January 20, 2011 The Oregonian

January 20, 2011 The Oregonian

http://blog.oregonlive.com/siliconforest/2011/01/diversification_and_hot_techno.html

Oregon venture capital enjoyed renaissance in 2010

Published: Thursday, January 20, 2011, 9:10 PM     Updated: Monday, April 11, 2011,11:10 AM

By Mike Rogoway, The Oregonian

Oregon enjoyed a welcomeboost of enthusiasm from venture capitalists last year, with startups attractingnearly twice as much outside investment as they did in 2009, according to newdata from the National Venture Capital Association.

The $173 million in backing for Oregonentrepreneurs made 2010 the state’s second-best year for venture capital sincethe dot-com era. The numbers represent a potential renaissance in Oregon’s entrepreneurialeconomy, and growing diversification among new businesses.

“I think that was very much not a blip, but indicative of where we’reheaded,” said Diane Fraiman, a partner with Seattle-based Voyager Capital,an active player in the Portlandstartup scene.

“There’s still a lot of really, really early-stage stuff,” she said,”but there are some really interesting things on the horizon.”

Venture capital is the seed money ambitious young companies use to hit the bigtime. Investors typically hope for a quick return, within a few years, eitherwhen a big company buys out the startup or when the young company grows big andsells stock to the public.

The startup scene has long been a weak spot in Oregon’s tech economy. Historically, thestate has attracted venture money at half the rate as the nation as a whole,and no Oregoncompany has held an initial public offering since 2004.

Startups are enjoying a cultural resurgence, however, especially amongyoung entrepreneurs working in Portland’s Old Townand Pearl District. Software engineers are tapping enthusiasm for mobiledevices and social networking to offer new services.

Most of 2010’s upsurge can be chalked up to industries that are relatively newto Oregon:cleantech and medical technologies. One deal, a $50 million round for Portland’s Home Dialysis Plus, accounted for more than aquarter of all the venture money Oregoncompanies raised last year.

The other big winner in 2010 was UpWind Solutions in Medford, a wind turbine company that raisednearly $30 million.

“The diversification, I think, is important,” Fraiman said. “Notonly does it bring new entrepreneurs and new businesses, but it brings newinvestors as well.”

Among those new investors: top-shelf Silicon Valley venture firm KleinerPerkins Caufield & Byers, which hadn’t rarely invested in an Oregoncompany (see note below) in nearly three decades before 2010. But lastyear the firm made two big Oregon investments– backing UpWind and Puppet Labs, a Portland company that makes software tomanage data centers.

Kleiner Perkins also backed Jive Software, a promising business softwarecompany that moved its headquarters to Palo Alto,Calif., last year but left most of itsemployees in downtown Portland.

“We’ve certainly felt increased momentum,” said Matt Compton, aformer Yahoo executive and venture capitalist. He’s now chief executive of Portland startupShopIgniter, whose tools help retailers market their products on socialnetworks. His company raised $3 million early in the year, and hascontinued attracting investor interest.

“We’re receiving inbound calls from Bay Area venture firms on a fairlyregular basis,” Comptonsaid.

Last year’s upswell is especially heartening because 2009 was Oregon’s worst year for venture capitalsince 1998. The picture was similarly grim nationally, when venture investmentfell 35 percent amid the recession and national financial crisis.

Oregon’s rebound was strongerthan the nation’s, with venture investment surging 90 percent in the statecompared with 19 percent nationally.

Venture capital firms across the country have raised less money for futureinvestments in each of the past three years, and hit a seven-year low in 2010.That’s raising concerns that venture dollars will be harder to come by goingforward.

But Sam Blackman, CEO of Portland video encoding startup ElementalTechnologies, said investors will remain interested in Oregon for the simple reason that thestate’s entrepreneurs have expertise in key new technologies: cloud computing,mobile computing, online video and open source software.

“Those are huge trends that are driving technology,” Blackman said,”and Portland’sgot some smart people in those spaces.”

Here’s my informal list of 2010 Oregon VC deals. The OregonTechnology BusinessCenterhas a slightly differenttally on its site (and the NVCA’s Oregontally is different, still.)

Company Location Date disclosed Amount (in millions)
Abacast Camas   Q4 $0.5
ActiveTrak Portland   March $0.50
Act-On Software Beaverton   Q4 $4.0
Advanced Inquiry Sys. Hillsboro   Q3 $10
Avnera Corp. Beaverton   January $10.00
Avnera Corp. Beaverton   November $10
Azuray Technologies Durham   June $7.15
Clear Catheter Sys. Bend   Q4 $1.2
ClearEdge Power Hillsboro   First quarter $11
ClearEdge Power Hillsboro   Fourth quarter $10
Clinicient Portland   Q4 $0.5
Elemental Tech. Portland   June $7.50
G5 Search Marketing Bend   August $15
Home Comfort Zones Beaverton   Second quarter $2
Home Dialysis Plus Portland   June $50
Iovation Portland   Q1 $1
JanRain Portland   Q1 $0.50
JanRain Portland   December $1
Kryptiq Beaverton   November $8
Puppet Labs
Paydici
Portland
Portland
  July
October
$5
$0.3
PHP Fog Portland   Q4 $1.8
Second Porch Portland   March $1
Shopigniter Portland   March $3
TrustID Tigard   January $4
Tyfone Portland   August $5
UpWind Solutions Medford   March $28.80
Urban Airship Portland   February $1.10
Urban Airship Portland   November $5.40
       
       

Update: I’m reminded that Kleiner Perkins investedin Platial, and points out that I left Puppet Labs out of my tally (though Idid have them in the article. Thanks to Sam Blackman for reminding me on bothcounts!

Mike Rogoway; twitter: @rogoway; phone: 503-294-7699

 

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