Flying Fish Partners is ready to cast its pole deep underneath Seattle’s iceberg.
The new venture firm has raised $27.8 million as part of a larger $80 million fund that will be used to invest in Pacific Northwest startups building artificial intelligence and machine learning technology.
Flying Fish launched last year and already has seven companies in its portfolio, ranging from Element Data to Ad Lightning.
But now the firm is ready to double down on a region it believes lacks sufficient capital to match the quality of available talent.
“We think we have the biggest iceberg of talent in North America. It could not be higher in quality, but the deals that investors are seeing today are just the very tip of that iceberg,” explained Heather Redman, a longtime Seattle-area tech veteran and general partner at Flying Fish. “The amount of the iceberg that’s underwater is 90 percent — once we get capital in front of that part, we will see a huge increase in deals.”
Flying Fish isn’t the only group in town that sees opportunity to raise new funds in a region long-criticized for its lack of venture capital. Just last week, Seattle startup studio Pioneer Square Labs launched its own $80 million fund with a focus on new startups across the Pacific Northwest.
Both firms believe there are hundreds of potential entrepreneurs that aren’t making the startup leap, instead opting to keep comfortable high-paying gigs at one of the local tech giants or various Silicon Valley engineering centers.
“If you are a rational person here in Seattle and see a couple seed funds that could potentially fund the idea you have in mind, that doesn’t seem like great odds,” said Flying Fish general partner Geoff Harris. “That same person in the Valley might see 100 seed funds — those odds seem a lot better.”
Flying Fish plans to make investments ranging from $500,000 to $5 million, with a focus on the region’s artificial intelligence and machine learning clout. Not only are local tech giants like Amazon and Microsoft recruiting heavily for those technologies, but other out-of-town giants like Baidu and Tencent have opened Seattle-area offices to tap into the rich talent pool.
“We believe it’s the biggest thing since the industrial revolution in terms of the impact on our economy and our lives,” Redman said. “And we think Seattle is the epicenter of talent for that technology.”
Related: What’s wrong with Seattle’s startup scene? Despite top talent, a lack of venture capital stunts growth
Harris is a Microsoft vet with a background in natural language processing, machine learning, and digital commerce. Frank Chang, the firm’s other general partner, also brings expertise in machine learning from companies like Amazon, Audible, Microsoft and Reef Technologies.
Redman, who held leadership positions at companies like Indix, Atom Entertainment, and Getty Images, said the firm’s knowledge and experience with new technology sets it apart from other traditional investment groups in town. She described Flying Fish as “VC 2.0” — a group that can do more than sign checks and provide financial or legal advice.
“We’re far more technical and operational than a typical VC that you would see in the first generation of VC firms,” Redman said.
The initial raise for Flying Fish’s fund comes from a majority of individual investors or small family offices, all of which are based in the Pacific Northwest or have ties to the region. Redman noted that 35 percent of the investors are women.
The firm plans to reach its $80 million goal by the end of 2018; Flying Fish will ultimately invest in 20-to-25 companies with the fund.
