The late 1990s were tough times for many VC firms, which overextended themselves into money-losing (and often pointless) dot-com startups that eventually hit the wall. That caused big problems in the venture industry that are still being felt today.
But not every firm took it on the chin. Case in point: Seattle’s Madrona Venture Group.
Fortune’s Dan Primack just got his hands on some data from that era, provided by a fund-of-funds which invested in venture capital firms during the period. While the industry as a whole saw returns shrink during the turn of the last decade and the fund-of-funds showed that just 66 percent of the called capital had been returned to investors, Madrona’s performance is quite startling.
Of the funds listed in Primack’s report, Madrona had the best track record with total distributions (including the value of investments in the portfolio that have not yet been realized) at 171 percent.
That beat out much bigger and better known firms such as Accel Partners VII (122 percent); Arch Venture Partners (41 percent); Benchmark Capital (133 percent); and Insight Venture Partners (169 percent).
Now, one might think that Madrona’s riches came from just one deal, the massive $2.25 billion buyout of digital storage firm Isilon Systems. That certainly did provide a nice payout.
But Madrona’s Elise Hebb tells us that Madrona’s $250 million fund actually had some other nice winners, which helped boost results. Those included Farecast (sold to Microsoft), World Wide Packets (sold to Ciena) and Sharebuilder (sold to ING).
That’s not to say Madrona was immune to the dot-com excesses, with Hebb noting that the firm had to “kill a lot of companies after the bubble burst.”
But the survivors — and even some of those that are still standing like WildTangent and PayScale — have continued to perform. Hebb said that the performance speaks to the power of Madrona’s model of focusing efforts in the Pacific Northwest, a region that sometimes gets overlooked in the shadow of Silicon Valley and New York.
“Part of it is that World Wide Packets and Isilon and Sharebuilder aren’t as sexy as Facebook or Zynga, but they provided really good returns,” she said.
And the success is paying off for Madrona. In June, the firm raised a $300 million fund, the largest in its 13-year history. Funds were even provided by the Kauffman Foundation, which has been highly critical of venture capital performance.
Madrona’s Matt McIlwain offered a bit of perspective at the time of announcing the new fund, saying the fundraising process was pretty straightforward.
“We have a long-time strategy of being early-stage investors in the information technology area here in the Pacific Northwest,” he said. “We are not trying to build the best companies in the Pacific Northwest. We are trying to build the best companies in the tech ecosystem that happen to be based in the Pacific Northwest, and that’s been our strategy really since the founding of Madrona.”
You can see more return data from Primack’s Term Sheet column here.