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Atlas Venture pulling out of Seattle

Eliminating one more source of venture capital for money-hungry entrepreneurs, Atlas Venture, a top-tier venture-capital company from Europe and Boston, said yesterday it would close its Seattle and Menlo Park, Calif., offices and would make no new investments on the West Coast.

By Tricia Duryee
Times Eastside business reporter

Laura Jennings, who manages the Seattle office, explained that it wasn’t a reflection of Seattle’s investment opportunities, but rather a way to scale back its fund size 38 percent, from $967 million to $600 million.

The firm will continue to fund and support its 10 active investments on the West Coast, she said, including Asta Networks and Isilion Systems of Seattle. (Asta filed for bankruptcy protection in July.)

In the past year, many venture capitalists with $1 billion funds have started to reduce the amount of money being drawn from investors, saying it was too much to invest in a timely fashion while still getting the stellar results investors were expecting. And since the West Coast offices were fairly new — Menlo Park was started in 1998 and Seattle was launched three years later — they had the least to lose.

"We believe that we will generate better returns for our limited partners by focusing a smaller fund on the core geographic markets where we have the most firmly established track record and strongest competitive position," Christopher Spray, senior principal at Atlas Venture, said in a news release.

Even though Seattle continues to have other "mega" funds in town, Janis Machala, president of the Northwest Entrepreneur Network in Kirkland, said it is unfortunate that Atlas is leaving because local companies have been having a difficult time getting startup and early-stage money.

"That will definitely have a negative impact on entrepreneurs," she said. "That’s a big deal, although I can completely understand why they made the decision."

Chad Waite, a partner at OVP Venture Partners in Kirkland, said the move was a sign of the overall state of venture capital, not a signal that Seattle had lost its reputation for being a strong entrepreneurial community. Just recently, he told investors from OVP’s fifth fund that management fees would not longer pay salaries and bills. Instead they would be used to invest in companies in the fund’s portfolio.

For Waite, Atlas’ departure is significant because he’s lost a potential investor he could have teamed up with.

"We were looking to do things together with them," Waite said. "I think our mantra these days — and it’s true for many others — is that the money at the table has to be enough to do the initial investments and additional financing."

Jennings and four others worked in the Seattle office.

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

Copyright © 2002 The Seattle Times Company

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