Startup funding in the Pacific Northwest (PNW) took a substantial hit earlier this year. Between January and March, PNW investments plummeted by 80%, dwindling from $1.2 billion in the same period of 2022 to a mere $246 million.
However, one venture capital firm is anticipating a revival. Fuse, an early-stage venture company based in Bellevue, Washington, with a focus on PNW startups, has announced the launch of a $250 million investment fund, targeting software and “AI-enabled” startups. This marks Fuse’s second fund, supported by state-affiliated organizations, foundations, universities, and a roster of prominent software executives based in Seattle.
Brendan Wales, co-founder and general partner of Fuse, explained the firm’s mission, stating, “Our goal at Fuse is to become the preferred partner for early-stage founders developing cutting-edge software businesses in the Pacific Northwest. Rather than initially approaching large foundations and endowments, which we now have, we first established a strategic limited partner network comprising the world’s leading technology experts residing in our region.”
Fuse’s new fund, simply referred to as “fund 2,” will back 30 to 35 companies, slightly exceeding the 24 investments made from Fuse’s initial $173 million fund. As before, Fuse will co-lead funding rounds, providing investment amounts ranging from $1 million to $10 million.
Regarding the specific types of companies that Fuse aims to support with fund 2, Wales highlighted the need for businesses that “automate business processes” and empower workers to excel in their roles. He cited examples from Fuse’s existing portfolio, such as Carbon Robotics, which is developing autonomous weed-zapping robots using lasers, and Quandri, which focuses on process automation for insurance brokers and agencies.
“We have a track record of investing in and assisting in the growth of massive software businesses,” Wales emphasized. “Creating an AI product is one thing, but building a valuable AI business is another.”
However, founders may wonder why they should choose Fuse as an investment partner, given the abundance of VCs eager to invest in AI ventures. According to a recent survey by PitchBook and Collision, nearly three-quarters of global VCs invested in AI in the past year, with 14% claiming more than six investments in the field.
Wales contends that Fuse is uniquely positioned at the “epicenter” of AI innovation in Seattle, offering early engagement with founders and access to limited partners, including former Nike COO Eric Sprunk, GitLab CRO Chris Weber, and iCertis founder Samir Bodas.
“We have no rigid criteria. Our primary objective is to engage with founders as early as possible, even if they haven’t left their current employer,” Wales explained. “We will invest from day one through Series A and provide founders with access to top enterprise buyers as they seek to discover and scale product-market fit.”
Wales also emphasizes Fuse’s deep roots in the Seattle entrepreneurial community, which he believes provides a distinct advantage over other, less “embedded” VC firms based in San Francisco.
Founded in 2020, Fuse now boasts over $420 million in committed capital. Its founding team includes Brendan Wales, Kellan Carter, Cameron Borumand, John Connors, Satbir Khanuja, and Seattle Seahawks linebacker Bobby Wagner. Several members of the team have backgrounds at Seattle-based Ignition Partners, Microsoft, and Amazon, reflecting Fuse’s commitment to addressing the underserved PNW ecosystem despite the region’s growing number of unicorns over the past decade.
While Seattle’s VC ecosystem has improved, with the city rising to ninth place in Startup Genome’s global startup ecosystem rankings, there’s still work to be done. VC funding for Seattle-based startups hit a six-year low in the first quarter, amid the broader tech industry slowdown.
Wales concluded, “Before our founding, there hadn’t been a fund established here in over two decades that could lead Series A investments. By positioning ourselves at the heart of AI innovation, just minutes from Microsoft, we were confident that founders would be drawn to a local group willing to invest the time to support them right from the early stages of their entrepreneurial journeys.”
