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Ignition Partners fueled by a further $300 million for startups

Ignition Partners http://www.ignitionpartners.com , the venture-capital company started by former Microsoft and AT&T Wireless executives almost five years ago, said yesterday it has raised $300 million to invest in software and telecommunications companies, primarily in the Northwest.

By Tricia Duryee
Seattle Times Technology reporter

The fund, the Bellevue company’s third, brings the total under its management to $750 million, making it one of the largest venture-capital companies in the Northwest.

Partners at Ignition said it wasn’t difficult to raise the money because 90 percent of Ignition’s limited partners, or investors from prior funds, participated again. The investors include the University of Washington, Stanford, Princeton and Harvard.

"Ignition is one of a handful of relatively new venture firms that we have invested in," said Peter Dolan, head of private equity for the Harvard University Endowment. "We are pleased to be a significant investor in both Fund II and Fund III."

"We are incredibly honored by the confidence given to us so far, but we have an awful lot to learn," said Steve Hooper, one of Ignition’s founding partners. "We don’t know everything in the venture business."

A couple of factors made it possible to raise the fund so quickly, Hooper said.

First, Ignition’s track record. At 4-½ years old, it’s considered young. Most investments take 10 years to be successful, but already, Ignition has sold three of its companies: UIEvolution, Avogadro and Consera.

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Ignition Partners

Bellevue venture-capital fund raises $300 million fund.

Founding partners:Brad Silverberg, Jon Anderson, John Ludwig, Rich Tong, Cameron Myhrvold, Jonathan Roberts and Steve Hooper

Investment focus: Telecommunications and software

Portfolio companies include:Wildseed, Wireless Services, Rendition Networks, Lockdown Networks, Entellium, Intelligent Results, Seven and MarketRange

Company successes: Consera, Avogadro and UIEvolution
Its current portfolio companies are also performing well, Hooper added. Many are achieving higher valuations and some have significant revenues.

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"They like what they see so far. Clearly, they are betting on us as an emerging fund," Hooper said.

Jonathan Roberts, a partner, said it also helped that the broad perception of venture capital has improved since the so-called nuclear-winter days.

"I do think there’s generally more enthusiasm for the asset class than two years ago," he said.

One strategy Ignition uses that differs from other venture-capital funds is the way it structures its organization. It has nine partners and 16 investing professionals, many more than a typical fund of its size. Instead of asking for more money to run the fund, they spread over a much wider base roughly the same amount of money that an average-size fund would expect.

Hooper said the partners also invest a significant amount of their own money.

Ignition takes this approach because it invests in companies at a very early stage, sometimes before a company has been formed. That takes more time, so Ignition needs more partners to do the same number of deals as other VC firms.

In the past year, Ignition has invested in 10 companies. With the new fund, it expects to invest in about six to 10 deals a year. It estimates that each company will need $7 million to $10 million in capital over its lifetime, allowing between 20 and 30 investments over three to five years.

Ignition expects to invest two-thirds of the money in the Northwest, Roberts said.

Hooper, a former chief executive of AT&T Wireless, said he is amazed at how far Ignition has come in such a short while.

In a bit of irony, Hooper noted Ignition was founded the same week that AT&T Wireless had its initial public offering. And now, Ignition is raising its third fund in the same week AT&T Wireless was sold to Cingular Wireless.

Hooper said that although some jobs may be lost with the merger, Ignition might be able to soften the blow. So far, it has added 600 jobs by its calculations.

"If we can do that again through Fund III and add to the employment base here, that’s great," he said. "I think there are terrific opportunities in Seattle, just with much smaller companies."

Tricia Duryee: 206-464-3283 or [email protected]

Copyright © 2004 The Seattle Times Company

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