The first quarter of 2017 saw continued strong venture investment in Pacific Northwest companies. While the total dollars invested in Washington companies dropped from the fourth quarter of 2016 ($251 million in Q1 2017 versus $295 million in Q4 2016), the number of companies being funded remained consistent (37 funded in Q1 2017 versus 39 in Q4 2016).
I believe that a better measure of the health of venture funding, on a quarterly or annual scale, is to measure the actual number of deals receiving venture funding. This value better illustrates the true activity in the Pacific Northwest startup environment, whereas a focus on the dollars invested can distort the picture. A few larger-dollar fundings will skew the results in any given quarter, whereas the number of fundings tells us how many early-stage, high-growth companies are getting the dollars they need to grow their businesses.
If we compare the first quarter of 2017 to the first quarter of 2016, we can see how the impacts of a few larger-dollar investments can mask an underlying weakness in the health of our Pacific Northwest venture community. The first quarter of 2016 saw total venture dollars invested in Washington-based startups of $293 million, as compared to $251 million invested in the first quarter of 2017, giving the perception that 2017 was weaker than 2016.
Comparing the number of Washington companies being funded in 2017 (37) versus the same period in 2016 (28) tells a much different story. In terms of the number of companies being funded, 2017 presents us with a more vibrant picture that supports the fact that we start 2017 with a healthier Pacific Northwest entrepreneurial marketplace.
In 2016, the Pacific Northwest saw a significant decrease in the number of companies being funded through the first half of the year. That decrease was caused by too many investment dollars chasing too few companies through 2015, resulting in a slowdown of venture investment deal-making during the first half of 2016. The second half of 2016 saw the level of venture investing in the Pacific Northwest return to more normal levels, which has continued through the first quarter of 2017.
For any given year, Washington-based companies receive in excess of $1 billion venture investment dollars, distributed among 120 to 130 deals. Activity for the first quarter of 2017 is on track to achieve these levels and continues to bolster our dynamic entrepreneurial community here in the Pacific Northwest.
Note: All of the financial data cited above was provided by Dow Jones Venture Source.