Qliance Medical Management, the Seattle-based company that doesn’t accept health insurance for primary care medical services, has raised $4 million in venture capital to expand its practice in Washington and to other states around the country.

The financing was led by Seattle-based Second Avenue Partners, and also included New Atlantic Ventures and Clear Fir Partners. Qliance, founded in 2006, has now raised a total of $7.5 million since it started.

We first profiled Qliance back in December. The company is pursuing a simple and disruptive idea to the U.S. healthcare system. It runs what it calls a “direct practice” in downtown Seattle, which freezes out health insurers and deals directly with patients. The patient hands over a credit card, and agrees to pay a $39 to $79 monthly membership fee to Qliance for unrestricted use of its primary care medical services. The model allows Qliance to avoid spending excessive time haggling with insurers, and lets the doctors see fewer patients. That frees up the company’s physicians to spend 30 to 60 minutes with each patient instead of less than 15 minutes for their peers who accept insurance, CEO Norm Wu said in our original profile.

“We see the Qliance direct primary care model as an important transformational option to health care reform that is easily scalable for other communities across the U.S.,” said Nick Hanauer, managing partner of Second Avenue Partners, in a statement. “Their innovative health care model reduces costs dramatically for individuals and businesses while delivering exceptional care and access for patients.”

The Qliance model doesn’t cover all the specialized services that some patients …Next Page »

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[This is the second part of a series on how the process of identifying venture-backed startups and commercialization opportunities at the University of Washington is evolving---Eds.]

How does the University of Washington Tech Transfer office view its ongoing relationship with venture capitalists?

On Wednesday, we reported on how venture firms around town are going about their business, working with researchers at the UW and looking for the next big startup. The focus was on recent changes at UW TechTransfer—with the high-profile hires of Linden Rhoads and Janis Machala, both prominent leaders in the tech-business community—that seem to have led to increased involvement with industry and venture capital. I wanted to hear Rhoads’s top-level perspective on this, as well as some more specifics from a few local VCs. I also dug up a couple intriguing bits of news, and things to look for down the road.

Rhoads first stressed the importance of outreach to the community. “We’re hosting many representatives from area firms, as well as Boston firms and other areas, and venture arms of pharmaceutical companies, but given the economic realities, none of that activity has turned out to be the most important to us,” says Rhoads. “Most important to us is the depth of our relationships with our traditional VC partners. It goes far beyond their actual portfolio companies.”

In this “far beyond” realm is the work that Seattle-area venture capitalists do to help recruit star faculty, serve on UW committees, and, of course, meet with the school’s researchers to advise them on commercialization possibilities.

Last month, UW TechTransfer held its first half-day retreat (including an advisory board meeting) since Rhoads took the helm. She says they hosted about 50 top business leaders in a room on campus for five hours: people like Nick Hanauer of Second Avenue Partners, Bob Nelsen of Arch Venture Partners, Matt McIlwain and Greg Gottesman of Madrona Venture Group, Ron Howell of the Washington Research Foundation (WRF Capital), Cameron Myhrvold of Ignition Partners, Bill McAleer from Voyager Capital, and Chad Waite from OVP. (The list of who’s who keeps going— Alan Frazier, Carl Weissman, …Next Page »

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‘Tis the season for Seattle startup awards. This week, the finalists have been announced for two separate sets of techie awards—one local, one national. If nothing else, the awards call much-deserved attention to the efforts of some very busy companies around town that we follow closely here at Xconomy.

—Finalists for Marcelo Calbucci’s Seattle 2.0 awards were announced in 10 different categories. (I was a judge for every category except for one, startup blogs, because Xconomy is one of the finalists. Thanks to everyone who nominated us.) Photo-editing startup Picnik leads the way, as a finalist in four categories. The ceremony, at which the winners will be named, is happening on May 7 at the Pacific Science Center in Seattle, and you can cast your votes here.

Best startup: DreamBox Learning, Picnik, Redfin, Wetpaint

Best bootstrapped startup: Appature, BigOven, Picnik, Urbanspoon

Best startup CEO: Andy Liu (BuddyTV), Glenn Kelman (Redfin), Jonathan Sposato (Picnik), Matt Hulett (mPire/Widgetbucks)

Best startup technologist: Chris Hahn (Appature), Greg Harrison (mPire/Widgetbucks), Joe Heitzeberg (WhitePages), Nat Brown (iLike)

Best startup product designer: Jenny Lam (Jackson Fish Market), Keith Harper (Inkd), Peter Roman (Picnik)

Best venture capitalist: Bill Bryant (Draper Fisher Jurvetson), Bill McAleer (Voyager Capital), Matt McIlwain (Madrona Venture Group), Nick Hanauer (Second Avenue Partners)

Best angel investor: Andy Sack (Founder’s Co-op), Bill Bryant (Draper Fisher Jurvetson), Geoff Entress (Voyager Capital), Mike Koss (Startpad)

Best service provider to startups: Adam Philipp (Axios Law Group), Craig Sherman (Wilson Sonsini Goodrich & Rosati), Shannon Swift (Swift HR Solutions)

Best blog about startups: Startup Whisperer (Matt Hulett), TechFlash (John Cook, Todd Bishop, Eric Engleman), Xconomy Seattle (Greg Huang, Luke Timmerman)

Best social event for startups: Ignite Seattle (Brady Forrest), Lunch 2.0 (Josh Maher), nPost Networking (Nathan Kaiser), Open Coffee (Andy Sack)

—CNET’s Webware 100 award nominees were announced (all 300 of them), also in 10 different categories across the Internet and Web 2.0 sector. Not counting some more established technologies from the likes of Microsoft and Amazon (like Amazon Web Services, Silverlight, and Windows Live Sync), here are the Seattle-area startups we found nominated in their respective categories. Winners will be announced on April 19. Vote here.

Audio & Music: iLike

Commerce: Farecast, Zillow

Communication: Jott

Photo & Video: Picnik

Productivity: Blist, LiquidPlanner

Search & Reference: eHow, Evri

Social Networking & Publishing: Wetpaint

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If anyone can ever build a real lightsaber like the ones from “Star Wars,” it will be Scott Keeney. The co-founder and CEO of Vancouver, WA-based nLight has expertise in high-powered semiconductor lasers, and he has shown some serious business chops by leading his company from early uncertainty to profitability in the past few years.

Based on this momentum, nLight raised $10.7 million last month in a new round of venture financing from existing investors Oak Investment Partners, Mohr Davidow Ventures, and Menlo Ventures. Getting the funding, which is being used to expand product development and sales, is impressive enough. But what’s really interesting is how a company involved with semiconductors and fabrication has managed to thrive in the current climate.

It all starts with the man at the top. A little-known fact about Keeney is that around 1997, he helped Seattle investor Nick Hanauer and others write the business plan for the online advertising company that became aQuantive (which was bought by Microsoft for $6.4 billion in 2007). Keeney had also worked for the Hanauers’ pillow and bedding company, Seattle-based Pacific Coast Feather, after graduating from the University of Washington. He learned a valuable lesson there. “High-tech entrepreneurs have a tendency to disparage low-tech, but for younger managers, you can learn a lot more in low-tech,” Keeney says. “Because the only way you win in low-tech is by out-executing your competition.”

Keeney started nLight in Seattle in 2000, initially with a focus on telecommunications. When that industry went through its downturn in 2001, nLight had to adjust (a bit like another Seattle company we profiled this week, Impinj). The laser company quickly expanded to customers in other markets like defense, medical, and industrial material processing. Today, nLight makes powerful lasers and fiber optics bought by original equipment manufacturers, and used for everything from welding plastic and cutting auto parts to military optics and surgical tools.

The company’s key advantage is its production method: it uses nanometer-sized particles that take care of both the waveguiding (light transmission) and active-ion (amplification) aspects of building a laser. The result is a cheaper, more energy-efficient, and brighter laser than what can be built using the conventional technique, which is called solution doping.

In 2002, nLight moved to Vancouver, WA, to be closer to manufacturing facilities. The company has an assembly plant in Hillsboro, OR, as well as offices in Germany, Finland, and China. It has more than 300 employees worldwide, about 200 in the U.S., and it first turned profitable in …Next Page »

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OK, I’m not usually a big fan of end-of-the-year lists. But given that Xconomy Seattle has been up and running for almost exactly six months (since June 16), Luke and I thought it would be fun and informative to share our site’s top 10 most-read stories so far—and why we think they were important or special.

The list is an interesting mix of stories that captures the spirit of what we’re doing here at Xconomy, and it also gives a pretty balanced retrospective on the events of the past half-year. The stories represent our commitment to cover all sorts of innovation in the Northwest, spanning technology, life sciences, breaking news (both good and bad), and in-depth features and analysis.

So, without further ado, here are the 10 most-read Xconomy Seattle stories of the past half-year:

10. Microsoft’s BizSpark Reaches Out to Startups

This piece covered how Microsoft relates to the startup community, through a review of the first 30 days of its BizSpark program.

9. It Came From the Hutch

The untold story of how Tysabri, the most effective multiple sclerosis drug on the market, was invented in a lab right here in Seattle.

8. Immune Design Raises $18M to Build Vaccine Company

Readers were excited to hear about one of the bigger venture financing deals of the year in Seattle, led by a team of superstars in immunology.

7. Heller Ehrman Dissolves

This was bad news based on a layoff filing from Washington State’s Employment Security Department. A global law firm with a large Seattle office, known for its work in the tech and life sciences community, has left the scene.

6. Amgen Scientist Vs. Bone Cancer

The story of a 13-year quest: how the persistence of a Seattle scientist at Amgen may pay off in the coming year, through a new drug for bone loss called denosumab.

5. Nathan Myhrvold Holds Court

An exclusive, in-depth interview with Nathan Myhrvold of Intellectual Ventures. The former Microsoft chief technology officer and founder of Microsoft Research covered everything from ping-pong with …Next Page »

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The list of donors to Barack Obama’s presidential inaugural committee includes some Seattle-area luminaries. The families of Bill Gates and Steve Ballmer each contributed $100,000, while several other Microsofties, including Craig Mundie, also made donations. Rob Glaser of RealNetworks and John Vechey of PopCap Games contributed $50,000 each, and Nick Hanauer of Second Avenue Partners donated $25,000.

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One of the simplest—and most disruptive—business ideas I’ve heard for U.S. health care reform is gaining momentum in downtown Seattle. It’s with a small group of primary care doctors at a company called Qliance, who don’t accept health insurance payments of any kind.

I made a beeline over to the Qliance office after hearing about this in a story Greg wrote a few weeks ago about Nick Hanauer, one of the early investors in Amazon. Hanauer, an investor in Qliance, said health insurance companies despise this idea, and he loves it. So naturally, I had to learn more about what this startup is trying to accomplish from its CEO, Norman Wu.

Here’s the problem they are trying to solve: American insurance companies gobble up about 40 cents of every dollar spent on health care for all the red-tape claims processing that goes on, and for their profits, Wu says. If primary care doctors decide to play ball in this system, the numbers tell an ugly story. They generally need to have a roster of patients 2,500 to 3,500 deep, whip through 25 to 30 appointments with patients each day, allocate less than 15 minutes for each patient, refer them unnecessarily to specialists, and move so fast they can barely remember anyone’s name.

Too much time, and staff energy, is wasted on haggling with insurance companies, and too little time doctoring properly, Wu says. About 90 percent of medical issues can be handled simply by a primary care doc, but these insurance hassles have turned this into a dying form of medicine.

“It’s akin to using your car insurance to pay for a new battery or a set of tires,” Wu says. “It doesn’t make sense.”

Instead, Qliance has set up what it calls “direct practice” which essentially freezes out the health insurers and deals directly with the patients. The patient hands over a credit card to get a recurring monthly membership fee sent to Qliance, for $39 to $79 a month. In return, the patient gets unrestricted use of the primary care service like a customer would get at a health club. If the patient has a fever and cough to get checked out, he or she simply calls to make an appointment, and gets in to see the doctor the same day, for 30 to 60 minutes. The doctor isn’t in such a hurry. He or she only has a roster of 800 patients, and generally books 10 to 12 appointments a day, while also being available for e-mail and phone consultations. The place has unrestricted, 7-day a week access to its physicians.

One thing most people don’t realize is how radically this changes the doctors’ perspective on medicine. The current insurance-based system encourages doctors to run all kinds of procedures and prescribe all kinds of drugs, because that’s how they get paid by insurers. When they get paid directly by the patient, regardless of what they do, the doctors’ perspective on what needs to be done suddenly changes, Wu says.

“They have to order up some procedure so they can justify having spent some time with you,” Wu says of the existing insurance-driven model. “They do unnecessary procedures, order up unnecessary repeat visits, or refer you to specialists. The cost just goes up and up, and the quality goes down.” He adds, “We don’t want to provide an incentive to push things on patients they don’t need. Our customer is the patient, not the insurance company.”

This being health care delivery, there are a lot of complex moving parts. Quite a few tests and procedures, like X-rays, EKG’s, or stitches are included in the Qliance monthly membership, but if a more complex treatment is needed, it can be added as an extra cost. If the patient needs a prescription, …Next Page »

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It was a very slow week for deals in the Northwest, with layoffs and other bad news dominating the headlines. But there were still a few deals in biotech, software, and e-commerce.

—The Fred Hutchinson Cancer Research Center in Seattle raised more than $2.2 million in donations for its research programs at its annual holiday gala, as Luke Timmerman reported. More than half the money, $1.2 million, will be used to expand immunotherapy clinical trials in the late stages of disease.

—Seattle-based nonprofit PATH is investing $3 million in a vaccine candidate against pandemic flu, as Luke reported. The vaccine, which is intended to mimic “bird flu,” is being developed by Gaithersburg, MD-based Lentigen.

—Microsoft (NASDAQ: MSFT) and Hopkinton, MA-based storage giant EMC (NYSE: [[ticker: EMC]]) expanded their partnership to improve data security for customers across networks and data centers, as our Boston colleague Ryan McBride reported. The deal, whose financial terms were not disclosed, will put technology from EMC’s security division, RSA, into certain Microsoft products, such as Windows Server 2008.

—Seattle-based Amazon completed its acquisition of Victoria, BC-based AbeBooks, an online marketplace for used and rare books. The deal was originally announced August 1. With this purchase, Amazon (NASDAQ: AMZN) also owns 40 percent of LibraryThing, a literary social site based in Cambridge, MA, that competes with Seattle-based Shelfari (another recent Amazon acquisition).

—Not a deal, but words of wisdom from two of Seattle’s most prominent deal-makers. Luke did an exclusive interview with Alan Frazier, founder of Seattle-based Frazier Healthcare Ventures. Frazier discussed why the traditional venture model is broken, and what companies need to do to adapt. And I sat in on a great talk by Nick Hanauer, founding partner of Seattle-based Second Avenue Partners and an early investor in Amazon, as he spoke about how to spot breakthrough ideas and companies.

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Last night, I attended an inspiring talk by Nick Hanauer of Seattle-based Second Avenue Partners. The venue was Seattle University, and the topic was “breakthrough thinking and ideas”—what they are, how to find them, and which companies have developed (and will develop) them. The event was organized by the Northwest Entrepreneur Network.

Hanauer knows a thing or two about business breakthroughs. He was the first non-family investor in Amazon.com, circa 1995. (Some nice nuggets from Amazon’s early strategy coming below.) He founded Avenue A Media in 1996, which was later renamed aQuantive and bought by Microsoft for $6.4 billion in 2007—Microsoft’s biggest acquisition to date. And he led an investment in Insitu, the maker of unmanned aerial vehicles that Boeing bought for some $400 million last July.

I’ll give a few highlights here from Hanauer’s talk, which he delivered to a jam-packed room of about 130 people. The start was delayed by a technical glitch in getting Hanauer’s slides loaded onto the right computer. (Insert obvious irony about a room full of techies.)

The key elements of a breakthrough idea, Hanauer said, are value creation and social disruption. “Value is difficult but possible to quantify—it’s the ratio of benefits to cost, divided by those of the alternatives,” he said. Benefits are things like a product’s durability, speed, and appeal; costs are things like price, distribution, and training. “Is this thing in some way 10 times better than the existing alternative?” he said. “No breakthrough idea has ever delivered less.”

He gave some examples. “Amazon offered 10 to 100 times the selection of any other bookstore, charged far less, and was much easier to search. It was the first real e-commerce business,” he said. “Insitu was started by some windsurfing freaks from Hood River. They were aeronautical engineers. They delivered 1,000 times the surveillance per dollar that Predator did.” Insitu’s UAVs were smaller, which made them harder to shoot down, and could fly lower, which made their cameras smaller and cheaper. They were effectively invisible at 1,500 feet, could read a license plate, radio it back to a base station, and locate it to within a few feet—all for $75,000, versus $10 million for a Predator drone. “That’s a transformational amount of value creation.”

As for social disruption, Hanauer gave a quick summary of what he meant:

—If everyone thinks it’s a great idea, it probably sucks.
—If people understand it, you’re too late.
—If people don’t like it and don’t understand it, it probably still sucks.

So entrepreneurship is a dangerous field, he said. “The difference between being an idiot and being a genius is very, very thin.” And keep in mind, he pointed out, “you can be very successful without being socially disruptive. Great fortunes have been made doing incremental things. Burger King, which came after McDonald’s, was not transformational, despite what they tell you…But they made a great fortune.”

Hanauer said the “most transformational idea” he’s working on right now is …Next Page »

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The Seattle community lost a giant last week, when Keith Grinstein passed away at the age of 48. A memorial service for Grinstein, the chairman of Coinstar and a venture capitalist at Second Avenue Partners, was held yesterday afternoon in Seattle. I wanted to post a couple of thoughts from the community that I’ve gathered.

From Michael Butler of Cascadia Capital:

“When I moved back to Seattle, Keith was one of the first people I met in the business community. He went out of his way to help me integrate into the community. He was a person with a kind heart, quick wit and a larger-than-life personality. His departure leaves a void and he will be deeply missed.”

From Nick Hanauer of Second Avenue Partners:

“Keith was an extraordinarily talented man. He was incredibly bright, educated and informed. He could do the Saturday NY Times crossword in about 15 minutes. It was humiliating to even be in the room with him when he was doing it.

“No one in Seattle had a better sense of humor or timing. Once, when a group of us at a large party were listening to one of our mutual women friends tell the story of their brief romantic relationship, and how wonderful it had been, Keith, without missing a beat said ‘Holly, you coughed me up like a hairball’. It was hilarious.

“He was larger than life. His early passing is tragic.”

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