Bellevue, WA-based Ignition Partners has raised a $150 million fund to make early-stage investments in enterprise technology companies, mainly on the West Coast, and is opening a second office in Palo Alto, CA.
Ignition Venture Partners V, which was oversubscribed and was raised in less than three months, is significantly smaller than Ignition’s $400 million fourth fund, raised in 2007. The firm says it will invest only in business technology, specifically big data, cloud computing, and “consumerized” enterprise IT. Those are areas the partners, and many other venture investors, view as ripe for growth in the next decade. The scaled-back fund will not be used to make new investments in telecom infrastructure and consumer technology companies, which Ignition focused on in previous funds.
A source told Xconomy when news of the new fund emerged in January that its size is similar to the amount marked for enterprise technology in the last Ignition fund.
Ignition will also place its bets on earlier-stage companies, says Nick Sturiale, a new Ignition managing partner in the fund with Frank Artale and John Connors.
“Some of that is a function of fund size, and the maturity and bloodlines of successful exits that have been produced that now make Ignition much more suitable as an early stage investor,” Sturiale tells Xconomy. “When you have XenSource, Splunk, Heroku, you get a halo that attracts interest of entrepreneurs at earlier and earlier stages.”
As a result, the firm plans to make in the range of 15 generally smaller investments a year from its fifth fund.
Sturiale says working with Artale and Connors at Ignition is “like getting the band back together,” referring to their shared work history through XenSource and Splunk, companies that Sturiale incubated and made initial investments in while at Sevin Rosen Funds. Artale was a XenSource executive and Connors was a board member before its 2007 acquisition by Citrix Systems. Connors and Sturiale are both Splunk board members.
The seven-person Ignition team for the fifth fund has only one Ignition founding partner, Cameron Myhrvold. CFO Jack Ferry, Robert Headley, Ignition’s longtime administrative partner, and Kristina Kerr Bergman, who joined the firm in 2012 after working on various Microsoft business products since 2006, round out the group.
Earlier this year, Ignition listed 11 partners, including co-founders Brad Silverberg, John Ludwig, Jonathan Roberts, and Steve Hooper, and visible partners such as Michelle Goldberg and Richard Fade. Partners from earlier funds “will continue to serve in their current roles to maximize returns from existing portfolio companies,” Ignition says. Some of Ignition’s local investing highlights include Glympse, SEOmoz, Appature, and Swype.
Sturiale says people should not view the changes at Ignition as unique to the firm or to the Northwest. “It’s venture firms in general,” he says. “A lot of them are going through transitions or pivots.”
With its Silicon Valley office, Ignition aims to access the best entrepreneurs and innovations in the two top West Coast technology clusters. Sturiale will be based in Silicon Valley, but the partners expect to be in both markets frequently. “We plan to be heavy users of Alaska Air,” he says.
This marks the second Seattle-area investment firm to expand to Silicon Valley recently. Paul Allen’s Vulcan Capital will seek Internet and technology investment opportunities in the $10 million to $100 million range from a new Palo Alto office to be headed by Abhishek Agrawal.
Asked for a Silicon Valley take on the Seattle technology scene, Sturiale says he sees “a change in how entrepreneurs view the Northwest to the positive recently.”
“I think there’s a much stronger interest in Seattle as a strategic arena for startups, either setting up development teams or partnering with the big cloud infrastructure guys,” he says.
The story of Tableau Software‘s early move from Silicon Valley to Seattle has not gone unnoticed, he adds. The data visualization company is sure to garner even more notice as it prepares for a $150 million IPO.
Sturiale’s take on big data—a space he’s watched closely through the lens of Splunk, among others—is that it is “overly hyped, which means there’s going to be disappointment, and then real companies will continue to make progress and the market will evolve. Big data is a massive category. It’s just not going to all happen overnight.”
