Venture capital dollars are flowing into Seattle-area companies in near-record numbers, but most of the cash is going to more mature startups.
Dow Jones VentureSource released its quarterly U.S. venture capital report, showing the highest amount both invested and raised by VC firms in the past three years nationally.
The spike was more pronounced in the Seattle region, which reached $793 million in capital invested for Q2 — the highest since 2015, and the second-largest amount since the dot-com era. That’s up from $591 million the quarter prior, and more than double from Q4 of 2017.
While the $793 million pales in comparison to the Bay Area ($10.49 billion in Q2 of this year), it’s still a big number for the Seattle tech ecosystem. Venture capital investing is also surging nationally, with a report released earlier this week from PitchBook and The National Venture Capital Association showing that $57.5 billion was invested in the first half of 2018 — a torrid investment pace not seen since the dot-com boom era of the late 1990s and early 2000s.
Seattle area companies like Rover ($155 million), Qumulo ($93 million), and Outreach ($65 million) helped draw large amounts of capital into the region, according to the report from Dow Jones Venture Source. Other big rounds announced during the second quarter include:
- Auth0 ($55 million)
- Nohla Therapeutics ($45 million)
- RealSelf ($40 million)
- SkyKick ($40 million)
- Cardiac Dimensions ($39 million)
- Just Biotherapeutics ($35 million)
- Tango Card ($35 million)
While the total amount invested increased, deal count for the Seattle area came in at 44 for Q2, around average from the past several quarters. There aren’t necessarily many more startups in the region compared to years past, but companies are raising larger rounds.
Data from a PwC/CB Insights MoneyTree report — a separate venture capital report released this week — shows eight later-stage deals last quarter, the most in Seattle since the first quarter of 2000. There were 23 seed and early-stage deals, about in line with past quarters.
Chris Seel, a partner with consulting giant PwC. said the jump in investment was tied to a combination of factors, including a strong stock market — including a surge in IPOs — as well as “high levels of fundraising by venture capital funds and the competition among them for high growth investment opportunities.” Several venture-backed companies with roots in Washington state recently completed IPOs, including sales tax automation company Avalara; electronic signature powerhouse DocuSign and enterprise software company Smartsheet.
With eight of the top ten deals in the later-stage category and the top ten deals accounting for more than 70 percent of total capital raised in Washington state, EY venture capital expert Jeff Grabow said this follows a trend of more money going into fewer deals.
Grabow also noted a “historic” quarter for the software category — $336 million was raised across 16 deals in Washington state, accounting for 42 percent of all capital raised.
This trend of more money flowing into fewer deals also played out nationally. There were 94 deals of more than $100 million in the first half of 2018, accounting for 40 percent of total money raised, according to the report from PitchBook and the National Venture Capital Association.
The most active firm in the second quarter was Seattle-based Madrona Venture Group, which invested in five deals. Seattle’s Pioneer Square Labs, which recently added a venture fund to its startup studio model, had four deals, followed by Maveron with three, according to the Dow Jones VentureSource report.
Out of town firms also invested in Seattle companies — Shasta Ventures; ARCH Venture Partners; Draper Fisher Jurvetson; Sapphire Ventures; Spark Capital; Trinity Ventures; and Two Sigma Ventures did multiple deals.
The Seattle tech ecosystem has long been critiqued for its lack of venture capital, in particular with home-grown venture capital firms. Last year, virtually no Seattle area firms raised new funds — a troubling situation since those pools of capital are needed to support the next batch of startups. Read more about the state of Seattle’s startup scene here.