Madrona Enterprise Group raises $345M for eighth fund, its largest ever, and $161M for 2nd later-stage fund

Madrona Enterprise Group has raised greater than $500 million in contemporary capital that the 25-year-old Seattle enterprise capital agency will use to bankroll each early and later-stage startups. It marks the agency’s largest fundraising effort.

Madrona reeled in $345 million for its eighth fund — cash that it’ll use to spend money on 35-to-40 Pacific Northwest tech startups over the following a number of years. It additionally raised $161 million for its second “Acceleration Fund,” designed for extra mature firms situated throughout North America.

The contemporary capital comes on the heels of Madrona’s $300 million seventh fund raised in 2018, and $100 million raised final 12 months for the inaugural acceleration fund.

The brand new funds mirror Madrona’s continued guess on the rising Pacific Northwest tech ecosystem, in addition to the fruits of returns from investments in firms similar to Accolade, Redfin, Snowflake, Heptio, Xnor.ai, Lattice Knowledge, and a flurry of others.

“It highlights simply how a lot recognition there may be that Seattle is a spot to delivery firms and to begin firms, but in addition a ‘Seattle mindset’ by way of serving to construct firms at any stage,” stated Madrona Managing Director Matt McIlwain.

Earlier experiences on the brand new funds — based mostly on SEC filings launched this week — didn’t element Madrona’s full fundraising efforts. GeekWire caught up with McIlwain on Wednesday to get extra particulars.

At the same time as Madrona more and more makes bets on later-stage firms past the Pacific Northwest, McIlwain stated it’s nonetheless very a lot dedicated to backing smaller firms in its yard.

“We’re tripling down on that core thesis we’ve believed in for 25 years,” he stated.

Greater than 90% of investments made out of Madrona’s seventh fund have gone towards seed and Collection A offers. McIlwain stated the agency has invested lower than half of the seventh fund thus far, partly as a result of it reserves capital to help portfolio firms as they develop.

Madrona will look to make investments starting from $500,000 to $8 million out of the eighth core fund, and from $8 to $12 million for the second acceleration fund.

McIlwain described the acceleration fund as “additive.” He stated it leverages each Madrona’s personal expertise partnering with giant firms similar to Smartsheet and Impinj from their earliest days, in addition to the collective group expertise and information from its companions within the Seattle ecosystem.

That features tech giants similar to Microsoft and Amazon — Madrona co-founder Tom Alberg was an early investor within the retail and cloud computing behemoth — in addition to its partnerships with the College of Washington’s laptop science faculty and the Allen Institute of Synthetic Intelligence (AI2).

Madrona has confirmed its skill to again nascent startups that change into large firms. Its monitor file for investing in later-stage firms for the primary time, particularly these exterior of its yard, will not be but as clear. Latest investments out of the acceleration fund embrace firms similar to VNDLY; Clari; and Coda.

Madrona will proceed following its core funding themes that embrace the intersection of machine studying and life sciences; next-generation software program infrastructure; low-code or no-code platforms; the digital transformation of client experiences; “clever functions;” and “the way forward for work.”

The $345 milion fund is among the largest capital raises for any Pacific Northwest enterprise agency, and gives extra early-stage funding for a area often criticized for its lack of funding choices.

Madrona is almost synonymous with Seattle’s enterprise capital scene — a powerhouse so sturdy that some entrepreneurs fret over the affect it holds as a funding gatekeeper.

“We’re tremendous curious and we’ll meet with actually anybody. We love taking first conferences,” McIlwain stated. “We view it as our job so as to add worth to any firm and any entrepreneurial staff that wishes to take the time to satisfy with us.”

Lately Madrona has confronted extra competitors on offers from newer corporations similar to Flying Fish Companions and Pioneer Sq. Labs — co-founded by former longtime Madrona managing director Greg Gottesman. Out-of-town traders are also extra often investing in Seattle-area startups.

“It’s good for the area to not solely have numerous sources of capital, however folks which are actually prepared to roll up their sleeves and add worth with you from day one,” McIlwain stated. “The extra of that, that’s targeted on firms which are based mostly in Seattle and the Pacific Northwest, the higher.”

Startups in Seattle are elevating gobs of cash as of late. Enterprise capital traders sunk $1.1 billion throughout 65 offers through the third quarter, in response to GeekWire’s tally, derived from our operating record of Pacific Northwest startup investments. Funding totals from July and August eclipsed final 12 months’s ranges.

Whereas Seattle nonetheless stays far behind Silicon Valley, New York, Boston, and Los Angeles in whole capital raised, the deal exercise is garnering nationwide consideration. The Wall Road Journal this summer time highlighted the Emerald Metropolis with this headline: “Enterprise Capitalists Goal Seattle as Startup Ecosystem Grows.”

The Seattle space is now dwelling to 10 unicorn startups valued at $1 billion. Eight of the ten firms have achieved their lofty valuations prior to now 18 months, and 5 years in the past, there have been no unicorns within the area.

Madrona is an investor in simply a kind of unicorns: Cloud storage firm Qumulo.

Lately, Madrona has strengthened its managing director lineup, including skilled tech leaders similar to S. “Soma” Somasegar, a longtime Microsoft exec; Hope Cochran, a former CFO of King Digital; and Steve Singh, former CEO of Concur and Docker.

Madrona additionally continues to assist help Madrona Enterprise Labs, a startup studio it launched in 2014. MVL raised its personal third fund final 12 months and has spun out a number of firms this 12 months.

Buyers within the new funds are principally those who have beforehand participated in previous funds — endowments, universities, foundations, giant household workplaces, and excessive internet price people.

U.S enterprise capital fundraising hit a file excessive this 12 months, reaching $69.1 billion as of Nov. 20, in response to PitchBook. However whereas general funding is up, the variety of corporations that raised funds has fallen by round 50%.