Seattle-based venture capital firm Madrona Venture Group has raised $690 million.
The new funding, announced Tuesday, will go toward two funds, with $430 million going toward Madrona Venture Fund 9 and $260 million going toward Acceleration Fund 3. Madrona's venture funds are aimed at seed and Series A startups, while its acceleration funds are aimed at companies near the Series B or C stage, the firm said.
"We had a big theme around the use of data and the nearly infinite cloud computing to reimagine how applications are built," said Matt McIlwain, managing director at Madrona. "These kinds of intelligent applications are a big theme of ours."
Madrona is following up a major raise from December 2020, when the firm landed $505 million across two funds: $345 million for Venture Fund 8 and $160 million for Acceleration Fund 2, the two predecessors to the current funds Madrona has raised. In December 2021, Madrona raised a $120 million extension for Venture Fund 7.
McIlwain said Madrona plans to start investing the $690 million in the fourth quarter. He added that there are about 30 companies backed by the older Fund 8. Madrona doesn't exhaust a whole fund investing in new companies, McIlwain said. Instead, the firm has a cutoff point with each fund to make sure there is enough left over for follow-on investments. Investments in new companies will have to come from a new fund, for example the two new funds Madrona is announcing now.
Madrona recently announced plans to open a new office in Palo Alto, California, this month with former Steadfast Capital venture capital lead Karan Mehandru as the managing director to lead the Silicon Valley outpost. The new office didn't signal a geographic shift from Madrona, according to S. "Soma" Somasegar, also a managing director at Madrona, who said at the time the new office would help Madrona stay in step with tech trends.
Somasegar said at the time Madrona views early-stage investing as a local business so the firm can do hands-on work with growing portfolio companies, but later-stage investing, like that done with the acceleration funds, can be more geographically dispersed. In a release announcing the new funds, Madrona said 85% of portfolio companies in the venture funds are based in the Pacific Northwest, while only about half of those in the acceleration funds are based in the region.
Madrona, founded in 1995, has invested in big names like Amazon, Redfin and Highspot. McIlwain said the current venture capital market, which is proving tougher than the red-hot market in 2021, can actually provide benefits to firms.
"In a tougher market like this, if you're good at picking them, it's a great time to invest in these acceleration-stage companies because there's probably a little better valuation scenario," McIlwain said. "It's a great time to begin acceleration-stage investing."
