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Madrona closes first fund in seven years

Bucking some predictions, the Seattle-based firm has closed a $167 million fund to invest in technology start-ups.

Madrona Venture Group announced today it has closed its third venture capital fund with commitments of $167 million, exceeding its $150 million target fund size.

Some in the Seattle VC community had wondered if Madrona, which hasn’t raised a fund since its 1999 Madrona Venture Fund II experienced several misses, would be able to attract a large amount of capital for its third fund. Although Madrona Venture Fund III is 30 percent smaller than the $250 million Madrona raised in 1999, it seems to have attracted a number of very interested investors.

The fund is expected to invest in 20 to 25 early-stage companies over the next four years in the wireless, software and consumer internet sectors. The firm began investing the fund in July 2005 and has made four initial investments in the iConclude, Redfin, Bag Borrow or Steal and Seadragon Software, which was recently sold to Microsoft.

Madrona was founded 11 year ago as a network of wealthy individuals who pooled their money to invest in cutting-edge companies. The firm’s early investment in the online bookseller Amazon.com put it on the map, however since the dotcom bust Madrona has slowed its activity.

Over that time the firm has evolved, and Madrona’s third fund is now made up of 80 percent institutional investors such as Investiture, the James Irvine Foundation, the Ewing Marion Kauffman Foundation, Quellos Private Capital and the Government of Singapore. In contrast, Institutional investors made up only 20 percent of the firm’s second fund.

The firm now has $400 million under management and 23 active investments.