Startups get $300 million for second consecutive quarter

It was another strong quarter for venture capital investing in Washington state, as $300 million in fresh capital primarily flowed to software and health care companies.

This marks the first time since 2000 that startup companies in the state attracted more than $300 million in back-to-back quarters. During the first quarter, venture capitalists invested $391 million -- meaning venture investments are on pace to top $1.2 billion this year.

Deal flow also is heating up. The 32 deals in the state during the most recent quarter were the highest total since the first quarter of 2001.

"You are definitely seeing a resurgence of venture capital in that region," said Jessica Canning, director of global research at Dow Jones VentureOne, which published the quarterly venture capital report along with Ernst & Young.

Nationally, venture capitalists invested $7.4 billion in 717 deals during the second quarter -- an increase of 8 percent in both dollars and deals.

"Venture capital has been steadily growing over the past several years, and this is one of the strongest quarters that we have had in a while," said Canning, adding that the trend continues to look positive going forward.

Washington continues to grab a large slice of the venture capital pie. It ranked third in terms of dollars invested and fourth in number of deals. California and Massachusetts -- historic hotbeds for new technology development -- continue to lead the nation in both categories.

Madrona Venture Group, an investor in PayScale, Redfin and Bag Borrow or Steal, was the most active venture capital firm in the state, with four deals. It was followed by OVP Venture Partners, Benaroya Capital and Draper Fisher Jurvetson, which each completed three deals last quarter.

Investments were pretty evenly split between health care and information technology, with $135 million invested in health care companies and $125 million invested in information technology companies.

Nationwide, the split was weighted more heavily toward information technology, as $4.1 billion was invested in 435 deals. That compares with $2.4 billion invested in health care companies.

Venture capitalists have remained optimistic in part because of the resurgence of the initial public offering market.

So far this year, 125 companies have completed initial public offerings. That compares with 198 IPOs for all of last year and 68 during 2003, according to Renaissance Capital's IPOHome.com.

"Right now, people are looking toward venture investment again because companies are proving themselves within the IPO ... market," Canning said.

Twenty-two venture-backed companies raised $2.73 billion through IPOs during the second quarter, the largest number of IPOs in three years and the biggest financing total since the third quarter of 2000, according to a report from VentureOne released earlier this month.

Only one Seattle-area venture-backed company, biofuel producer Imperium Renewables, is in the pipeline to go public.

But with the market improving, some Seattle-area companies have been considering joining the IPO parade.