Seattle Savors High-Tech Boom Blend Of Money, Talent, Experience Helps Stimulate Growth

The pace of high-tech business start-ups in the Puget Sound area shows no sign of slowing. And they’re drawing money to the region as savvy investors scramble to pick the winners.

The ventures are in a range of hot new fields - electronic commerce, Internet gaming, wireless telephones and more.

And there to offer them capital to grow on are investment banks and venture firms. Venture funding in the Northwest increased by 87 percent last year, according to the Price Waterhouse accounting firm. That’s a bigger gain than the national 26 percent increase - and it tops the 35 percent rise in California’s Silicon Valley, though on a much smaller base.

“The flow of good deals is picking up,” said Stephen Arnold, who heads the new Bellevue office of Boston-based Polaris Venture Partners, an $85 million fund that began investing last year.

“We believe (Seattle) is going to be one of the very strong markets in the next phase of technology development,” Arnold said. “That’s part of the reason we’re now headquartered here.”

Silicon Valley Bank also opened a Bellevue office about a year ago.

Some of the most interesting new ventures were presented at an investment forum Tuesday and Wednesday organized by the Washington Software and Digital Media Alliance. Competition for time and space at the forum was so fierce that the group had to turn away three companies for every one it accepted, said its president, Kathy Wilcox.

The area’s higher profile drew 200 potential investors to this year’s forum from as far away as Singapore and Paris.

“There’s a recognition by the capitalists themselves that this is the place to be,” Wilcox said.

The enterprises are getting bigger. Two years ago, 80 percent of Washington software companies had 10 or fewer employees. Today only 64 percent are that small, Wilcox said.

“These people are looking for very large sums compared to prior years,” she said.

“And the companies themselves are more sophisticated. They have management teams that have been around the block.”

For example, there’s David Pool, who founded Spry Inc. in Seattle and in 1994 launched a product called Internet in a Box, which let people instantly connect to the Internet. CompuServe bought Spry in 1995.

Six months ago, Pool started DataChannel Corp. to help companies better manage the flow of information from inside and outside.

The Red Herring, a technology business magazine, just named Pool one of the “Top 20 Entrepreneurs in Digital Technology,” along with News Corp.’s Rupert Murdoch and Jeff Bezos of amazon.com.

Another example is RTIME Inc., a Seattle company with a software engine that lets hundreds, even thousands, of people play an Internet game simultaneously. The software to play RTIME’s spaceship game, which demonstrates the technology, can be downloaded free off the Internet at http://www.rtimeinc.com.

RTIME is headed by Chip Overstreet, a veteran of more than 10 years in software marketing who just received $1.5 million in funding from a group led by the Seattle venture firm Pacific Horizon Ventures.

Microsoft’s growth over the last 20 years is a factor in all this activity, but not the only one.

Research at the University of Washington and the Fred Hutchinson Cancer Research Center has led to new companies, in biotechnology as well as computer hardware and software.

Redmond-based Nintendo of America is one of the top names in video games.

And three local companies - WRQ, Attachmate and Wall Data - lead the world market in linking various types of computers into networks.

The area also has many tele-communications start-ups that trace their roots to McCaw Cellular, now AT&T Wireless.

The region’s blend of money, talent and experience now supports more new ventures than in the past.

“I suppose it’s called moving out of adolescence and into adulthood,” said George Klute, a principal in Olympic Venture Partners and chairman of this year’s investment forum.

“What’s changed here is that we’ve got enough examples or role models for entrepreneurs to see how this (venture funding) works,” Klute said.