Pacific Northwest Venture Activity ‘Healthy’ in First Quarter

Xconomy Seattle — 

While venture capital investment in the first quarter nationally hit levels not seen since spring 2001, the Pacific Northwest started the year with a fairly typical level of funding and deals.

Investors backed 30 companies in Washington and Oregon with more than $186 million in the first quarter, according to the newest MoneyTree Report. That’s down sequentially—the fourth quarter of 2013 was the best locally since before the Great Recession—but up about 10 percent in terms of dollars invested from the first quarter of 2013.

“It’s a healthy level of investments,” says Stephen Sommerville, a Seattle-based partner at PricewaterhouseCoopers, one of the firms that puts together the report.

And the second quarter is off to a roaring start both north and south of the Columbia River. Act-On Software, based in Beaverton, OR, raised $42 million earlier this week, surpassing in one deal the amount raised in the second and third quarters of 2013, according to the MoneyTree report. Also this week, three Seattle-area companies had large, later-stage funding rounds totaling $87.5 million. Earlier this month, Adaptive Biotechnologies, a Fred Hutchinson Cancer Center spinout, raised $105 million from Viking.

Sommerville wonders whether some volatility creeping into the public markets will affect venture financing throughout the rest of the year. Wall Street investors had big appetites for initial public offerings last year. “It’s still strong in Q1, but I think it’s starting to show some signs of weakness,” he says. “There’s been some deals pulled rather than getting priced. … A couple of weeks ago, you weren’t seeing that.”

This has been more notable in biotech, a strong suit in the Pacific Northwest and the industry that has seen some of the biggest single financing rounds over the last six months with Adaptive and Juno Therapeutics.

Nationally, venture capital funds raised more money in the first quarter—$8.9 billion for 58 funds—than in any single quarter since the fourth quarter of 2007, according to the National Venture Capital Association, which collaborates on the MoneyTree Report with PricewaterhouseCoopers and Thomson Reuters.

“There is lots of money, dry powder, so to speak,” Sommerville says, adding: “It’s going to be interesting to see how the next couple of quarters shake out and whether this market volatility and the slowdown in the exits starts to influence continued enthusiasm to plow money into venture-backed companies.”

The report notes only four venture investments made in Oregon in the first quarter for a total of $13.7 million. (CB Insights, another source of private investment data, tracked six deals worth $18 million.) In any case, it was a very quiet start to the year in the Beaver State, particularly compared to the first quarter of 2013, during which companies including Janrain and Urban Airship helped boost total investment to more than $79 million, the highest level for a single quarter since the fourth quarter of 2007.

Notable first-quarter financings include:

—Sales-tax compliance software maker Avalara, which raised $30 million

Juno Therapeutics, which expanded its Series A round by $25 million, making it one of the richest biotech startups ever

Simply Measured, the expanding Seattle social-media analytics company, which raised $20 million

Shockwave Medical, a Bellevue developer of devices to treat cardiovascular disease, which raised $12.5 million

Pet-sitting matchmaker Rover, which brought in $12 million

Inrix, the Kirkland-based traffic information company, which quietly raised $10 million

Brammo, the electric motorcycle maker in Talent, OR, which raised $9.5 million