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

April 3, 2013 at 6:00 AM

Ignition confirms new fund, smaller scale, Silicon Valley branch

Bellevue-based Ignition Partners today is confirming that it’s scaling down while tightening its focus on enterprise software, the category where it’s done best in recent years.

“That’s where we’ve had a lot of success and it’s clearly where the market’s going,” said John Connors, who joined the firm in 2005 after serving as Microsoft’s chief financial officer.

Ignition raised $150 million for its fifth investment fund, down from the $400 million it last raised five years ago, when it was the region’s largest venture capital firm. Since then the venture industry has gone through a rough patch, leading to a contraction and the shuttering of several firms in the Seattle area.

Ignition was founded in 2000 by a group of early Microsoft and McCaw Cellular employees. The founders will continue working with prior funds and companies in the portfolio, but they’re stepping back and letting Connors and two newer partners lead the next wave of investments.

Some founders may continue investing in early stage companies separately. Those with telecom veterans aren’t seeing as many venture opportunities as that space matures, Connors said, so “they were clear that the next fund is not one for us.”

Changes at Ignition were first revealed by Fortune magazine in January, but the company said little about the transition at the time.

Today the firm is issuing a press release announcing the Silicon Valley expansion and the new fund, which was oversubscribed and raised in less than three months. Investors included new and previous clients such as university endowments, pension funds and investment firms, the release said.

General partners in the new fund — Ignition Ventures Partners V – are Connors; Frank Artale, an enterprise veteran who joined Ignition in 2011; and Nick Sturiale, a new partner in Silicon Valley. Sturiale is opening an Ignition office in Palo Alto, Calif.

Sturiale was an early investor in Splunk, through which he and Connors got to know each other.

Ignition has found success with a string of California companies, including Heroku and Splunk, and with “hybrid” companies that have operations in both Silicon Valley and Seattle. Connors said 60 percent of the companies backed by the new fund could be in Silicon Valley, but he still sees lots of opportunities in the backyard of Microsoft and Amazon.com.

“I think you’ll see more high quality startups here,” he said.

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