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Venture Status of the Union

Venture capital investments topped $1 billion in Washington last year, marking the biggest surge of private investment money in the state since the dot-com boom. It’s only the third time funding has reached that level since record keeping began in 1997, as reported in the Seattle P-I’s Venture blog.

Ninety-seven companies in the state raised $1.07 billion — a 29 percent increase in dollars invested and a 10 percent increase in deals.

The investment tally in the state actually could have been much larger had Dow Jones VentureOne and Ernst & Young, which compiles the report, included a massive corporate investment of more than $1 billion in Kirkland-based Clearwire.

The last time investments topped $1 billion, venture capitalists found themselves trying to dig out from failed experiments such as HomeGrocer.com., Point.com and Vitessa. Nonetheless, Seattle venture capitalists — many of whom lived through the dot-com boom of 1999 and 2000 — expressed cautious optimism about the current investment climate. And they say that Washington, which ranked fifth in investments and sixth in number of deals last year, has become a top-flight destination for investors seeking cutting-edge wireless, Internet and life science startups.

Jon Staenberg, a venture capitalist in the Seattle office of Rustic Canyon Partners, believes that Seattle is well positioned for future growth because of recent fundraising activity by firms such as Madrona Venture Group and Voyager Capital. But the former marketing manager at Microsoft admits that there is a “minibubble” with “way too much money chasing deals.”

Jordan — whose firm recently invested in Seattle mobile search startup Medio Systems and Seattle wiki creator Wetpaint — agrees that too many companies are receiving financing. On several occasions, Jordan said he has passed on opportunities because valuations crept too high. “Where I worry a little bit is some of the companies we see getting funded that don’t fundamentally have a technology element underneath them or a durable network effect underneath them,” he said. “We worry that those companies are probably getting funded and they may not last.” [24×7]