State companies snag highest quarterly amount of VC in years
Washington companies land $485 million in 37 deals in the last quarter of 2013, nearly a 77 percent increase from the final quarter of 2012, according to the MoneyTree report being released Friday.
Seattle Times business reporter
Venture-capital funding in Washington made a comeback in the fourth quarter, pulling in the largest quarterly amount since 2000.
Washington companies attracted $485 million in 37 deals in the last quarter of 2013, a 300 percent increase in venture funding from the previous quarter and an almost 77 percent increase from the final quarter of 2012, according to the MoneyTree report being released Friday by PricewaterhouseCoopers and the National Venture Capital Association.
By contrast, investments in the first quarter of 2013 had plummeted to the lowest level since 2003.
The report, based on data from Thomson Reuters, said venture capitalists invested $913 million in 126 deals in Washington in 2013, an increase of 7 percent in dollars and nearly 8 percent in deals over 2012.
VC investments nationwide for 2013 also increased to $29.4 billion, a rise of 7 percent over the previous year. For the quarter, the number of deals increased by 4 percent, to 1,077, while drawing in $8.4 billion in investments.
The fourth-quarter turnaround put Washington back in fourth place nationally for dollars invested — behind California, Massachusetts and New York. The state had been as low as ninth place in previous quarters, said Stephen Sommerville, an assurance partner in the Seattle office of PricewaterhouseCoopers.
“This was the single biggest quarter in Washington for a number of years,” he said. “It has been a long time since we have had this amount of dollars in Washington.”
Those numbers were, in part, boosted by the $120 million raised by Juno Therapeutics, the Seattle-based biotechnology startup unveiled last month. It was formed in partnership with Fred Hutchinson Cancer Research Center, New York’s Memorial Sloan-Kettering Cancer Center, and Seattle Children’s Research Institute.
Juno’s haul accounted for nearly 25 percent of all the venture funding received by Washington companies in the quarter. Nationwide, it was the quarter’s largest early-stage venture deal.
“This is a very large investment in an early-stage company,” Sommerville said. “It really bodes well for the future. ... Venture capitalists clearly see optimism in Washington companies.”
The number of early-stage deals has continued to increase each quarter in the state and nation since 2008. There were 2,003 such deals nationally in 2013, up from 1,738 in 2012. In Washington, 2013 had 56 early-stage deals involving more than $443.3 million — representing 48 percent of the year’s total investments.
One downward trend that continues across the nation and in Washington since 2010 is a decrease in seed investments — the first dollars a company attracts to get off the ground. Nationally, there were only 218 seed investments, a 26 percent decline from 2012, and the lowest number of seed deals since 2003.
Washington had five seed deals in 2013, down from 11 in 2012.
However, Bobby Franklin, president and CEO of the National Venture Capital Association, said that decline may not indicate fewer initial investments in startups.
“Many of those young companies are kept under the radar,” he said on a conference call with reporters Thursday. “There are likely much more seed investments than we are seeing in this survey.”
Another trend in the state and around the nation is the continued increase in venture funds for Internet-specific, software and biotech companies.
According to the report, Internet-specific companies captured $7.1 billion in 2013, the highest level since 2001. (Internet-specific is a classification the report assigns to a company whose business model is fundamentally dependent on the Internet, regardless of the company’s primary industry category.)
Additionally, annual investments in software companies hit the highest level since 2000, with $11 billion and 1,523 deals in 2013. Biotech had $4.5 billion going into 470 deals, making it the second-largest investment sector for the year in terms of dollars invested, right under software.
The biotech sector led Washington’s investments for the fourth quarter, with more than $175 million in funding across five deals, followed by software, with more than $150 million and 17 deals.
Besides Juno, other notable local funding in the fourth quarter included Seattle-based real-estate website Redfin ($50 million), Seattle biotech Immune Design ($48.5 million), and Chef Software ($38 million), formerly known as Opscode.
Sommerville says timing played a large role in Washington’s fourth-quarter growth. If the deals would have been completed in previous quarters, the year’s annual growth would have looked smoother, he said.
“Obviously the big dollars skew the total,” he said. “It is probably too optimistic to say we are going to have another quarter like this one anytime soon. ... But I would like to see us maintain.”
Coral Garnick: 206-464-2422 or firstname.lastname@example.org. On Twitter @coralgarnick