Portland, Oregon. Photo via Radworld
Portland, Oregon. Photo via Radworld

I’ve been covering the venture capital beat for nearly 15 years in the Pacific Northwest, through good times and bad. And this marks the very first time I’ve seen this occur.

Oregon overtook Washington in terms of venture capital investing during the first quarter.

Venture capitalists invested $146 million in Oregon, compared to just $100 million in Washington, according to a report out today from CB Insights. Washington state’s slip could be a one-time blip, or not.

The report’s author says they’ve not seen Oregon surpass Washington for at least five years. It could actually be a much longer timeframe than that, and may have never occurred. (UPDATE: The National Venture Capital Association, which runs the MoneyTree venture capital survey, looked at 20 years of data and said the only time that Oregon surpassed Washington in venture capital dollars was the second quarter of 1993).

The fact is dollars invested fell by 64 percent from Q4 to Q1 in Washington state. It was also down on a year-to-year basis, dropping 51 percent compared to the $206 million invested in the first quarter of 2012.

Nationally, the CB Insights report found that deals and dollars actually increased in the first quarter, with $6.9 billion invested in 841 deals.

Now, before the rivalry between the two cities really starts to roar, consider this. Washington is still way out in front in terms of deals, with 32 compared to Oregon’s 12.

vcdollars-wa

Oregon did see some huge blockbuster deals in the first quarter — a $30 million round for Puppet Labs; a $33 million round for Janrain and a $25 million round for Urban Airship.

Big deals do matter, since it indicates a swing-for-the-fence mentality and a breed of companies that have matured to the point to possibly emerge as the next tech titans. (Seattle has seen this in past quarters as well, including large investments in Apptio and Zulily. But there were no deals of that size this time around).

wa-dealvolumeI’ve been writing (and talking publicly) in recent weeks about growing concerns over the lack of capital available in Seattle. Some VCs claim that money will flow to good ideas, and that the Seattle startup ecosystem just isn’t producing enough raw entrepreneurial talent that is VC-worthy.

Others, however, claim that there’s a lack of capital available — accelerated by the fact that leading venture capital firms such as OVP Venture Partners and Frazier Technology Ventures have disappeared. In addition, Ignition’s scaled-back $150 million fund — announced last week — will make a large percentage of its deals in California startups.

top20statesvcIt’s certainly a new era. And here’s my take: A great tech community — one with the likes of anchor tenants such as Microsoft, Expedia and Amazon (not to mention engineering offices of nearly every major Silicon Valley tech giant) — needs more than one or two venture firms.

It’s promising to see Seattle area tech heavyweights like Microsoft and Concur launch new venture funds to support startups. But they are often targeted on a specific niche, and typically have a broader geographic reach.

So, I ask this: Can the region’s startup community survive with essentially one hometown VC firm?

Previously on GeekWire: Seattle vs. Portland: Which city is more hip?

Comments

  • guest

    I think the question should be, which startups here have a viable business plan to actually make money rather than absorb VC funding? Innovation is cool, but there needs to be some actual return on investment for VC’s to continue funding here.

  • Victor

    “So, I ask this: Can the region’s startup community survive with essentially one hometown VC firm?”

    The answer is simple and obvious, of course the community can survive. All one has to do is to look at the history of Seattle. How did the likes of Boeing, Nordstrom, Microsoft, Starbucks and Costco got to where they are today? A bunch of VC posers funding them? More like a bunch of passive aggressive hustlers going about their ways regardless if there is such a thing as VCs.

    The whole VC industry is nothing but a recent invention that has seen its prime already. They are too small to compete against private equity, too slow to compete against angels. Startup guys have always been and always will be here, its the VCs that needs to demonstrate their value and worry about their survival. The fact a bunch of local VCs folded speaks volumes, they added little to no value.

    Also the size of these deals are nothing but headline numbers, they don’t break down how much of the money actually goes to fund the startup as oppose to providing liquidity for some early investors or founders. Just because the numbers are bigger doesn’t mean they are “swinging for the fences”, in more and more cases today, it is the early guys heading for the exits.

    • johnhcook

      Perhaps “survive” was too strong of a word, but can it thrive and compete with the likes of NYC, SF, etc. as one of the truly great tech hubs?

      There certainly is a great history of bootstrapping success stories coming out of the region (and you pointed to several). More recent examples include companies such as PopCap and DoubleDown Interactive.

      Perhaps the VCs here were no good, and they shut down as a result. But the region still needs money.

      I’ve always looked at venture capital as the fuel to get businesses going.

      You can have tons of people (entrepreneurs) building great cars, but if there’s no fuel, they won’t go anywhere. Venture capital is one very important source of fuel, and I’d say the numbers are going in the wrong direction on this front.

      Plus, there are countless of examples — including many from Seattle like Isilon, Swype and Amazon.com —that were supported by venture funding. (Point taken on early investors/founders cashing out in bigger rounds, and it would be interesting to see in what percentage of deals that occurs. My guess is still pretty low).

      Bootstrapping is great, and we need to encourage that for sure. But capital is an important ingredient to add into the mix for sure. Otherwise, many “cars” will just be stuck on the road.

  • johnhcook

    KPLU has a report on the numbers out today, and it quotes CB Insights Anand Sawal who says there is not as much enthusiasm in Seattle’s startup scene as other regions like New York and LA. They also quote Madrona’s Greg Gottesman, who disagrees:

    “My sense is that good deals with great entrepreneurs and good technology – they’re getting funded here.”

    http://www.kplu.org/post/venture-capital-activity-drops-washington-state-1st-quarter

  • Paul_Owen

    John, has anyone counted the number of startups versus VC funding in Seattle area vs Bay Area (or Portland)? How can we claim we don’t have the same ratio as the Bay Area unless we know the total number of startups for both regions?

    • Mark Monroe

      The same can be said about the amount of support that we startups receive locally in comparison to wanting to leave Seattle for SF, NYC, etc. because there is support there. Seattle from what I’ve been told is highly risk averse which goes against the laws of being an entrepreneur. We create products and services at such a risk. The idea that their is so much support elsewhere whereas here its somewhat of a good ol’ boys club is daunting. Many startups I know struggle here but succeed elsewhere. (Like SF, NYC, MASS, etc.)

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