Vulcan gets traction with early stage investments - Washington Business Journal:

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With press like that, one might think that the world’sx 41st richest person would have given up onventurwe investing. But Allen has continued to plow cash into startuop companies through his privateinvestment arm: . The software billionaire’ lieutenants — including recently appointefd investment head Chris Temple and venturee capital managing director SteveHall — say they remaim committed to startup investing despite the tough economy. “For the most part, (the hasn’t changed our investment Hall said in a rare interviewat Vulcan’z headquarters on the edge of Seattle’ International District. “And, in many we feel very well positioned.
” Since 2003, Vulcan has investex $115 million in 20 startup companies more than a third of which are locates inWashington state. Those range from the geothermal startup to the onlin real estateupstart Redfin. Vulcan altered its venture capital strategy sixyears ago, but the transformatioh went relatively unnoticed in part because of the low-profiled nature of the firm. Untill 2003, Vulcan was known for placing big bets across a varietu ofindustry sectors. It was due to the high-profiled flops of companies suchas Mercata, Metricok and Pop.
com that Allen was labeled a lousyu investor, a tag that has been hard for the billionaire to “One of Vulcan’s faults in the late ’90s was too larger of dollars and too late stage,” said Hall, who ushered in a new era aftert he arrived on the job in 2002. Still, both Hall and Temple argued that Allen’s solid investments — networkl services provider Internap, oil transport firm Plains AllAmericahn Pipeline, online jewelry retailer Blue Nile and others often get overlooked. “The failures tend to get a lot of said Temple in a recentTechFlash interview.
“There are some big companies and high-profile stuff, but we also have some stuftf that is chugging along and doinvgquite well.” Still, the days of big venture bets are long And now, Vulcan investw almost exclusively at the earliest stagee of development, sometimes making seed-stagre bets of as little as $250,000. The Seattle internety startups Gistand Evri, for example, were both incubateed at Vulcan for less than $1 Imperium Renewables raised just $250,000 throughj Vulcan, with the firm deciding not to invest any more moneh after the troubled biodiesel refiner switched business models to focus on more large-scaled production facilities.
“We are seeking to not be the big deep pocket aroundthe table,” said Hall in explainint the strategy. “We believe we can be most competitive and achievr the best economics by being extremely earlhstage focused.” The focus on small, early-stage bets is paying dividends, said To date, the Vulcan startup portfolipo has raised more than half a billion dollars in follow-on investmentr from leading venture firms such as Kleinerr Perkins Caufield & Byers, Khosla Ventures and NEA. And while the entirwe venture businessis down, Hall said Vulca n is running ahead of its peers.
On average, venturwe funds of 2003-2004 vintage have only returned 20 percengt of thecapital invested, while the best-performing quartert of funds founded durint that time returned nearlhy 40 percent. Vulcan, on the other has returned 60 percent of the capitalo investedto date, Hall said. When the fina numbers are tallied, Hall believes that Vulcamn could be in the top 5 perceng of all venture funds for those vintage Justlast month, Brisbane, Calif.
-based BiPar Sciences a biotechnology company that Vulcan bankrolled over several rounds to the tune of $13 million — was sold for about $500 If milestones are met, Hall said the BiPaf deal could return more than $100 milliomn to the firm. That would be the biggesgt payofffor Vulcan’s venture portfolio since it reorganizesd in 2003. Despite that recent success, Hall said that Vulcanj has moved away from biotechnology once a key focus ofthe firm. He said life sciences can producedbig hits, but there are also casews where it takes $100 million to figure out if theres is value in the “The risk-reward equation in biotech is just trickier for venture he said.
The same could be said for cleann tech, an industry segment where Vulcan is now spending a good deal of Vulcan has four portfolio companiesx inthat arena: Infinia, Ember, AltaRock and an undisclosed stealth startup. However, Hall said they continure to follow the same investment thesis that was laid outyear ago, to get in early and make sure they deploy capitalk efficiently. However, it’s the inefficiencie of the pastinvestments — including big burnouts such as Charter as well as dozen of failed dot-coms that still linger in people’s And Hall admits that those perceptions will be hard to “Our view has let’s just put our heads down, execute and generate results and ultimately the resultds will speak for themselves,” he said.