Confirmed: Ignition Partners Scaling Down With New $150M Fund

1/24/13Follow @bromano

[Updated 5:30 pm Pacific] One of the Northwest’s leading venture firms is scaling back, looking at raising a smaller fifth fund with fewer active partners.

A source familiar with the situation confirms the news that Bellevue, WA-based Ignition Partners is in the process of raising a new fund in the $150 million range, significantly smaller than the firm’s 2007-vintage $400 million fourth fund.

The source also confirms that the new fund—expected to close soon—will involve three partners focused on enterprise software, cloud services, and other business-focused technology companies: John Connors, the former Microsoft CFO who joined Ignition in 2005; Frank Artale, a former XenSource, then Citrix Systems executive, who joined the firm in 2011; and Nick Sturiale, currently a venture consultant at Palo Alto, CA-based Jafco Ventures.

The news was first reported by Dan Primack at Fortune. An Ignition spokeswoman declined to comment.

It’s a huge change for the 13-year-old Bellevue, WA, firm, started by Microsoft veterans—tellingly, none of Ignition’s founding partners are among the group expected to go forward with the new, smaller fifth fund.

Ignition’s other partners, however, aren’t expected to leave the firm. Instead, they’ll stay involved with their current portfolio companies, shepherding those investments toward exits (11 partners are listed on the firm’s website today).

But those partners will have to look for new things to tackle in the future—there just doesn’t seem to be hunger in the limited-partner world for a firm with as many partners, and as many varied interests, as Ignition has had in the past.

The firm started looking into a new fund in 2012, but hasn’t been able to close one under the old structure. Tellingly, the new fund’s focus and size reflects the amount of cash dedicated to enterprise and cloud investments under the old, larger fund, our source notes.

While some reports say the larger group of Ignition VCs may seek a new, consumer-focused fund, we’re hearing that it’s not clear what founders like Brad Silverberg will do just yet.

Others appear to have more developed plans. Another source with knowledge of the situation tells Xconomy that at least one Ignition partner, Michelle Goldberg, is looking at striking out with new investments in consumer Internet and digital media, possibly as a kind of super-angel, while maintaining existing roles at Ignition portfolio companies like SEOmoz and Glympse.

Ignition’s apparent downsizing follows our October report that OVP Venture Partners is shutting down, which could restrict the supply of capital just as the area’s early-stage startup ecosystem is blooming.

Following the recession, limited partners have pulled back from venture capital and concentrated their investments among the biggest firms. But not everyone has suffered, even in a small market like Seattle: Last summer, Madrona Venture Group—the region’s leading VC firm—raised a new $300 million fund that was over-subscribed.

Seattle’s Voyager Capital has also been fundraising.

This wouldn’t be the first significant organizational change for Ignition in recent years. In addition to bringing in Artale, it set up a separate, but related private equity operation called Ignition Capital in 2009.

Xconomy senior editor Curt Woodward contributed to this report.

Benjamin Romano is editor of Xconomy Seattle. Email him at bromano [at] xconomy.com. Follow @bromano

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