernst & Young’s venture capital adviser group leader in Silicon Valley.
A company that received its first round of capital in Washington state in the first quarter was Inrix, a Redmond company using technology from Microsoft to create traffic-prediction software. The company received $6.1 million in the first round, the largest amount a Washington software company has obtained at that stage in almost two years.
In general, the venture-capital climate has maintained some vibrancy since investing started rebounding from a low point in 2001, said Jeff Brown, RadioFrame Networks’ chief executive. The Bellevue-based company, which builds equipment for wireless carriers, was able to raise $8 million from existing investors in a fifth round, he said.
By summer, he expects to ask new investors to finish off the round. Although he hasn’t started meeting with investors, he said it hasn’t stopped them from cold-calling him.
“Oh yeah, we are definitely on the call list these days,” he said. “It is exciting times.”
Tricia Duryee: 206-464-3283 or firstname.lastname@example.org