Seattle-based Madrona Venture Group is doubling down on a recent push to invest beyond the Pacific Northwest, opening its first office outside the region in Silicon Valley.
Founded in 1995, Madrona traditionally focused on its backyard of Seattle and the Pacific Northwest, becoming one of the area’s largest investors of tech companies including Apptio, Smartsheet, Impinj, and others.
But in 2019 the firm launched an “acceleration fund” designed for more mature companies located across North America. It raised $100 million that year for the fund and added another $161 million in late 2020.
The move to open a physical outpost outside of Seattle reflects Madrona’s ongoing desire to look beyond its backyard for new investments and keep tabs on other tech ecosystems.
It’s a similar strategy followed by Flying Fish, another Seattle firm that raised its second fund earlier this year and said it would expand its geographic reach.
Madrona is “first and foremost a Seattle firm,” said S. Soma Somasegar, a former Microsoft exec who became managing director in 2015. The firm will continue making a vast majority of its early stage investments in the Pacific Northwest, which set records for funding levels last year.
But Somasegar also said “we want to get into the best of the best companies.” Planting a flag in Silicon Valley helps fuel that goal.
“We are going to be more open to getting into those companies, no matter where they are,” he said.
About 15% of Madrona’s portfolio consists of companies based outside the Pacific Northwest, and half of the “acceleration fund” has gone toward out-of-town companies. Some of its recent non-Seattle investments include fintech company Sila; travel software startup Spotnana; and revenue operations platform Clari. It has also backed later-stage companies such as UiPath and Snowflake.
“We want to be a world class firm,” said Somasegar. “And whatever that means for us to be world class, we will be doing that.”
The 50-person firm is facing more competition for early-stage deals in the Seattle region, with new groups such as Fuse, Flying Fish, Pioneer Square Labs and others raising sizable funds in recent years.
“I’m really excited about these funds,” Somasegar said. “Sometimes we are going to compete; sometimes we are going to partner. But this really enables us to have a bigger ecosystem, which is just fantastic from any dimension you look at it.”
There are also out-of-town venture capitalists increasingly looking at the Seattle area for new investments.
Somasegar said the shift to remote work amid the pandemic helped Madrona get even more comfortable with backing companies outside of Seattle.
The firm also just hired its first out-of-town managing director. The Palo Alto, Calif., office, located at 524 Hamilton, will open next month and be led by Karan Mehandru, who just joined Madrona as the firm’s newest managing director.
Mehandru was previously was a venture capitalist at New York-based Steadfast Capital and Menlo Park, Calif.-based Trinity Ventures, a backer of Seattle-area giants including Auth0 and Outreach. He’ll focus on “early and acceleration stage companies based anywhere in North America, with a focus on SaaS, Future of Work, ML/AI, intelligent applications, developer focused tools and datacenter infrastructure,” Mehandru wrote in a blog post.
Madrona in 2020 raised $345 million for its eighth “core” fund, which is focused on Pacific Northwest companies. Last year it added $120 million for a “Fund VII Extension Fund” from investors who previously backed its $300 million seventh fund raised in 2018.
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