At the Seattle 2.0 Awards last night, venture capitalist Mark Suster said that Seattle needs to encourage “foreign direct investment” from venture capital firms located outside the region. While Suster is actively looking to develop relationships here, the fact is he’s still trying to find the right deal. But there’s one under-the-radar Silicon Valley venture capital firm which is spending a lot of time (and money) here: Meritech Capital Partners.
That might not be a household name in venture capital circles, but Meritech has jumped into some of Seattle’s hottest deals. Just this week, the Palo Alto firm emerged as the lead investor in ExtraHop Networks’ $14 million oversubscribed round. In 2009, it led a $22.5 million round in PopCap Games — a Seattle game maker which had shunned venture capital for much of its life and is now positioning to go public. Other investments include Tableau Software and Audience Science.
And there very well be more cash to come as Meritech just raised a $425 million late-stage fund.
We chatted with Rob Ward, managing director at the firm and a board member at PopCap and Tableau, to find out why he’s spending so much time flying to Seattle and what excites him about the region. In a nutshell, Ward said they love Seattle’s unique blend of companies.
“We love doing deals in Seattle, and we are pretty convinced there’s going to be a pretty robust opportunity for more late -stage deals in the future,” said Ward.
But part of the appeal foes beyond great companies. Ward also pointed out that it is easier to find high-quality deals that are “off the beaten path” in Seattle when compared to the echo chamber that is Silicon Valley.
The fact that a late-stage venture capital firm like Meritech is spending so much time in Seattle is good news for the region. That’s because it signals that there’s a new crop of potentially IPO-ready companies sprouting. We’ve seen a flurry of activity on the IPO front in recent weeks, with Impinj and Zillow.com filing to go public.
If the economy holds, Ward thinks others will follow suit.
“It is no surprise. There’s a deep pool of technical talent in the Seattle area, and I think that’s why you see many of the big Silicon Valley companies like Facebook and Google coming up there,” said Ward. “There are certainly any number of successful companies that have gone from startup to being very large public companies, so there’s a lot of good managerial talent too.”
Ward said he’s tracking a few other deals in region, but declined to name those. “I don’t think, by any means, that we have exhausted the list,” he said.
Interestingly, Meritech has a few other portfolio companies with Seattle roots, including ZipCap and Box.net. ZipCar, which just completed its IPO, purchased Seattle-based FlexCar in 2007. Box.net originally started on Mercer Island, and then moved to the Bay Area in 2006.
But Ward points out that the talent flow has gone the other way too, noting that Tableau Software was started with research from Stanford University before relocating to Seattle.
Since everyone in the Seattle startup community has been chatting about the lack of investment support in the region, I asked Ward for his take.
“I am not sure that anything is lacking,” he said. “What we like about it is just the great ratio of late-stage opportunities to available late-stage capital. We are pretty excited about the opportunity to invest there.”
Previously on GeekWire: “Q&A: Straight-talking VC Mark Suster challenges entrepreneurs to think big”