Seattle Week in Review: To Asia via Puyallup, Space via Kent

Xconomy National — 

We’ve reached the end of a very long week. Let’s review. There was wind, rain, power outages, and an earthshaking natural gas explosion (we felt it) that leveled three buildings but mercifully caused only minor injuries to responding firefighters. There were tours of a new international crossroads of information, the Transpacific Hub, and the formerly secretive headquarters of Jeff Bezos’ space venture, Blue Origin. Tableau and INRIX made acquisitions. Icertis raised $15 million. Element8 announced investment totals. And more…

—The Transpacific Hub, unveiled this week in Puyallup, WA, about an hour south of Seattle, is a physical intersection for digital communications and commerce between the world’s two largest economies—China, and the broader Asian market, and the U.S.

Given that, this datacenter and broadband and fiber junction is surprising not only for its size (more than 130,000 square feet of usable datacenter floor space) and power (50 megawatts of dedicated service from Puget Sound Energy), but also because it’s the first of its kind on the West Coast, according to its developers.

Simon Lee, board director at Centeris, which developed the project—“a nine-figure investment”—explains that there are telecomm hotels on the West Coast, such as the Westin Building in Seattle, One Wilshire in Los Angeles, and 11 Great Oaks in San Jose. Those facilities, packed with switches, routers and other networking equipment, largely redirect communications and data traffic, but very little of that traffic sits inside the building, Lee says. The Transpacific Hub, meanwhile, combines “industrial IT power with the networking portion,” he says. Both are required to run modern enterprise IT systems.

Wave, a West Coast fiber and broadband provider, partnered with Centeris on the hub, building high-capacity fiber connections from new and existing trans-Pacific undersea cables that make landfall in Oregon to the Northwest’s data and communications infrastructure, by way of the Transpacific Hub. That allows the Centeris datacenter “to connect to really anywhere in the world,” said Wave senior vice president Paul Koss.

Transpacific subsea cables make landfall in the Northwest, the closest point to Asia.

Transpacific subsea cables make landfall in the Northwest, the closest point to Asia.

While the off-the-beaten-path location may seem counter-intuitive, it has a lot going for it beyond the proximity to the undersea cables. It’s close to the Northwest’s major technology center in Seattle, which is also a global capital of cloud computing, but not too close. Land is cheaper (the Transpacific Hub sits on an 86-acre campus, pictured at top). The specific location is 525 feet above sea level and built on bedrock, providing better protection against floods and earthquakes. The region’s moderate temperature reduces the need for cooling systems. “It makes much more sense to build large-scale, industrial IT campuses in the Pacific Northwest versus, say, California,” Lee says.

A staged combustion test of Blue Origin's BE-4 rocket engine.

A staged combustion test of Blue Origin’s BE-4 rocket engine.

—There was another big facility unveiling this week. None other than Jeff Bezos gave a group of journalists a four-hour tour of Blue Origin’s Kent engineering and manufacturing base. Blue Origin now has some 600 employees, mainly in Kent, but that number may double as the private space company makes good on plans for a series of increasingly large rocket engines, rockets, and crew capsules that could begin carrying passengers in 2017. Blue Origin needs a larger location for volume production of its BE-4 rocket engine. Whether that will be in Washington or elsewhere hinges at least in part on tax incentives for the state’s emerging commercial space industry. A bill to extend existing aerospace industry tax credits to the makers of spacecraft did not make it out of the House Finance Committee during the regular legislative session.  For more on the Blue Origin facility, check out coverage from Seattle Times’ veteran aerospace reporter Dominic Gates and GeekWire aerospace and science editor Alan Boyle.

—Blue Origin probably doesn’t have to worry about capital the way a typical space startup would. Indeed, one strength of Seattle’s emerging space industry is the number of billionaire-backed space ventures locally. For those that do have to find investors, here’s some good news: More than 50 venture firms backed space startups in 2015, and they plowed in some $1.8 billion, almost doubling the total invested in the, ahem, space during the prior 15 years. That’s according to a new report, Start-Up Space, from industry consultant The Tauri Group.

On to the M&A news… Tableau Software acquired a German database company with an origin story similar to its own. The fast-expanding Seattle data visualization software maker bought HyPer, “a fast main-memory database system designed for simultaneous [online transaction processing] and [online analytical processing] without compromising performance,” Tableau says in a news release. “It also unifies transactions and analysis in a single system, and when coupled with Tableau will help customers take visual analytics closer to the transactional systems that underlie most businesses.” HyPer began as a Technical University of Munich research project, while Tableau emerged from Stanford University. The acquisition, terms of which were not disclosed, brings the HyPer technology and technical personnel into the Tableau fold, seeding a new research and development center in Munich.

—Another deal this week unites two players in Seattle’s automotive IT industry cluster. INRIX, the traffic information company that spun out of Microsoft Research 11 years ago, bought OpenCar, which makes tools, a clearinghouse, and other technology to link app developers and automakers. The move signal’s INRIX’s intention to take on Apple and Google in the battle for control of the in-car app ecosystem.

—Who else is buying in tech? CB Insights, a venture capital industry data provider, reports that tech exits were up 21 percent in 2015, but five out of eight tech industry giants were actually less acquisitive in 2015 than the year prior. Taken as a group, Amazon, Apple, Facebook, Google, Microsoft, Salesforce, Twitter, and Yahoo made 71 acquisitions last year, compared to 101 in 2014. But the Seattle area’s two giants, Amazon and Microsoft, each bought more companies than they have in any of the last five years. Microsoft in particular ramped up to 18 acquisitions last year, compared to 10 in the year prior. Kurt DelBene, who heads corporate strategy and planning at Microsoft, unpacked some of the company’s recent acquisitions in the Feb. 29 episode of the podcast Acquired, summarized here by GeekWire.

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Some funding news (of which there’s not been much locally so far this year)… Icertis, a Bellevue startup making cloud-based software for managing business contracts, raised a $15 million Series B round. Ignition Partners led the round, and Ignition managing partner John Connors is joining the Icertis board. Existing investors Greycroft Partners and Fidelity Growth Partners India also participated in the funding, increasing their ownership stakes in the company. Icertis, founded in 2009, had raised a seed round in 2012 and a $6 million Series A in spring 2015. The fresh funding will support global expansion, marketing, and further product development.

—Element 8, the Seattle-based cleantech and sustainability-focused angel investing group, said it backed 17 companies to the tune of $3.3 million last year. That’s down from $5.7 million invested in 14 companies in 2014. The nearly 70 members in the group made first-time investments in eight companies in 2015: Apana, Axiom Exergy, Building EnergyConnectDEREnergy Storage SystemsIntelliHotPotaVida, and Honeycomb. Element 8 investors have backed 63 companies with almost $23 million total since 2006. Earlier this year, Element 8 co-chair Eric Berman talked with Xconomy about a rebounding cleantech investment sector.

Madrona Venture Group’s in-house company building effort, Madrona Venture Labs, has signed up a 10-person advisory board—several drawn from the ranks of Madrona-backed companies or its stable of venture partners—to help with idea development, customer acquisition, talent recruitment, and company building. The advisors, representing some of the Seattle area’s biggest tech startup successes, are: Zillow Group CEO Spencer Rascoff; zulily CEO Darrell Cavens; Julep CEO Jane Park; Accolade CEO Raj Singh, co-founder of Concur; AOL board director Dawn Lepore, former CEO of Drugstore; Allen Institute for Artificial Intelligence CEO Oren Etzioni, also a serial entrepreneur; Rival IQ founder T.A. McCann, former CEO of Gist; PicMonkey CEO and GeekWire chairman Jonathan Sposato; BuddyTV CEO Andy Liu; and SmartSheet CEO Mark Mader.

—9Mile Labs, the business-to-business startup accelerator, has made some significant changes to how it funds companies. The idea is to more closely link meaningful business development milestones—mainly around customer acquisition—to subsequent funding tranches. Check out our story here.