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Friday, April 14, 2006 - Page updated at 12:00 AM

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Seattle VC funds fuel up

Seattle Times technology reporter

Some fresh powder is dumping on the Northwest and it's not snow, but money.

Madrona Venture Group, a Seattle venture-capital company with deep roots in the technology community, said it has completed raising its third fund — the first in seven years.

In addition to Madrona, a handful of other VCs in Seattle have either recently completed a fund or are working to attract money for a new one, signaling that early-stage companies in the Northwest may have more options in raising capital locally in the next couple of years.

Matt McIlwain, a managing director at Madrona, said the company raised $167 million in the third fund. Previously, it raised a $250 million fund in 1999. Before that, individuals who helped start Madrona pooled their money for investments.

Madrona expects to invest in 20 to 25 early-stage companies in the next four years in several industries, including Internet, software and wireless.

In all, the company has made money on 27 investments, including Amazon.com, Nextel Partners, Classmates.com and The Cobalt Group.

Its best-known partner is founding member Tom Alberg, a former McCaw Cellular Communications executive who went on to make one of the original investments in Amazon.

Other local VC funds are also looking for more capital to invest.

Kirkland's OVP Venture Partners, which raised a $180 million fund in 2002, is in the middle of securing $200 million.

A spokeswoman said the team started raising the fund at the beginning of the year and expects to complete it soon. The fund will be OVP's seventh.

Seattle's Voyager Capital is raising a third fund after a six-year hiatus, according to VentureWire, a Dow Jones electronic newsletter. Voyager did not return calls for comment.

The Voyager fund will total about $200 million and focus on digital media and wireless, among other businesses, VentureWire said.

Ignition Partners and Frazier Healthcare recently closed funds.

Bellevue-based Ignition said in February it had opened a venture-investment firm in Shanghai called Qiming Venture Partners to invest $200 million in mobile applications, consumer Internet services and semiconductors and systems in China.

Last May, Seattle's Frazier Healthcare said it completed raising $475 million for its fifth fund, one of the largest in the region.

Other recent funds include those raised by Fluke Venture Partners (no longer associated with Fluke Corp.) and Maveron, started by Starbucks' Howard Schultz.

For its new fund, Madrona said it focused on raising money from a few institutions instead of numerous wealthy individuals.

Investors include the James Irvine Foundation, the Ewing Marion Kauffman Foundation, the Oregon Growth Account, Quellos Private Capital and the University of Washington.

So far, Madrona has made four investments from the new fund: Seadragon Software, which was sold to Microsoft; iConclude; Redfin; and Bag Borrow or Steal.

McIlwain said fundraising went well.

"It was very positive," he said.

"We knew it was going to take a handful of months to build relationships at the right time. Our first close was in the summer, and we technically wrapped up in January," McIlwain said. "It took about nine months. We found people receptive to our story, and our focused strategy."

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

Copyright © 2006 The Seattle Times Company

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