More than half of Seattle startup investments in 2017 came from outside the city

Seattle has most every part different startup communities dream of — two of the most important tech firms by market cap, high-profile household places of work wanting to spend money on tech, and one of many highest focus of tech staff within the nation. So why does it nonetheless punch beneath its weight in enterprise capital?

That’s in accordance with a brand new report on the higher Seattle tech ecosystem. For the previous three years, the University Washington of Bothell and Seattle-based advisory agency Iinnovate Leadership Network have measured the progress in Seattle’s tech ecosystem by measuring the variety of new startups, funds, and help organizations for entrepreneurs.

This yr’s report discovered that whereas Seattle nonetheless raised an enviable quantity of enterprise capital final yr — $1.7 billion — it nonetheless pales compared to comparable cities like Boston and Los Angeles.

“From the outside, it’s like ‘how can you get any healthier than that?” Iinnovate CEO R. Joe Ottinger instructed VentureBeat.

But he stated that there’s additionally a scarcity of sequence A and seed capital in Seattle — which can come as a shock to different startup ecosystems. Since 2006, Seattle enterprise capital companies have raised $7.6 billion whereas Boston enterprise capital companies have raised $41.2 billion throughout that very same time interval.

In its writeup of the report, GeekWire highlighted BitTitan, a cloud providers startup whose $15 million Series A got here from San Diego-based TCV capital — after no Seattle agency would chunk. Founder Geeman Yip instructed GeekWire the probabilities that it might look in Seattle for its subsequent spherical of financing had been “zero percent.”

The report additionally discovered that, not like in lots of different startup ecosystems, a good portion of capital got here from outdoors Seattle in 2017 — “more than half the dollar volume and two-thirds the number of total financing deals,” in accordance with the report.

That’s not stunning information to Matt McIlwain, the managing director of Seattle-based Madrona Venture Group. Madrona is invests in seed and early-stage know-how firms, with 85 p.c of its investments headquartered within the Pacific Northwest. Some of its previous investments embody Seattle tech successes Apptio and Redfin, which went public in 2016 and 2017 respectively.

McIlwain stated that Madrona invested $120 million in startups final yr — and its coinvestors in these firms doled out one other $600 million.

“There’s an increasing number of our friends from other places, such as Silicon Valley who are interested in joining us in Series A and Series B rounds and then beyond to help build these companies over the long term,” McIlwain instructed VentureBeat in a telephone interview.

McIlwain thinks that the outsized presence of outsized capital is an efficient factor — lots of the buyers in Silicon Valley have the startup-building expertise that isn’t discovered as regularly in Seattle. But Otttinger stated that he’s heard from some Seattle entrepreneurs that after they attempt to do fundraise in Silicon Valley, Menlo Park companies are nonetheless most serious about investing in their very own yard, until the Seattle firm is ‘extraordinary.’ Some are additionally questioned about why Madrona — essentially the most energetic VC investor in Seattle — might need handed on them.

Ottinger stated that the Seattle tech ecosystem wants to consider different methods to encourage the formation of further capital — probably by way of authorities incentives, or encouraging profitable tech executives or entrepreneurs from the Valley to return as much as Seattle. Though there are household places of work from a number of the highest profile people — like Vulcan, the funding arm of Paul Allen — there’s simply not as excessive of a focus in Seattle as there's in Silicon Valley.

“You don’t see same cycle…of investing back [into the community]” Ottinger stated.

Seattle’s story gives a takeaway for different startup ecosystems: even with the presence of wildly profitable tech firms like Microsoft and Amazon, it nonetheless takes a excessive focus of firms exiting or going public with a purpose to get a excessive focus of people who're serious about investing within the startup neighborhood.

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