Ignition Partners Plans to Stay the Course with $200M Sixth Fund
The headline on venture capital firm Ignition Partners‘ pitch deck to investors in its new $200 million fund was “No Change.”
Ignition, based in based in Bellevue, WA, and Palo Alto, CA, has good reason to stay the course. In announcing Ignition Venture Partners VI, the firm touted 25 significant exits in the last three years, generating some $800 million in liquidity.
The firm will maintain its focus on investments in early stage enterprise software startups, and its leadership team of managing partners Frank Artale, John Connors, both former Microsoft executives, and Nick Sturiale, previously a VC at Sevin Rosen Funds. That’s the same group at the helm of the $160 million Ignition Venture Partners V, announced in April 2013, which marked a significant turning point for the firm, founded in 2000.
Sturiale, based in Palo Alto, shared his views on a tech bubble (maybe in pre-IPO companies), accelerators and incubators (good for investors), and the rise of Seattle (“Cloudville” is a huge part of the startup ecosystem), in a condensed interview below.
Ignition highlighted several exits from its portfolio including Splunk, the machine data company that went public in 2012; Azaleos, the Seattle tech consulting firm acquired by Avanade in 2012; and Zenprise, which made mobile device management tools and was acquired by Citrix in 2013. Ignition has also backed several fast-growing companies, such as Bromium, Chef, and Cloudera, which remain independent. Many of those investments were made from earlier Ignition funds.
Venture capital and startup data provider PitchBook counts 18 companies backed by Ignition Venture Partners V: Azuqua, BlueData, Couchbase, Hipmunk, Keas, Mail Bypass, Mattermark, Nymi, SignalSense, StrongLoop, Tellwise, Tempered Networks, Tipbit, Trifacta, Unidesk, Vastrm Fashion, wit.ai (which Facebook acquired), and Xamarin.
Ignition’s investors—mainly endowments, family offices, and fund of funds—were happy to see the firm continue status quo with its sixth fund, Sturiale says. So much so that Ignition received $300 million in interest, but capped the fund at $200 million.
“Investors, [limited partners] in particular, are very savvy at picking managers that have some demonstrated track record and I think we’ve been very fortunate to work with some fantastic entrepreneurs that have helped us accumulate a bit of a track record,” he says.
Ignition aims to extend that record with a focus on areas including “mobile first enterprise, industrial Internet infrastructure, and cloud-delivered vertical and horizontal productivity services,” the firm said in a news release.
Sturiale’s read on a tech bubble: “We are really focused on early stage, predominantly Series A, a couple of seed investments. The real bubble discussion is happening at the late stage, the pre-IPO rounds that are getting done, and so to some extent we are somewhat insulated from that, although all things are interconnected.”
On how the proliferation of startup incubators and accelerators impacts the venture capital game: “What the incubators are really providing in many respects is a field education service for startups, for seed projects. I think that helps. You’re training the 25-year-olds with the best methodology for seeing whether or not an idea merits taking it to the next step.
“It provides a pipeline of good startups for us. It creates an educational feedback loop, so I think by and large, they’ve been tremendous contributors to the startup world.” (For just one example, Ignition-backed wit.ai, acquired earlier this year by Facebook, went through accelerator Y Combinator.)
On Seattle’s role in the startup ecosystem: “It does feel like things have picked up quite a bit in Seattle—the entrepreneurial energy, the deal flow, the real resurgence of Microsoft.
“To me, Seattle has become Cloudville with Amazon Web Services and [Microsoft] Azure becoming dominant vendors. And for us as a firm, it’s just hugely advantageous to have a presence in Palo Alto and in Seattle because of the connection to the major cloud vendors, and their presence now in the Bay Area.
“Amazon is becoming a huge narrative in the startup ecosystem, because very few startups aren’t going through them now or Azure. That is just part of the conversation now, where maybe two years ago it was less so.”
For more on Ignition’s outlook and strategy, see this 2014 interview with Frank Artale.