Fuse is pouring more fuel on its fire.
The Seattle-area venture capital firm raised $250 million for its second fund, a major swath of cash that will support early stage enterprise software startups across the Pacific Northwest. GeekWire previously reported on the fund last year.
It’s one of the largest funds ever raised by a venture capital firm in the Seattle region, where Fuse plans to double down on its investments.
“We’re super fired up about the density of talent here and the resulting entrepreneurs starting companies here,” Kellan Carter, general partner at Fuse, said in an interview with GeekWire.
Carter and Cameron Borumand launched Fuse in 2020 as a spinoff from longtime Seattle-area firm Ignition Partners. It raised $170 million for its first fund and invested in 24 companies, including Carbon Robotics, Pictory, WellSaid Labs, and others. Nearly all were based in the Pacific Northwest.
Fuse expects to back 30-to-35 companies with the second fund.
The latest fundraise is notable in part due to the venture capital slowdown. PitchBook reported just $33.3 billion raised across 233 venture funds for the first half of the year. Firms raised more than $167 billion in 2022.
Emerging firms like Fuse — which is led by general partners all under the age of 40 — will likely have their worst fundraising year since 2015, according to PitchBook.
Fuse managed to navigate the headwinds, crediting its growth in part to the Pacific Northwest ecosystem.
“Everything going on here has exceeded a very high bar of expectation that we have,” Carter said.
As Fuse doubles down on its backyard, other Seattle-area venture capitals firms are dipping their toes into other regions.
Flying Fish said it would look beyond Seattle for investments after raising a new fund last year. Madrona Venture Group recently opened a Silicon Valley office.
“We’ve done the Bay Area thing. We know what that’s like,” said Brendan Wales, who joined as general partner in 2021 after relocating from San Francisco.
Ignition spread itself outside of the Seattle region, with a Bay Area presence and even a China investing arm.
But Fuse is staying focused on Seattle.
“The moment we start flying to Minnesota to do a deal, we’re in trouble,” Wales said. “We’ve got to stay patient and feel comfortable that this is a great market opportunity and keep doing it better than others.”
The firm, like others, is bullish about the AI talent in Seattle — home to cloud giants Microsoft and Amazon — and the potential impact on enterprise startups.
“With the entire public cloud flowing through Seattle, there is no team as strong and as prepared as Fuse is to back the emerging technologists coming out of the area,” Eric Sprunk, a former Nike exec and Fuse limited partner, said in a statement.
Fuse made room on its cap table for more limited partners in the second fund, including institutions “that saw market opportunity in the Pacific Northwest,” said Borumand.
The firm is bullish about the performance of its first fund. “There have been a number of significant milestones crossed in these companies,” Borumand said.
Fuse does not have any acquisitions within its portfolio. The firm typically leads investments up to the Series A round, and invests between $1-to-$10 million.
Bill Bryant, a longtime Seattle-area investor and limited partner at Fuse, told GeekWire last year that Fuse was “filling a gaping hole in the Pacific Northwest venture landscape” since it can lead big seed rounds without syndication, and follow on with significant capital at the Series A stage.
Venture capital activity has dipped considerably in the Seattle region this year amid the larger tech slowdown. Fuse investments this year include companies such as Griptape, PDM Automotive, and Digs.
“It feels like we’ve been managing a firm for 30 years of cycles,” Carter said, alluding to the turbocharged startup investing environment in 2021 and subsequent slowdown.
John Connors, an Ignition managing partner and former Microsoft CFO, is an operating partner at Fuse, along with Satbir Khanuja, who was a venture advisor at Ignition.
Seattle Seahawks star Bobby Wagner is a Fuse operating partner.
Other Pacific Northwest firms that announced new funds this year include PSL Ventures, Ascend, Madrona Venture Labs, and AI2. Trilogy and Madrona raised funds in 2022. Voyager Capital is raising a new fund.
