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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

June 11, 2008 at 12:00 AM

Madrona raises $250 million in fourth fund, still NW tech focused

Seattle’s Madrona Venture Group is announcing today that it closed its fourth venture fund, raising $250 million to continue investing in early-stage Northwest technology startups.

“We’re going to stick to what has worked well,” said managing director Matt McIlwain.

McIlwain noted that Madrona-backed companies had five positive exits over the last 18 months — four companies were sold and one went public.

The fund exceeded its target of $225 million, with all of Madrona’s existing institutional investors signing up, including the University of Washington. Also participating are several new individual investors and institutions, including Cambridge and Oxford universities.

Among the company’s recent hits were investments in ShareBuilder, Isilon Systems, World Wide Packets and iConclude.

Although economic conditions are poor, McIlwain said Madrona and its investors have a long-term view and the 10-year fund will continue beyond the current cycle.

“Maybe it will be a little slower the rest of this year but market cycles tend to go up and down,” he said.

Madrona will likely begin making investments from the fund in the fall. Among the areas where the firm still sees opportunity are online advertising and sub-categories of virtualization.

Some of the money is also likely to end up backing companies spun out of the University of Washington, which has been especially fertile ground for Madrona.

The fund also validates a decision the firm made with its last ($167 million) fund in 2005 to turn its focus to institutional investors, more than the high net-worth individuals who were the primary investors in its 1999 fund, McIlwain said.

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