Pacific Northwest startups raised $920 million in the third quarter, marking the lowest quarterly amount in five years and a 46% drop compared to the same time period in 2022.
The venture capital market has cooled considerably following a record 2021. The broader tech downturn and elevated interest rates are forcing startups to cut costs and investors are more selective. A number of cash-strapped startup founders are seeking buyers to avoid going out of business or raising cash on unfavorable terms.
Deal count in the Pacific Northwest actually rose to 48 from 46 deals in Q3 of 2022, according GeekWire’s fundings list, which tracks investment raised by privately held tech startups. But overall funding is down — and at a slightly higher clip compared to national trends.
Nationally, venture-backed companies raised $32.7 billion across 2,715 deals in the third quarter, according to PitchBook’s Venture-Monitor report released Wednesday. That’s a 30% drop from the $46.4 billion raised in 3,933 deals during the same quarter last year.
The lack of giant fundings in the Pacific Northwest, particularly deals of at least $100 million, is adding to the overall slump. Only one such deal occurred in the third quarter: Seattle-based biotech company Avalyn raised $175 million last week.
Last year, four Pacific Northwest companies had giant funding rounds: Terrapower ($750 million), Cap Hill Brands ($100 million), Swiftly ($100 million), and Flexe ($119 million), which recently laid off 33% of its workforce.
In addition to Avalyn, the third quarter funding total was buoyed by other notable rounds: Viome ($86.5 million), Wrench ($54.2 million), MotherDuck ($52.5 million), Propio ($43 million), Risc Zero ($40 million), and Hyperproof ($40 million).
About $2 billion was raised in 115 funding rounds through the third quarter, down from $6 billion in 189 deals in the same time period last year, according to GeekWire funding data.
Despite this dip, some remain bullish about the Seattle tech industry. Investors point to factors such as the region’s talent pool and the growth of generative AI as tailwinds for a potential rebound.
Here are other key takeaways from PitchBook’s third quarter report:
- Venture fundraising in the U.S. for the third quarter totaled $42.7 billion across 344 funds, a decrease from last year’s $150.9 billion, according to PitchBook. Pacific Northwest firms are still raising capital. Fuse, PSL Ventures, Ascend, Madrona Venture Labs, and AI2 announced new funds this year, while others such as Voyager Capital are raising.
- Exit activity in the third quarter remained subdued, but the total exit value rose, thanks to a string of public offerings. During this period, there were 216 deals totaling $35.8 billion in deal value, compared to 298 exits totaling $16.4 billion the previous year, according to PitchBook. Notable exits in the Pacific Northwest included Onder, DreamBox Learning, Procore, and APImetrics, according to GeekWire’s M&As and IPOs tracker.
