$100M for Web startup Donuts Inc. is top venture-capital deal in 2Q
A Bellevue startup that seeks to do for domain names what Top Pot does for doughnuts led the way among Northwest venture-capital deals in...
Seattle Times business reporter
A Bellevue startup that seeks to do for domain names what Top Pot does for doughnuts led the way among Northwest venture-capital deals in the second quarter.
Donuts Inc., led by veteran tech entrepreneur Paul Stahura and a team of domain-name experts, last month raised $100 million from several deep-pocketed VC and private-equity firms to fund its application for more than 300 new top-level domains — the part of a Web address to the right of the dot, such as .com, .org or .info.
Among the domains Donuts is seeking to register, according to its website: .art, .baby, .blog, .fail, .inc, .love, .toys and .wtf. Several of its proposed new domains are in Spanish, French and German; four are in Chinese characters.
Donuts accounted for nearly a third of the $327 million in venture capital raised by Washington-based companies last quarter, according to the Dow Jones VentureSource report to be released Friday.
A competing report, the MoneyTree survey from PricewaterhouseCoopers and the National Venture Capital Association, pegged the state's second-quarter VC haul at $236 million. The two reports use differing methodologies and definitions.
However, both reports had Washington-based companies raising about half a billion dollars in venture capital in the first half of the year — nearly double the amount raised in the first half of 2011, and confirmation that the state's startup culture remains strong.
MoneyTree counted 25 Washington companies receiving VC funding last quarter and 51 in the first half, vs. 63 in the first half of 2011. VentureSource's deal count was 31 in the second quarter and 56 in the first half, one more than in the same period last year.
"When you look at the quantity of deals, we continue to be consistent with prior years, with volume sufficient to maintain a vibrant entrepreneurial economy," said Greg Beams, a partner at Ernst & Young who leads the technology practice at the firm's Seattle office.
Other big deals
Some of the other significant local VC deals in the second quarter included Alder Biopharmaceuticals of Bothell, which raised $38 million; Seattle-based DocuSign, which took in $47.5 million; and Kona Medical of Bellevue, which raised $30 million.
The quarter's investments by and large fell into familiar categories. Eight of the 25 deals listed by MoneyTree involved software makers, two were for e-commerce technology companies, and five others were Internet-related businesses. Four deals were for biotechs, and two others involved medical devices or therapeutics.
But the Donuts deal overshadowed them all. The company's backers include Austin Ventures (Austin, Texas), Adams Street Partners (Chicago), Emergence Capital Partners (San Mateo, Calif.), Generation Partners (Greenwich, Conn.) and TL Ventures (suburban Philadelphia).
Donuts' founders and executives have extensive experience in the arcane but potentially lucrative world of domain names. Stahura, the CEO, started domain-name registrar eNom in 1997 and sold it nine years later to Demand Media, where he then worked as chief operating officer and chief strategy officer.
Richard Tindal, Donuts' chief operating officer, formerly ran the domain-name registry at NeuStar. Jon Nevett, executive vice president of corporate affairs, was formerly senior vice president at domain-name registrar Network Solutions.
Chief Financial Officer Kevin Wilson spent four years in the same role at ICANN, the nonprofit that doles out domain names and assigns Internet addresses.
ICANN hopes to formally approve potentially hundreds of so-called "generic" top-level domains by the end of this year or early in 2013, though the review process already has hit technical snags.
After a strong start, VC and private-equity activity has slowed in recent weeks, as wary investors eye Europe's ongoing debt crisis and the U.S. election season shifts into higher gear, said Michael Butler, chairman and chief executive of Cascadia Capital, a Seattle investment bank.
"That doesn't mean good companies can't get funded, but it's a lot choppier than it used to be," Butler said.
The market for initial public offerings, once the preferred exit route for VCs and other investors in private companies, also has gotten choppier, especially since Facebook's problem-plagued IPO was widely seen as a disappointment.
But "I think you're starting to see the window open up again, post-Facebook," said Stephen Sommerville, a partner in PricewaterhouseCoopers' Seattle office.
Beams, of Ernst & Young, added that several unspecified local companies plan to test just how much the IPO window has reopened.
"But that's hard to do in the summer time frame, when a lot of [Wall Street] people are basically out of town," he said. "I'd be surprised if we saw much activity over the rest of the summer."
Drew DeSilver: 206-464-3145 or email@example.com