Madrona raises $690M for two funds to accelerate early-stage AI and machine learning firms

Seattle-based venture capital firm Madrona Venture Group announced today that it has raised a $690 million push for two oversubscribed funds that will be used to support promising technology startups in the Pacific Northwest, Silicon Valley and beyond.

The $430 million Madrona Fund 9 and $260 million Acceleration Fund 3 saw 100% of existing institutional investors, Madrona said. Together, they represent a nearly 40% increase over the funds Madrona raised in 2020. The funds will be used to invest in technology companies ranging from pre-seed to Series C startups.

Madrona is one of the most prominent technology-focused venture capital firms, focused on seed, early and acceleration stage startups that leverage technology and promise to disrupt huge existing markets. Most notably, it was an early supporter of Inc., which later came to dominate online retail and, with its Amazon Web Services Inc. unit, cloud computing.

It also invested in Snowflake Inc., the cloud data warehouse company that’s now a Wall Street darling, and Isilon Systems Inc., which pioneered clustered storage systems and was later acquired by EMC Corp. was acquired. Other promising tech companies it has invested in over the past few years include Observe Inc., Smartsheet Inc., and iSpotTV Inc.

Madrona CEO Matt McIlwain said Madrona sees itself as a “full-stack investor” looking to invest in early-stage companies and support them over the long term – a philosophy he says resonates with his limited partners during tough economic times.

“We’ve had an early-stage strategy here in Seattle for 25 years,” he said in an interview this week with SiliconANGLE Media chief executive and theCUBE host John Furrier. “As our friends at Amazon like to say, we’re here on day one and want to help build businesses for the long term.”

Madrona’s primary focus remains the Pacific Northwest and Seattle in particular. But now it’s going beyond that with its accelerator fund. “We invest in companies all over the country, actually all over the world, these are the types of companies that want to have the Seattle point of view,” he told Furrier. “They don’t understand how to work with Amazon and AWS, they don’t understand how to work with Microsoft, and we have some unique relationships in those places and we believe we can help them be successful in that.”

In fact, Madrona recently announced that it will be opening a Silicon Valley office in Palo Alto this month and hiring Karan Mehandru as its first foreign executive. He was a venture capitalist at Steadfast Capital and Trinity Ventures.

The move is also recognition that young companies need to be managed locally even in the age of hybrid work. “Early-stage venture is a local business,” McIlwain said. “It’s a kind of rolling up your sleeves. It’s not a financial transaction.”

Madrona said the vast majority of the companies she plans to support will be disruptive in the areas of artificial intelligence and machine learning. These technologies are critical to the next generation of intelligent applications, in which the company has extensive expertise.

The Madrona 9 Fund aims to help start-up founders build and scale early-stage companies. Traditionally, more than 80% of supported companies are based in the Pacific Northwest region, reflecting Madrona’s belief that early-stage startups can benefit from experiential learning and the trusted networks it has built over the years.

As for Acceleration Fund 3, this fund will be more focused on teams that have already found their product is fit for the market. As such, Madrona will seek to support Phase B or C companies seeking funding to accelerate their growth. Traditionally, about half of the companies supported by Madrona’s Acceleration Funds are based in the Pacific Northwest, with the rest in other areas of the United States

McIlwain spoke more with Furrier about the new funds and Madrona’s plans to open an office in Silicon Valley to expand its reach:

Image: Macrovector/Freepik

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