Northwest Venture Deals Down in Fourth Quarter of 2008—But Still a Few Good Ones

Xconomy Seattle — 

OK, no big surprise here. In the fourth quarter of 2008, venture capital investment in Washington and Oregon fell to $142 million, down 45 percent from $260 million in the previous quarter and a 68 percent drop from $450 million in the fourth quarter of 2007. For the year, venture investment in Washington state dropped below $1 billion for the first time since 2005, with $906 million invested in 93 deals—down 35 percent from the $1.4 billion invested in 124 deals in 2007.

That’s according to a Dow Jones VentureSource report released over the weekend that seems to confirm that VC firms are getting hit hard by the economic downturn, along with everyone else. What’s more interesting, though, is to look at which companies landed the top investments, and which venture firms were most active.

First, some more context. On the national front, venture funding for new companies declined by 30 percent in the last three months of 2008, with $5.5 billion in 554 deals. That’s as compared to $7.9 billion in 718 deals during the fourth quarter of 2007. For the year, there was an 8 percent decline, with $28.8 billion being invested in 2,550 deals across the country.

There were still bright spots in the Northwest. Using the survey data, here are the five biggest tech and life sciences venture deals in Washington during the fourth quarter. They span Web marketing, software, energy and cleantech, and drug development:

—BlueKai, an online marketing firm based in Bellevue, WA, received $10.5 million from Battery Ventures and Redpoint Ventures.

—EnerG2, a Seattle-based energy storage startup, secured $8.5 million from OVP Venture Partners and Firelake Capital. Xconomy broke the news of the deal here.

—Qwell Pharmaceuticals, a Seattle developer of small-molecule drugs, raised $7 million from Arch Venture Partners and the Wellcome Trust. Xconomy broke the story here.

—Datacastle, a Seattle information-security startup, raised $5.3 million led by the Australian venture firm CM Capital Investments.

—Kashless, a Seattle startup focused on “recommerce” software, raised $5 million led by RRE Ventures.

As for local venture firms, the most active in the fourth quarter were OVP Venture Partners and Madrona Venture Group—each with three investment deals in Washington—according to Dow Jones VentureSource. Next was Arch Venture Partners, with two deals, and then a large number of firms with one deal each.

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