The Pacific Northwest (Washington and Oregon) has become a thriving ecosystem for emerging companies. While the presence of large tech companies in the region such as Amazon and Microsoft has helped to create a tech startup scene, the region also sees its share of energy and healthcare investments.
Over the past five years, total funding to the Pac-NW has doubled, seed funding has grown, and top tech acquirers have been actively buying in the region. This analysis provides an in-depth look at the financing and exit landscape in the Pacific Northwest as well as the investors and companies fueling the Pacific Northwest startup ecosystem.
Specifically we’ll cover:
- Financing trends by stage
- Financing trends by sector
- The most well-funded Pacific Northwest startups
- Investor league tables
- Exit activity
It is worth noting that this analysis is not just a look at venture capital investments in the region. It includes private company investments in the Pacific Northwest (Oregon, Washington) by venture capital firms, corporations, corporate venture investors, hedge funds/mutual funds, angels, incubators and accelerators. Debt, grants and lines of credit were not considered in this dataset.
As the private company funding landscape has gotten more diverse, i.e. not dominated only by venture capitalists, we have used CB Insights data to provide the most holistic view of what is happening in the region.
Since the start of 2009, both deal and funding activity in the Pacific Northwest have seen a marked rise. On the funding front, investment dollars have risen 81% in 2013, compared to 2009, and saw a slight dip on a YoY basis from 2012 to 2013. Deals have surged, hitting 475 in 2013, an increase of 23% from 2012 and a whopping 144% from 2009.
On a quarterly basis, the increase in funding to the Pacific Northwest has been buoyed by a number of notable funding rounds. Q4 2013 saw a peak in total funding, driven by Juno Therapeutics’ $120M Series A round led by ARCH Ventures and Alaska Permanent Fund, and Redfin’s $50M Series F led by Tiger Global Management and T. Rowe Price. While financing activity fell in Q1 2014, Q2 2014 saw over $590M in funding, surpassing Q3 2013 for the best quarter yet. Seattle-based Adaptive Biotechnologies’ $100M Series D from Viking Global and Beaverton, Ore.-based Act-On Software’s $42M Series E from investors including Norwest Venture Partners, US Venture Partners and Technology Crossover Ventures drove the quarterly funding high.
Pacific Northwest Financing Trends by Stage
Bolstered by notable exits for the Pacific Northwest including Zillow and Zulily, early-stage activity has taken an increasingly prominent role in the region’s funding landscape. Of note, 2013 saw both Series A and seed/angel funding activity hit five-year highs. While late-stage activity (Series D+) took 34% of all funding in the Pacific Northwest in 2012, dollar share fell in 2013 to 27%.
After capturing just 18% of deals in 2009, seed deal share has more than doubled, and rose to a five-year high in 2013. Series A deal share has remained range-bound over the past four years, capturing between 25% and 30% of deals.
Pacific Northwest Financing Trends by Sector
Since 2010, the Internet sector has taken the top spot by share of funding in the Pacific Northwest. The funding growth to the internet sector can perhaps be attributed to the success of companies like Zulily, which received $138.6M in funding over 4 rounds from 2009 to 2012 before going public in late 2013 at an initial $5.04B valuation. After falling to 15% in 2011, funding share to healthcare companies has grown over the past two years to take nearly a quarter of all investment dollars in the Pacific Northwest behind deals including a $34M round to Avalon Ventures-backed Cardeas Pharma in 2013 and a $32.5M round to Alta Partners-backed Immune Design.
Energy remains highly variable from year to year with notable dollar share in 2011 and 2012, but negligible share in 2013. Alternative energy companies have received considerable funding in the energy sector with $183M to Element Power, a wind and solar provider, in 2012, and $48.8M to UpWind Solutions, a wind energy maintenance provider. The “Other” category is led overall by the chips & semiconductors industry, which represents 18% of “Other” funding from 2009 to 2013.
The Internet sector has consistently led deal activity to Pacific Northwest companies since 2009 and matched a five-year deal share high in 2013.While healthcare topped deal activity to the mobile & telecom sector in 2009 and 2010, that appears to be shifting with the mobile sector accounting for a higher share of deals in both 2011 and 2012 and matching healthcare deal share in 2013.
Most Well-Funded Pacific Northwest Startups
Element Power, a wind and solar provider, is the most well-funded company in the Pacific Northwest, with $183M received in 2012, but one of only two energy companies in the top 20 companies, with ClearEdge Power as the other. Healthcare is the best represented sector among well-funded companies registering 6 firms including Juno Therapeutics, the second most well-funded company with $176M over 3 rounds in 2013 and 2014. Among the well-bankrolled tech companies headquartered in the Pacific Northwest are IT cost transparency firm Apptio, real estate tech company Redfin, and IT automation company Puppet Labs. The prominence of healthcare and energy companies in the most well-funded companies list should not be all the surprising given the capital intensiveness of those sectors versus tech.
Investor League Tables
Madrona Venture Group leads in early-stage activity in the Pac-NW since the start of 2009, followed closely by Founders Co-op with 26 deals. Madrona’s largest early-stage deal was their participation in the $30M Series A investment in Cheezburger Network in 2011. Although angels were not included in our investor league tables, Alliance of Angels was the top angel group with over 70 deals since 2009, twice as many deals as the second angel group, Oregon Angel Fund. Alliance of Angels invests almost exclusively in Washington with 90% of its deals in the last 2 years in the state. It focuses mostly on seed/angel stage with about 70% of its deals going to companies at this stage although the group may follow-on in select deals at later stages.
Madrona Venture Group is also the most active investor at mid-stage (Series B and C) since 2009. Its largest deal was a $30M Series C round to Julep Beauty in April 2014. Madrona has a diversified portfolio with investments spread across all stages and sectors, though internet has received the most deals and funding. Most funding activity occurs in Washington with a few deals in Oregon and California. Madrona has coinvested most with ARCH Venture Partners in 24 deals in 11 companies, mostly at Series A and B.
Ignition Partners, the second most active mid-stage investor, is the most active late-stage investor over the past five years. Ignition Partners differs from the other investors we profiled above in that the majority of its investments are outside the Pacific Northwest. California receives most of its deals and funding, but Washington is the second most popular state. Ignition Partners invest mostly in tech companies in the internet sector. Madrona Venture Group, the top mid-stage investor, is also the second most active late-stage investor, including Redfin, PayScale, and Apptio, highlighting the fact that it is a true multi-stage fund investing across the maturity spectrum of companies.
Exit Activity
Exits have increased slightly from 2011, but not significantly. Notable exits include the aforementioned Zulily, a daily deal site for moms, with an IPO at a $5.04B valuation in 2013 and Tableau Software, a provider of visual analysis and reporting solutions, which also IPO’d in 2013 and remains one of tech’s most capital efficient exits.
Although some of the bigger exits have been IPOs, M&A still accounts for the vast majority of all exits. IPOs accounted for just 3% of exits in 2012 and 2013 and only 1% in 2011. Notable acquisitions include the acquisition of PopCap Games, a mobile game developer, by Electronic Arts for $750M in 2011 and the acquisition of Vertafore, a provider of insurance software, by TPG Capital for $1.4B in 2010.
Google is the top acquirer with 7 acquisitions in the Pacific Northwest since 2009 with mostly internet companies, making it the top acquirer of tech companies as well. Yahoo, top acqui-hirer, is second with 4 acquisitions of internet companies. Of the top acquirers, only Amazon, Avanade, and Microsoft are based in the Pacific Northwest, each with 3 acquisitions. Google is the top acquirer in Washington with 6 of its 7 Pacific Northwest acquisitions in the state. SEOmoz is the top acquirer in Oregon with 3 acquisitions.
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