Seattle Roundup: State Budget, Unikrn, Skykick, & Korner

Heading into Independence Day weekend, Washington state still has a functioning government. The budget deal reached this week had implications for life sciences, the tech industry—including a tax increase specifically targeting Microsoft—cleantech, education, and much more. There were also a spate of smaller funding deals for Korner, Unikrn (not yet valued at “tres commas,” as far as we know), and Skykick, as well as a new fund raised by Keiretsu Forum affiliate Keiretsu Capital. Read on for details:

—The Life Sciences Discovery Fund and the state research and development tax credit, two pillars of state support for the biotech industry, met their demise, to the shock and disappointment of industry leaders. Gov. Jay Inslee, who didn’t save the fund with a veto this time around, maintains he’s still a biotech stalwart, and pledged to “find a way forward.”

—The head of the Washington Technology Industry Association, Michael Schutzler, maintains his position that the lack of an R&D tax credit in an innovation-heavy state such as Washington is “silly,” but praised the state budget compromise. He noted that if the industry wants things like better public education to produce the pipeline of computer science graduates it needs, it must be “willing to participate in the compromises.”

—Microsoft was willing. Legislative language ending a sales tax exemption for software machinery and equipment targets a single company. Know any other software makers with more than 40,000 employees in the state in business since 1981 or earlier? The Seattle Times’ Jim Brunner dug out the details of this unique bit of loophole-closing, which is expected to increase the Redmond software giant’s state tax bill by $57 million in the next biennium. Microsoft executives expressed no misgivings about the move.

—It’s the third helping of corporate largesse heaped on the state by Microsoft to come to light in the last month. It committed $40 million to launch the Global Innovation Exchange and $10 million to begin the private fundraising campaign for a new computer science building at the University of Washington. At the time of that donation, I asked Microsoft general counsel Brad Smith whether the tech industry and his company were doing enough to match their rhetorical support for improving the state’s STEM education pipeline with concrete proposals to the state’s revenue shortfall. He said the company is sensitive to the issue, and added “sometimes conversations are better off through the front page of the paper, and other times, the harder issues are better off discussed in other ways.”

—Smith was also adamant that the state needs to “move forward and make its contribution” to the UW computer science expansion. But here again the tech industry was disappointed. Instead of the $40 million from the capital budget UW had originally requested, or the $32.5 million it hoped for as the budget hash started coming together, it instead got that total through a combination of a capital allocation and a draw from a separate building maintenance fund. That means the UW will have to raise an additional $15 million in private donations (on top of the $70 million it was already seeking) to repay the building maintenance fund, says computer science professor Ed Lazowksa, leading the way on the fundraising drive, in an e-mail to GeekWire.

—The state’s cleantech industry, meanwhile, got what it wanted out of the capital budget: a $40 million extension of the Clean Energy Fund, which has been instrumental in funding things like large-scale energy storage demonstration projects. According to the CleanTech Alliance industry trade group, the extension includes a $10 million revolving loan fund for efficiency and renewable energy projects using proven technologies; $6.6 million in credit support for advanced solar and other renewable energy manufacturers in the state; $13 million in new grants for new renewable energy technologies and the systems needed to integrate them into the grid; and $10 million to match other non-state funds for research, development, and demonstration.

—If you’re looking for a break from the state budget, and the heat, take a virtual dip in Puget Sound with our story and slideshow from a recent dive in the Cyclops 1 submersible, developed by OceanGate.

And, some funding news:

Keiretsu Capital, based in Seattle, has raised more than $6 million in its first co-investment fund to back startups that receive investment from angel groups including Keiretsu Forum, Element 8, Portland Seed Fund, Tie Angels Group Seattle, Oregon Angel Fund, Zino Society, Band of Angels, Sand Hill Angels, Tech Coast Angels, and several more. The CEO of Keiretsu Capital is Nathan McDonald, chairman of the Keiretsu Forum Northwest. It has made 17 investments so far, and plans to deploy all of its capital over the next year to 18 months.

Korner, a Seattle startup, making an inexpensive home security system, has raised $1.4 million from Alliance of Angels, Tech Coast Angels, and other angel investors, says CEO Steve Hollis. The equity funding follows a $420,000 Indiegogo campaign last summer. Korner uses sensors installed in windows and doors that connect to transmitter attached to a home modem or wireless router. An app delivers security alerts and controls the system. Hollis says manufacturing of the Korner system has begun. Indiegogo supporters are expected to receive units in a few weeks, with general availability planned for August.

SkyKick, a Seattle company making software to help IT professionals centrally manage their customers’ cloud applications, has raised $10 million from existing and new investors, including Navin Thukkaram, COO of Qwiki; angel investor Tim Ferriss, and former German bureaucrat Karl-Theodor zu Guttenberg, the company said in a news release. SkyKick also provides backup and migration tools that work with cloud products including Microsoft Office 365 and Dropbox.

Unikrn, an e-sports betting startup in Seattle, has raised $7 million from Binary Capital. It had previously raised $3 million from investors including Mark Cuban, as TechCrunch reports. The company was founded by former Microsoft Ventures head Rahul Sood and Karl Flores. PS, how cute is it that they use childhood pictures on their about page?

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

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