We hope to make this a regular feature in our Xconomy cities. It’s a look at small financings of private companies in tech, life sciences, and cleantech. These are deals in the roughly $100,000 to $1 million range, and they’re increasingly where the action is for local entrepreneurs, yet they’re often harder to track than the bigger deals we tend to report on.

And there were at least 12 of these smaller financings in the Northwest in October (see table below), according to ChubbyBrain, a New York-based information services company tracking VC, angel, and other investments in private companies. ChubbyBrain gets its data from regulatory filings, user submissions, and other sources, and this is the second monthly installment of “under the radar” deals in the Seattle area (you can see the previous deals for September here). The data didn’t include the investors or the stage of financing.

A few quick observations: Like the previous month, most of the financings were in Washington (7 out of 12), but a significant number (5) were in Oregon. Most were equity deals (7), with the rest (5) being debt financings. The majority of financings (9) were in software, Internet, or tech, while a much smaller number (3) were in life sciences and healthcare, and no cleantech or energy deals made the list.

If nothing else, these lists are a cool way to hear about emerging startups we otherwise wouldn’t know about. For example, I’ve heard of Teranode, Nearlyweds, and 1000Museums before, but Zapproved and Intellisist are completely new to me.

Here are the 12 “under the radar” deals from last month:

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Just when I thought venture deals, especially for software and tech companies, had headed south for the winter (or longer), the Northwest erupted with a slew of financings in the past week.

—But first, some serious biotech. Kirkland, WA-based OVP Venture Partners led a $30 million Series B round for Fate Therapeutics, a San Diego-based stem cell company with ties to the University of Washington, as Luke reported. Existing investors Arch Venture Partners, Polaris Venture Partners, and Venrock Associates also participated in the funding, as well as three strategic corporate investors—Astellas Venture Management and Genzyme Ventures were named.

—Seattle-based DocuSign, a maker of software to automate and control the process of electronic signatures, received a strategic investment from Second Century Ventures, the VC fund of the National Association of Realtors. The funding amount was undisclosed, but the money will be used to accelerate and extend DocuSign’s efforts with real estate customers.

—Beaverton, OR-based Avnera pulled in an $8 million equity round from undisclosed investors, according to a regulatory filing. The company’s previous investors include Bessemer Venture Partners, Redpoint Ventures, Jafco Ventures, Intel Capital, and DAG Ventures. Avnera was founded in 2004, and designs novel chips for wireless audio applications.

—Seattle stealth startup Doxo raised $5.25 million in equity financing, according to a regulatory filing and media reports. The investors were not disclosed, but David Feinleib of Mohr Davidow Ventures was listed on the SEC form as a director.

—Bellevue, WA-based Enroute Systems, a developer of software that helps companies manage their parcel-shipping logistics, closed a Series A funding round worth $810,000 from Keiretsu Forum, Zino Society, Puget Sound Venture Club, and angel investors. Next up, Enroute is looking …Next Page »

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Early-stage tech financings are still chugging along, it seems. On the heels of yesterday’s news of a $5.25 million financing of Seattle stealth startup Doxo, I checked in with Keith McCall of Bellevue, WA-based Enroute Systems, a maker of parcel-shipping management software, to hear the latest on his company’s recent financing.

McCall, the company’s founder and CEO, says Enroute has closed an oversubscribed Series A round worth a total of $810,000. That includes more than $500,000 from Keiretsu Forum Northwest earlier this year, and a new investment (as of October) from W.R. “Ford” Smith, the founder of PetSmart. Other investors include Zino Society and Puget Sound Venture Club. (The Series A round also includes $60,000 that Enroute won in Zino Society’s investment forum this fall.)

Enroute makes a Web-based software platform that helps businesses choose the cheapest and fastest delivery service—international, national, or regional carriers—to ship their packages. McCall says the software reduces companies’ shipping costs by about 30 percent.

The startup has moved into new 4,500-square-foot digs in Bellevue—near the Burgermaster and Microsoft’s original offices—as of the start of November. It is now up to a dozen employees and has signed more than 50 business customers, including Zumiez, Natural Partners, Renton Western Wear, Theo Chocolate, BikeWagon.com, and Lumber Liquidators.

McCall, who previously founded Seattle-based e-mail and communications management firm Azaleos, says he expects Enroute to be profitable in the first half of next year, and is now focused on expanding its customer base.

With that in mind, he is already getting ready to raise more money. “For those investors who would like to join our existing angel investors today, we are immediately opening a $500K convertible note, which we anticipate converting to a Series B offering in 2010,” McCall says. He adds that the next formal capital raise “is targeted as a $3 million Series B.”

McCall says that next financing round will be focused on expanding the company’s shipping-management services to Asia and Europe. “We’re interested in continuing our momentum,” he says. “There’s huge opportunity for us to significantly reduce cost for businesses of all sizes.”

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There’s lots of buzz in the startup community about agile software development; there are software programs, books, and seminars on the topic, and even huge firms like IBM are now touting their “agile development solutions”. The general idea is to create a team and a software process that is flexible, quick, and adaptive to feedback from the market. Put stuff out there, collect feedback on what works, kill what doesn’t, improve what does, rinse and repeat.

But there’s a parallel trend occurring in the early stage technology market that hasn’t been talked about much. Programs like TechStars, Y Combinator, and Founder’s Co-op have been pioneering what I like to call agile organizational development. These “initiator” organizations provide founding entrepreneurs with an incredibly compressed calendar of iterative feedback on all aspects of their company. The feedback comes from a broad network experienced entrepreneurs who serve as mentors in these programs, and it comes often, regularly, and relentlessly.

Mentors in these programs provide feedback on the startup’s team, 30 second pitch, fund raising pitch, positioning, product, pricing—on just about every aspect of the organization. Some of the feedback is contradictory—just like market feedback can be. The TechStars program even has a name for the confusion that results from conflicting advice: “mentor whiplash”.

The net effect of all this mentor input is a set of organizations that adapt to market feedback much more nimbly than startup organizations of the past. This feedback cycle and the entrepreneurs’ response is what I’m calling agile organizational development, and my bet is that the companies that embrace it are much more likely to succeed than those that don’t.

These programs are all relatively new, and there aren’t any books or seminars on the topic yet—but I’m betting there will be.

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Bellevue, WA-based Onehub announced it has raised $1.3 million in Series A financing from Bellevue-based Ignition Partners and angel investors. Onehub makes cloud-based software for collaboration and file-sharing, and was founded in 2007. Back in April, we reported that Onehub had raised $600,000 from undisclosed investors, and in September we mentioned the company was part of Ignition’s portfolio.

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Beaverton, OR-based Prolifiq was named winner of the day at the annual Oregon Entrepreneurs Network (OEN) Venture Northwest investor forum in Portland, OR, today. Eleven companies, including three from the Seattle area, presented to an audience of investors and entrepreneurs. Prolifiq makes mobile marketing software that helps companies distribute sales materials to customers in the technology, media, and life sciences industries.

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They are the deals that slip through the cracks unnoticed. They are worth less than $1 million, but at least $100,000. Though small in size, these investments need to be included along with the bigger deals that get more press, if you want a more complete picture of the funding landscape in the innovation community. And there were at least 16 of these deals in the Northwest in September (see table below), according to ChubbyBrain, a New York-based information services company tracking VC, angel, and other investments in private companies.

It’s probably too soon to talk about trends, because this is the first month we’ve had access to ChubbyBrain’s data on these smaller deals, which were compiled from regulatory filings, user submissions, and other sources. But here are some quick observations.

About two-thirds of the deals (11 of 16) were equity investments, while one-third (5 of 16) were debt financings. Half the investments (8) were in software companies, while about a quarter each were in biotech/medical (4) and cleantech (3) firms. The majority of the deals were in the Seattle area (10), but a significant number were near Portland or in Oregon (6). Anecdotally, all those breakdowns seem consistent with the deal flow we’ve been seeing and reporting on in the Northwest for the past year or so. The data didn’t include the investors or the stage of the investments.

Without further ado, here are the 16 “under the radar” deals from last month:

Vantos (Seattle)                                            Equity        $873,487
Investigation software

InEnTec (Bend, OR)                                     Equity        $800,000
Cleantech fuels

WA 32609 (Redmond, WA)                           Equity         $800,000
Biotech

Inson Medical Systems (Bellevue, WA)      Equity         $642,536
Biomedical drug delivery

Napera Networks (Mercer Island, WA)         Debt           $600,000
Networking software

Acucela (Bothell, WA)                                    Equity         $439,603
Biotech drugs

Adometry (Kirkland, WA)                               Equity         $400,000
Analytics software

Smilebox (Redmond, WA)                              Equity         $399,999
Consumer software

Asemblon (Redmond, WA)                             Debt            $386,000
Cleantech/materials

Ohio River Clean Fuels / Baard Energy (Vancouver, WA)    Debt            $245,000
Cleantech fuels

Safetec Compliance Systems (Vancouver, WA)                    Debt            $235,000
Software for chemical compliance

Second Porch (Portland, OR)                          Equity         $225,000
Social software

SynapticMash (Seattle)                                    Equity         $200,000
Educational software

Silere Medical Technology (Kirkland, WA)      Debt            $120,000
Medical devices

BallLogic (Portland, OR)                                   Equity         $100,000
Consumer devices

Site 9 (Portland, OR)                                          Equity         $100,000
Web development software

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TechStars, the startup incubation and seed investment fund based in Boulder, CO, and Boston (as of this year), is holding its annual reunion event in Seattle on November 4. (See a couple of local VC blogs here and here.)

As part of the event, a number of TechStars companies that are raising money will make pitches to investors. There will also be a panel discussion on angel and venture investment trends, featuring Brad Feld of TechStars and Foundry Group; Andy Sack from Founder’s Co-op; Steve Hall from Vulcan Capital; David Cohen from TechStars; Greg Gottesman from Madrona Venture Group; and Chris Sheehan from CommonAngels. (Full disclosure: Chris is a member of Xconomy’s board of directors.)

Last February, when Brad Feld spoke to a crowd of tech entrepreneurs and investors in Seattle, there was some hopeful speculation in the crowd about whether TechStars might set up operations in the Northwest in the future. Nothing new on that front, but this reunion event in two weeks can’t hurt for down the road.

It sounds like the event is invitation-only, and meant for local angel investors and VCs. We’re looking forward to a stellar gathering, and will see what comes of it.

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Seattle-based Delve Networks won the “best presenting company” award from the attendees of the first annual Angel Capital Expo, hosted by Keiretsu Forum Northwest on Tuesday. More than a dozen companies across different fields presented to investors, including Humanity Interactive, Iverson Genetic Diagnostics, and Exro Technologies. Delve Networks started in 2006 (formerly called Pluggd) and makes video hosting and searching software.

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It took about a year and a half before I could even begin to understand the I Can Has Cheezburger (or “LOLcats”) phenomenon online. The mundane yet bizarre cat pictures. The misspelled captions. The curious Internet-slang grammar. They were kind of funny, but mostly they were weird—and, at times, even a little annoying.

Yet millions of people flocked to these Web pages, submitting their own photos and captions and commenting on others. The Cheezburger Network, as the company behind it is now called (formerly Pet Holdings), has become a runaway success—an Internet sensation that has spawned a total of 26 humor sites, including FAIL Blog, GraphJam, Engrish Funny, and Emails From Crazy People. The original Cheezburger site hit 1 billion page views (10 billion cat images) earlier this month. And during the first half of 2009, the company raked in seven figures’ worth of revenue from advertising, licensing fees, and sales of merchandise, according to Time magazine.

So what’s its big secret? Why has the Cheezburger Network succeeded where so many other humor sites and blogs continue to toil in obscurity? It took me a while to realize it’s not about luck, or marketing, or the power of certain kinds of humor. There’s some good timing involved, sure, but mostly it’s about the drive and mentality of the company’s leader, Ben Huh.

Huh is often portrayed in the media as a jokester. Photos in articles show him wearing a funny hat or mask, surrounded by stuffed animals, or posing with a cheeseburger. That image is pretty far from the reality, as I understand from reading more about Huh and interviewing him recently. In a Q&A with Advertising Age earlier this week, for instance, Huh emphasized, “I am a business person.” And he shed some very interesting light on his approach to business: “We’ve gotten into situations where we’ve tried to acquire a blog for large sums of money, and they turned us down, and we’ve gone on to compete and we’ve won,” he said. “My final offer is, ‘If you do not do this, we will start a competitive blog, and we will not stop until we win.’”

Clearly, Huh has the killer instinct. He is deeply competitive, but not in an over-the-top way. He could turn out to be the Michael Jordan of consumer Internet startups, though we probably shouldn’t put him in the Hall of Fame just yet. Still, as a promising entrepreneur in his early 30s with a pretty big success already under his belt, his story—and his company’s strategy—is worth a closer look.

Huh first arrived in the Northwest in 2005 to work for Intava, an interactive media startup in Bellevue, WA. Before that, he had graduated from Northwestern University with a degree in journalism during the dot-com bubble. “They were handing out bonuses to college grads because we’d used the Internet once,” he jokes. Huh worked for a number of startups in the Chicago area, including his own Web analytics firm. “I made all the mistakes they say you’ll make,” he says. “I raised too little money, and spent all my time fundraising and not making a product for the market.”

By the time he landed in Seattle, Huh had made it a priority to always work for a company’s CEO, or at least have a dotted-line connection to them, in any job he took. “That was going to teach me more about running a company,” he says. “This is for my career, not for [any particular] job.” Huh had also learned from his previous startups to have a “huge focus on staying profitable.”

In 2007, he came across the I Can Has Cheezburger site, which had been started by a …Next Page »

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The Oregon Entrepreneurs Network (OEN) has announced its lineup of 12 presenting companies for the Venture Northwest 2009 investment forum, to be held on Oct. 29 at The Nine’s Hotel in Portland, OR. The Seattle-area companies are Calidora Skin Systems, Doxo, Lucid Commerce, and MicroGreen Polymers, while the Portland-area companies are Advanced Inquiry Systems, Cularis, DesignMedix, Elemental Technologies, Giftango, Prolifiq, Second Porch, and Wicked Quick.

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In the past week, the Northwest has seen its share of debt financings in medical devices and bio-IT, small funding deals and partnerships in Internet software, and mounting interest in an impending IPO.

—Amazon (NASDAQ: AMZN) rolled out a new mobile payments service that lets applications developers and distributors tap into the e-commerce giant’s one-click checkout system on mobile devices. As part of the rollout, Amazon has formed partnerships with mobile content distributors like Kansas City, MO-based Handmark, which sells games, apps, ringtones, and the like. Financial terms were not given.

—Seattle’s Theraclone Sciences formed a partnership with Tokyo-based Zenyaku Kogyo, worth up to $18 million over time, to discover antibodies that could protect millions of people in a flu pandemic, as Luke reported. Under the deal’s terms, Theraclone has given Zenyaku an option for exclusive rights to new flu antibodies in certain Asia-Pacific countries, while Theraclone gets an undisclosed amount of upfront cash and royalties on future product sales in Zenyaku’s territories.

—Seattle-based Omeros, the developer of anti-inflammatory treatments and other biotech therapies, is on the docket to go public this week and raise more than $80 million, as Luke reported. The company is also defending itself against accusations from its former chief financial officer that it filed false records with the National Institutes of Health and then wrongfully terminated him after he reported it to the board’s audit committee under the company’s whistleblower policy.

—Seattle-based Teranode raised $900,000 in debt financing, as Luke reported. The investors weren’t disclosed, although Bellevue, WA-based Ignition Partners has invested in the past. Teranode, a maker of software to organize life sciences labs, was founded in 2002 out of the University of Washington.

—Seattle-based Founder’s Co-op, a seed-stage investment organization, has backed two local Internet startups, Nearlyweds and BigDoor Media. Financial details of the deals were not announced, but Founder’s Co-op says it typically invests $250,000 or less in its portfolio companies.

—Redmond, WA-based Spiration raised $7 million in debt financing out of a $10 million offering, as Luke reported. The financing came from the company’s partner in Europe and Japan, Olympus Medical Systems. Spiration, which makes an implantable device to treat deadly lung diseases like emphysema and chronic bronchitis, has raised about $97 million since its founding in 1999.

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Depending on who you talk to, you get conflicting views about where real innovation and growth come from in today’s economy.

One school, well represented at the established venture capital firms on Winter Street in Waltham or Sand Hill Road in Palo Alto, says that there are only a few truly disruptive technology ideas in each business cycle; that these ideas end up generating most of the wealth and job creation in the technology industries; and that wise investing is mostly a matter of finding the right teams of entrepreneurs with the rare and magical combination of ingenuity and experience needed to build strong companies.

The other school, represented by the dozens of startup incubators, business plan competitions, and angel-investing groups currently popping up across the country, says it’s better to let a thousand flowers bloom, even if they turn out to be dandelions. According to this point of view, there are far more entrepreneurs with good ideas than the established venture-capital business can handle, and the important thing is to find ways to connect these innovators with capital, at least in small amounts, so that they can test their ideas in the market.

Chris Hurley belongs to this second group. He’s the founder and CEO of Revolutionary Angels, a new investing group based in Cambridge, MA. Revolutionary Angels isn’t a traditional angel investing group where members pool their own money to fund startups. Rather, it plans to run a quarterly business plan competition where the prizes—currently pegged at $250,000 for the first-place winner and $50,000 for second place—are financed by entry fees from the competitors themselves. The group began soliciting submissions for its first competition on October 1, and plans to announce the first two winners in November. In return for their fees, Hurley says, entrants will get not just a chance at the big prizes, but enough advice from a group of experienced advisors and service providers that the $4,995 entry fee could be a good investment even for teams that don’t win.

“The pool of people looking to get a business of the ground is growing, while the pool of venture and angel capital available to help them is shrinking, and what occurred to me is that there has got to be a better way to do this,” says Hurley. A longtime sales executive and IT consultant, Hurley was until recently a member of corporate development group at Sun Microsystems. He says he resolved to leave Sun after Oracle announced plans to acquire the struggling maker of business software and servers.

“I decided it was better to control my own destiny than to have someone else control it,” he says. “I’m hoping this is an opportunity that will not only provide that control but help a lot of other entrepreneurs out there, because it’s a challenging environment.”

Despite, or maybe because of, startups’ thirst for capital, Hurley’s model may prove to be a controversial one. The $4,995 fee to enter Revolutionary Angels’ first competition is not inconsiderable to a business in need of cash. Hurley’s plan is to …Next Page »

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Angel capital just might be alive and well—at least in Oregon. Following up on Rick Turoczy’s guest post about Portland, OR, startups on Friday, we’ve learned that the Oregon Angel Fund has closed a new $3 million fund this summer, made up of 60 individual investors who each contributed $25,000, plus $1.5 million from the Oregon Growth Account, a state-run fund dedicated to Oregon startups and supported by proceeds from the state lottery.

The Oregon Angel Fund was co-founded in 2007 by investor Eric Rosenfeld of Capybara Ventures. Rosenfeld says the angel group’s new fund, which closed in July, is its third and largest fund. The group’s previous investments include Elemental Technologies, RNA Networks, and other prominent Portland-area startups.

What’s more, Rosenfeld tells me the group has already made three startup investments out of its newest fund. Here’s an update, and a little bit about each company:

—Vancouver, WA-based ClearAccess makes software that enables Internet service providers to remotely manage their customers’ residential and office broadband networks. In June, the Oregon Angel Fund invested $500,000 in ClearAccess, part of the company’s Series B financing of a little over $6 million that was announced last month. ClearAccess has about 30 employees and is led by CEO and co-founder Ken Hood.

—Portland-based Giftango makes online gift card systems for hotels, restaurants, spas, retail stores, and other merchants. The Oregon Angel Fund has committed to invest $500,000 in Giftango this month and lead the company’s series A financing. CEO and founder David Nelsen, a former project manager at Intel, leads Giftango. Bob Greenberg, an investor and Pixelworks co-founder, will join the company’s board.

—Portland-based Wicked Quick is a fast-growing clothing and apparel brand, founded by former executives and designers from Nike, No Fear, and Bain & Company. The Oregon Angel Fund invested $405,000 in Wicked Quick last month, and led the company’s Series A financing, which is fully subscribed at $1.1 million. Wicked Quick is led by founder and CEO Tarran Pitschka and chief operating officer Eric Happel. Rob Stewart, an investor and former Xerox consumer products executive, has joined the company’s board.

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What’s it like in the world of corporate venture capital these days? For Jeff Schrock, it’s pretty stable and good. Probably more stable than at many boutique venture firms, which are under increased pressure to raise funds and get quick returns.

Schrock is a Seattle-based tech investor with Intel Capital. In a previous life, he co-founded Seattle startup Activate—which was bought by CMGI in 1999 and then Loudeye Technologies in 2001—before becoming an executive at Yahoo and then RealNetworks. He was most recently an investor with Monster Venture Partners, until he joined Intel Capital in late 2008. Schrock is a board member of San Francisco-based Transpera and Seattle-based LearnLive Technologies, and chairman of EVO Media, the Seattle makers of the DevHub publishing platform, which recently became “ramen profitable,” as Schrock puts it.

A quick snapshot of Schrock’s current firm: Intel Capital has invested about $4 billion in some 400 companies, including a $1 billion investment in Kirkland, WA-based Clearwire (NASDAQ: CLWR). It has approximately 70 investors globally, about half in the U.S. and half international. The investment team is organized into eight sectors (including consumer Internet, digital home, and mobility) across 20 or so different geographies. Although Schrock is based in Seattle, his investment focus is not tied to the Northwest. But it’s where he has the most experience and contacts, so he has a unique perspective on the region.

In an e-mail interview, I asked Schrock about his new gig at Intel Capital, his specific investment themes, and the trends he’s seeing in consumer technologies and startups. Here’s a transcript of our interview:

Xconomy: Can you talk about your current role and responsibilities at Intel Capital, and how it fits into the arc of your career as an entrepreneur and investor?

Jeff Schrock: My job is to make profitable investments in companies which move computing and Intel forward. I am on one of our consumer investment teams—so it feels very familiar as much of my career has been in the consumer Internet. (Previously, I was an executive with both RealNetworks and Yahoo!) It is different, however, being on the other side of the table. I spent a good chunk of my early career as an entrepreneur asking, receiving, and sometimes begging for venture capital. I can empathize with the startups and entrepreneurs I have the pleasure of working with. But it’s still early in my investing career, so we’ll see if this makes me a better investor or not.

X: What is special about Intel Capital, and how does it differ from most VC firms?

JS: There are a number of things unique to Intel Capital. First, it is truly a global organization. It’s very easy to collaborate across sectors and geographies. This brings advantages to us, as investors, but also to our portfolio companies who can tap into a wealth of expertise and relationships. Secondly, because of the heritage as a manufacturing company, Intel Capital is very well organized. The decision-making process is quite transparent and structured. As an outsider who’s primarily worked in software companies, this was a welcome surprise. Lastly, Intel Capital is not a fund. Unlike our colleagues in boutique VC …Next Page »

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Colin Wong called me from Malaysia last night. His startup, Bellevue, WA-based Sharein (formerly ZoeCity), has rolled out an interesting new product and website today—a bookmark tool for sharing links with friends, family, and customers to Twitter, Facebook, and e-mail, all from your Web browser.

It’s not earth-shattering technology, but it’s part of a new generation of browser-based social media tools that are changing how people browse and share information online. Wong’s startup seems to have a lot in common with other sharing sites like Cambridge, MA-based Shareaholic, and Mountain View, CA-based ShareThis. “The goal is convenience, to make it easy for the user,” Wong says. “It’s not a power tool, but for the average user who wants to share.”

What differentiates Sharein from the competition, Wong says, is the ability to combine sharing to social media sites with all forms of e-mail, as well as providing analytics on things like how many people have re-shared a given link and its overall reach. “Once we get more traction, we’ll expand on the consumer side,” Wong says. He adds that once his team has more data on how people are using the tool, Sharein can add recommended links and other features that will be more attractive to advertisers.

“It’s going to gain a lot of momentum,” he says. “You look at Twitter, there’s quite a lot of sharing. We’re finding the older generation is more comfortable with e-mail, but the new generation is basically doing link sharing through Twitter.”

Wong has been CEO of the company since 2007, when it was founded as ZoeCity, a social network for the Christian community, by entrepreneurs Rocky Tannehill and Jyde Ojo. Previously, Wong worked for Google on the AdSense product team from 2002 to 2006. Originally based in Silicon Valley, he moved to Seattle in early 2005 and worked out of Google’s Fremont office.

Sharein currently has 10 employees—four in Bellevue, and six developers in Malaysia. The company is backed by angel investors, and Wong says he will probably look for additional funding towards the end of this year.

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Bellevue, WA-based LiquidPlanner, a collaborative software and project management startup, has raised $1 million from angel investors. The money includes the first investment from Seattle-based Alliance of Angels’ new seed fund it announced last month. The news was first reported by TechFlash, and was confirmed by Greg Huey from Alliance of Angels and investor Geoff Entress, who has joined LiquidPlanner’s board.

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The Keiretsu Forum is the world’s largest angel community, with 750-plus accredited members across 18 chapters from Barcelona to Bellevue. Since 2000, its members have invested more than $180 million in 200 companies spanning technology, healthcare, consumer products, real estate, and other sectors.

So it’s high time I caught up with Todd Dean, the president of Keiretsu Forum Seattle/Northwest, to hear his perspective on local angel investing in the current economic climate. Dean is originally from Montana and built his career at American Income Life Insurance before catching the startup bug in 2002. Dean has recently been an advisor and helped raise funding for Seattle-area companies like NodeLogic Networks, BioPassword (now AdmitOne Security), PayScale, and LINQware.

Members of Dean’s local chapter of Keiretsu Forum have invested more than $47 million in 74 Northwest companies, as of January 2009. He says the size of deals has tended to be $500,000 to $3 million per company in a typical Series A round (although those were almost certainly before the recession hit). In terms of investment philosophy, he says members shoot for a hit rate of 6 or 7 out of 10 companies getting a 2-5X return. The main goal of the forum is to bring a structured approach to angel investing, which Dean says is often thought of as a big, mysterious thing. “We act as a group even though we all invest,” he says. “The majority of investors are serial entrepreneurs.”

Just last week, Keiretsu Forum Northwest announced some prominent new members, including David Anastasi, the former CEO of Bellevue, WA-based Captaris (now part of Open Text); Bryce Fisher, former defensive end for the Seattle Seahawks, now into commercial real estate; and Steve Gahler, a vice president and station manager at KSTW-TV.

Dean says his chapter sees 50 to 100 inquiries a month, which get narrowed down to two to four companies that are then screened at investor forums. There is a $6,000 fee to present. The companies that apply tend to break down into about 50 percent tech, 26 percent consumer goods and retail, 6 to 8 percent sustainability and cleantech, and 12 percent real estate (with the rest miscellaneous).

As for his take on investing in the Northwest, Dean says, “We’ve never lacked entrepreneurs, and never lacked capital. But there’s a huge disconnect between the two.” He points out that Keiretsu has been successful in the Northwest in part “because of pulling deals from the Bay Area” and working together with other Seattle-area investors. For example, he points to Seattle-based Earth Class Mail, which raised a large Series A round ($13.3 million) in early 2008 from Keiretsu Forum members and Bellevue-based Ignition Partners.

But there’s no question the recession has hit angel investing particularly hard. “Last summer, we thought we’d have lots of members not renew,” says Dean. But that didn’t turn out to be the case. The number of deals Keiretsu looks at did decline between August and March, but Dean says he has seen an uptick in the last 90 days, and also an uptick in Keiretsu’s membership—it’s now up to about 250 members in the Northwest, counting Washington, Oregon, and Idaho.

Dean has no illusions about the prospects of a broader economic recovery, however. “Between now and September will be the telltale sign of what happens,” he says. “I think this fall will be fine.” As for capital liquidity and exits, he says, “I don’t see it happening for 12 to 18 months.”

I pressed him a bit about the tendency for local investors to become more conservative in the current climate. Asked what’s really at stake here, Dean says, “Angel investing is as high a risk as possible, but it is the future. We’re all investing for a big return. That will only happen if people are thinking big.”

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Portland, OR-based SplashCast has been making news in the past day or so, after a report surfaced in TechCrunch that it has discontinued its original product—user-generated content software—and is looking for a buyer after failing to raise a Series B funding round. Rick Turoczy, of the Portland-based blog Silicon Florist, pointed out that when it comes to a startup being for sale, “Who isn’t?”

I caught up with SplashCast chief executive Michael Berkley this morning, and while the TechCrunch piece is essentially on target, he had some important clarifications to the broader story. For one thing, SplashCast is not going out of business—it is refocusing. “The real story was that the product we originally launched with in 2007 was a user-generated content system that we are taking offline, and we’re focusing all our resources on the product we’ve been developing in the past year,” Berkley says. “We took a shot at user-generated content. It’s a really difficult product. It’s a difficult play in general to monetize. Now we’ve found something really easy to monetize.”

That something is “social television”—software that syndicates TV shows directly to viewers’ social-network pages on the Internet. And the money comes from big advertisers. Back in December, we reported on SplashCast’s partnership with video service Hulu to distribute TV shows on Facebook and MySpace. “The value we’re giving advertisers is a way to get their branding and messaging into Facebook and MySpace in a really authentic way by using premium television content as the vehicle,” Berkley says. “For large brand advertisers like car manufacturers or cereal companies, they’re very concerned about what social network users will say about their brand. But they want to be part of Facebook and Myspace. So if there’s a way for them to do it by associating themselves with predictable content, in the context of Facebook and MySpace, that’s what we’re offering.”

As for the other half of the story—the part that has some observers worried about another startup going belly-up in Portland (Vidoop recently closed)—Berkley was reassuring. “We’ve been struggling with raising a series B round of funding,” he says. “In the meantime, we’ve been approached by a couple of larger companies looking to buy us, and we’re evaluating those opportunities. The truth is, we’re on the M&A market.” He adds that any acquisition will play out in the next two or three months.

SplashCast currently has eight employees. It was founded in 2006, and raised $4 million in first-round funding from angel investors. “That’s one of the reasons it’s been hard to raise the series B,” Berkley says. “We don’t have a VC in the Series A to help with the introductions and provide the validation a lot of series B investors would look for.” He adds that an ongoing discussion locally is that “it’s very hard to raise money in Portland. There isn’t the VC establishment here.”

(Sounds like an opportunity for Seattle and Silicon Valley to me.)

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Any venture firm named after a rodent, especially the world’s biggest rodent (100 pounds), is OK in my book. But I did have to ask co-founder Eric Rosenfeld where the name Capybara Ventures comes from.

Rosenfeld explained that the capybara is a “majestic, noble, inspiring rodent.” It’s also a “category leader,” he added, and “spends most of its time beating the bushes” for food. It’s much like how he and fellow Capybara co-founder Bob Ward beat the bushes of Oregon looking for the next great company to fund.

Earlier this week, I dropped in on Rosenfeld at his office in Portland, OR, for a wide-ranging chat about his investment philosophy, the Portland tech scene, and the state of venture and angel capital in Oregon. Rosenfeld is a managing partner at Capybara Ventures, and is also a co-founder of the Oregon Angel Fund (which has seeded Portland companies like Elemental Technologies and RNA Networks). In April, he and Ward were also named venture partners with DFJ Frontier, a branch of Menlo Park, CA-based Draper Fisher Jurvetson. Let’s just say these guys are connected. They’re also Portland natives who have known each other since sixth grade.

Rosenfeld and Ward started Capybara Ventures in 2004. Since then, the firm has made investments in 10 companies, all early-stage, including RSS software startup Attensa, telecom networking firm Clear Access, and optical tech startup Phoseon. “We look for companies that are at the intersection of what grows well in Oregon, including semiconductors, electronics, Internet software, wireless communication, and where we have experience,” Rosenfeld says. He adds that Capybara’s seven active portfolio companies are doing between $3 million and $11 million in revenue this year, and about half are at cashflow break-even.

Here are a few highlights from our discussion:

Xconomy: Talk about your connections to other venture firms on the West Coast, especially with your recent DFJ Frontier relationship. Do you collaborate much with Seattle-area investors, for instance?

Eric Rosenfeld: We talk to them quite a bit. The ones we’re most close with are Buerk Dale Victor, Voyager Capital, and Madrona Venture Group. We collaborate quite a bit with the angel groups. The DFJ Frontier is a close relationship, but there’s nothing formal yet. They want to be active in Oregon. We have co-invested in one deal with them—Capybara and DFJ led a Series A round in Clear Access in Vancouver, WA. We hope to do more with them. They’ve been wonderful partners. They come up at least once a month, and we try to introduce them to companies they should know. They share their due diligence, we share our due diligence. We have a similar relationship with Walden Capital in the Bay Area.

X: What are your thoughts on the strengths and weaknesses of the Portland innovation scene, as compared to Seattle and Silicon Valley?

ER: When we started Capybara, the semiconductor industry here was more diverse and in better shape. It was Intel plus a whole ecosystem. It’s been a long time since we’ve had a startup really succeed in the semiconductor world. One company we’re involved with is Avnera, which does analog wireless audio chip sets. They’re doing very well, hopefully they’ll be the one that revives people’s confidence locally.

If you step back, Portland’s got an enviable quality of life which draws people from all over. That’s part of the solution. Our research universities are not necessarily world-class, and that’s hurt …Next Page »

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