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Originally published April 18, 2013 at 9:02 PM | Page modified April 19, 2013 at 1:15 PM

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Venture-capital investment plummets to start year

Venture-capital investment plummeted across the nation in the first quarter, with Washington state, by at least one measure, experiencing the worst showing since 2002.

Seattle Times business reporter

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Venture-capital investment plummeted across the nation in the first quarter, with Washington state, by at least one measure, experiencing the worst showing since 2002.

Washington companies attracted $79.9 million in the quarter, 64 percent less investment than the previous quarter and 53 percent less than the first quarter of 2012.

National deal volume fell from last quarter’s 800 to 752 deals, and the total amount invested fell from about $7.2 billion to $6.4 billion, according to the quarterly Dow Jones VentureSource report. From the start of this year compared with last, the number of deals dropped 11 percent from 848, and funds depleted at the same percentage from $7.2 billion.

Steve Sommerville, an assurance partner in the Seattle office of PricewaterhouseCoopers (PwC) said Washington’s numbers in this go-round are “disappointing — with the positive note being the large number of investments.”

The quarterly MoneyTree report produced by PwC and the National Venture Capital Association found 863 national deals worth $5.9 billion, compared with $6.3 billion and 868 deals in the same quarter of the previous year. In the near past, Washington has bucked national downward trends in VC investments. From 2011 to 2012, as investments declined nationally, Washington benefited from a 69 percent increase in total funding, according to Dow Jones.

The Dow Jones report was released Thursday, as was the MoneyTree report, which is based on data from Thomson Reuters. (The two surveys use slightly different methodologies.)

Jeff Grabow, West venture capital leader for Ernst & Young, said quarterly comparisons aren’t necessarily representative of the health of the startup market.

Last year, Washington numbers were bolstered by heavy-hitters, with $100 million going to Bellevue domain-name entrepreneur Donuts, and $85 million to online shopping destination Zulily.

This year, the market appears to be trending away from megadeals and toward early-stage investment, with the majority of Washington deals stemming from lower-dollar, early-seed companies. Julep Beauty topped Washington’s VC investment list at just $10.3 million.

“Lots of early stage deals bode well for the future,” Sommerville said.

For now, though, there’s a national pause in the overall health of capital based on the lack of investors making big bets on later-stage, more established companies.

A region normally characterized by software innovation, Washington this year is instead seeing the highest investment in personal-care products, shopping facilitators and biotechnology therapeutics.

Sommerville credits the lack of a consistent industry trend to the array of small-seed companies.

Nationally, business applications software, online communities, and advertising/marketing are leading the start of 2013’s investment trends.

Despite the sagging figures, Grabow said fundraising dollars climbed nationwide last quarter, lending opportunity for bigger investment as the year progresses.

Forty-three funds garnered $4.2 billion this quarter, a 65 percent increase from last quarter, though still behind last year’s $5.1 billion fund average.

Alysa Hullett: 206-464-2718 or ahullett@seattletimes.com

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