Industry reports signal tough times for venture capital firms, with shrinking returns and lackluster results tied to a weak IPO market. But despite the headwinds, Madrona Venture Group still was able to meet with success on the fundraising trail.
The Seattle venture capital firm has closed a $300 million fund, beating out original targets of $250 million. It marks the biggest venture fund for Madrona since the firm was founded in 1995 by Tom Alberg, Paul Goodrich, Gerald Grinstein and William Ruckelshaus. It is also the largest in the Pacific Northwest since Ignition Partners raised $400 million in 2007.
Madrona, which made a name for itself with early investments in companies such as Amazon.com, Isilon Systems and Sharebuilder, will continue to focus on early-stage investments in the Pacific Northwest. Its main areas of interest include consumer internet, enterprise software, digital media, online advertising, mobile and cloud computing.
We’ll be talking to Madrona’s Matt McIlwain later today, and we’ll have more from that interview Wednesday. (See link below).
Madrona plans to invest the new fund in about 30 new companies over the next four years, targeting roughly 85 percent of the capital in companies in the Pacific Northwest. McIlwain said that’s a strategy that has worked in the past, and they don’t plan to stray from it in fund V.
“Early-stage venture capital is a local business, and Madrona has a long track record of successfully helping great entrepreneurs build lasting companies from the seed and Series A stage onward,” said McIlwain in a statement. “Our new fund will focus on backing the entrepreneurs and ideas that drive the next technology revolution and expand the innovation ecosystem our team fosters every day. We also believe that venture funds with focused strategies and capital between $200 million and $400 million create the strongest alignment between entrepreneurs, venture capitalists and institutional investors.”
Madrona’s fifth fund is good news for the Pacific Northwest startup ecosystem, providing much-needed capital for early-stage entrepreneurs. In recent months, some in the region have expressed frustration over the lack of startup capital available at good terms, highlighted in recent months by the departure of entrepreneur Tony Wright for Silicon Valley.
One recurring theme in the criticism is that Washington state — which ranked fifth in venture capital financing last quarter — just doesn’t have enough capital to fuel early-stage startup ventures.
Madrona has made a number of new investments in companies in the Seattle area in recent months, including Mobilisafe and Rover.com. With the new money now in place, the firm can ramp up its investment pace. It’s already been adding to its bench strength, promoting Tim Porter, Scott Jacobson and Len Jordan to partner last year. It has also added Julie Sandler, formerly of Amazon.com, and Robin Andrulevich — a veteran HR director who previously worked at Lockerz, Amazon.com and Qpass — to the team.
Cash for the new fund was provided largely through the firm’s existing endowment partners, but some of the money also came via technology executives and entrepreneurs in the Seattle area.