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Originally published Friday, January 21, 2005 at 12:00 AM

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State sees venture capitalists pour it on in 2004

Venture-capital investing in Washington state jumped more than 67 percent last year over 2003, making the state the fourth most active in...

Seattle Times technology reporter

Venture-capital investing in Washington state jumped more than 67 percent last year over 2003, making the state the fourth most active in the country, according to a report being released today by Ernst & Young and VentureOne.

Investments in information technology led the increase locally and nationally, said VentureOne Research Manager Matt Garlick.

He said nationally the category received more money in 2004 than a year earlier, partly driven by a strong interest in mobile devices, including Apple Computer's iPod music player.

Overall, venture companies invested $20.4 billion in the U.S. last year, an 8 percent increase over the $18.9 billion in 2003.

Washington startups and other developing companies drew $773.6 million in 2004, compared with $461.7 million in 2003.

The state trailed only California, Massachusetts and Texas in activity.

The venture-capital industry saw record-breaking highs marked by dot-com parties and extravagant spending around the turn of the century, and since has been trying to find a reasonable level of investing. Some say recent levels are close to that, though investing might fluctuate from quarter to quarter.


Although the overall trend points upward, Washington state investing in the fourth quarter fell to $101.1 million from $182.4 million in the third quarter and $111.3 million in the year-ago period.

"On a quarterly basis, I try not to read too much into the numbers," Garlick said. "Yearwise, the trend was up overall, even though the quarter was down a bit."

Scott Bergquist, Silicon Valley Bank's Northwest region manager, said although the numbers turned down in the second half of 2004, venture activity grew stronger as the months passed.

"We saw investing get increasingly active as we went through the year," said Bergquist, who spends a lot of time with venture-backed companies and venture capitalists. "We are very optimistic about 2005 both regionally and nationally."

What may have contributed to the dollar decrease later in the year was increased focus on early-stage activity, Garlick said.

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In the fourth quarter, 37 percent of the money invested nationwide went to seed or early-stage deals, typically companies in research and development and without significant revenues.

Such deals tend to be smaller, which would reduce the overall amount invested, Garlick said.


In Washington, the information-technology category, which includes software, semiconductors, communications and electronics and information services, was up in both dollars and deals, with $419.5 million invested in 55 companies. In 2003, $212.7 million was invested in 35 companies in the category.

Contributing to that increase were investments in so-called information services, which include applications and content for electronics.

One particularly large deal — $44 million for Mforma — boosted the total.

The Bellevue-based publisher of video games, ringtones and other content for mobile phones raised $19 million more later in the year, for a total of $63 million in 2004.

Other companies that received funding included Redmond-based SchemaLogic, which raised $4.6 million to help companies manage content over different software platforms; Bellevue-based Bocada, $9.5 million to sell software that protects a company's data; and ReliOn of Spokane, which raised $25 million to market and sell fuel cells it is developing.

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com

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