The second quarter of 2017 was another outstanding quarter for venture investment in Washington-based, emerging high-growth companies, putting the first half of 2017 on a record-setting pace for Washington start-ups. According to Dow Jones VentureSource, 40 companies received funding in the second quarter, compared with 42 in the first quarter, for a total of 82 completed through the first half of this year. We have not seen two consecutive quarters of 40-plus deals in more than five years, making the first half of 2017 one the strongest periods of venture investment in recent memory.
The amount invested for the second quarter was $427 million, compared with $374 million in the first quarter of 2017, an increase of 14% quarter over quarter. The total amount of invested dollars through the first half of 2017 was $801 million and, while that doesn’t top the record investment levels of 2015, it’s a 59% increase from the $504 million invested through the first six months of 2016.
In 2015, we experienced the highest level of venture investment in Washington-based companies in more than a decade, with more than $1.8 billion invested during the year. Underlying that level of investment was the influx of nontraditional venture investors chasing early-stage investments as a way to realize higher pre-IPO returns. Those nontraditional investors reduced their level of venture investing in the second half of 2015 and, while they have made some continued investments in 2016 and 2017, their participation has been much less than in early 2015.
Eventually, venture investors need to liquidate their positions, so having successful liquidity events is an important measure for emerging-company marketplaces. Some early stage Washington-based companies have been the targets of higher profile acquisitions during the past two years, while others, such as Apptio and Impinj, have completed their IPOs. These events provide venture investors with a way to realize their returns and signal that Washington-based start-ups provide a strong venture investment opportunity. These events kick off a cycle that then leads to higher levels of venture interest and venture investment in Washington’s start-up companies.
While it’s still too early to predict if this year’s total venture investment in Washington companies will set a new high, the growth in the number of venture investments made through the first half of 2017, combined with the recent significant liquidity events taking place across the region, is making Washington a very attractive home for venture investors and entrepreneurs.
