Seattle venture-capital activity is among the fastest growing

In the world of venture capital, the Seattle area is dwarfed by the frenetic activity of Silicon Valley and Massachusetts. But the Emerald City was the third-fastest-growing U.S. investment hub of the past 10 years, according to a report by PricewaterhouseCoopers and the National Venture Capital Association.

The study, known as the MoneyTree Report, indicated local startups raised some $1.25 billion in 2007, up 211 percent since 1997.

Two other areas, New Mexico and Pittsburgh, showed even faster growth over the decade, but the level of investment they attract is far smaller than Seattle's.

"It's growing along nicely," said Chad Waite, a director with Kirkland-based OVP Venture Partners.

When Waite entered the Seattle venture-capital scene in the 1980s, "we had a market that was interesting but immature," he said.

At the time, it was hard to attract money to the area and to find skilled management teams to lead new startups. But the astounding success of entrepreneurial firms like Microsoft, Amazon and Starbucks has lifted all boats, he said.

Now there's ample entrepreneurial expertise in the area, and "guys from the Bay Area want to invest here," Waite added.

The region was hit hard by the dot-com bust of 2000. But the numbers indicate venture-capital activity has slowly built up in the past few years, Waite said.

The Seattle startup scene is dominated by software, biotechnology, wireless applications and clean technology; and well-established local firms like Ignition Partners, Madrona Venture Capital and OVP play a major role, the MoneyTree report said.

In 2007, the largest deals were scored by firms like Imperium Renewables, a biodiesel maker that raised $113 million; Telecom Transport Management, which snagged $120 million; and software company Dexterra, which received a $36 million investment. Some 42 percent of the recipients were early-stage firms, the MoneyTree report said.

Other emerging hubs, according to the report, are the Washington, D.C., area, with a large software, life-sciences and telecommunications industry; and metro Los Angeles, a media and entertainment center.

Relatively small Pittsburgh saw $198 million in deals — a 513 percent increase over a decade ago, the biggest jump among cities in the MoneyTree study. The surge was driven by life sciences, software and clean tech.

New Mexico — which saw a nascent Microsoft pack up for Washington state back in 1979 — saw $128 million in venture funding, up 375 percent from a decade ago. The deals were mostly in alternative energy, biotech and computer chips.

Silicon Valley, the largest venture-capital hub, grew 120 percent to $10.4 billion in annual investment over the past 10 years. In the same period, Massachusetts grew 139 percent to $3.8 billion.

Seattle's venture-capital scene is disproportionately active for a metropolis its size, said Stephen Sommerville, a partner with PricewaterhouseCoopers.

"Places like San Diego and New York City were only marginally bigger" in venture capital raised although their economies are much larger, he said.

Ángel González: 206-515-5644 or agonzalez@seattletimes.com