Are Seattle startups missing the mark?

There's been a lot of chatter in recent months about the inability of Seattle venture capitalists to find promising startups. But it appears that VCs are finding the deals, they just don't happen to be in Seattle.

I was struck by this trend today after perusing the Dow Jones FASTech 50 Startups to Watch list. Once again, no local startups made the cut. But taking a closer look shows that Seattle VCs are well represented with non-Seattle portfolio companies.

New York-based Animoto (backed by Madrona Venture Group); San Francisco-based Heroku (backed by Ignition Partners); and Santa Clara, California-based StorSimple (also backed by Ignition) all made the list. Even more disappointing is the fact that one of the startups on the list (Twilio) left Seattle for San Francisco in June 2009.

We've noted this trend in the past, pointing out some of the bets that firms such as Ignition Partners, Voyager Capital and OVP Venture Partners have made outside of the region. But it goes deeper than that.

Consider this: Some of the best exits so far this year for the Seattle venture capital firms have occurred with companies that are based elsewhere.

Madrona's best deal occurred in August when Google gobbled up Jambool for a reported purchase price of $75 million. That marked the first major acquisition of a Madrona portfolio company since 2008. And while Jambool employed key staffers in Seattle, its headquarters was in San Francisco.

Ignition's best deal not only occurred outside of the region, but it came from outside of the country. The Bellevue venture capital firm bankrolled ChinaCache, a Beijing-based company which earlier this month conducted one of the best performing initial public offerings of the year on Nasdaq.

OVP Venture Partners is hopeful that its first IPO in more than a decade comes from Complete Genomics, which filed to raise up to $86 million this past summer. The biotechnology company happens to be based in Mountain View, California.

I wouldn't call this a crisis, not just yet. And who knows, maybe some blockbuster Seattle deals are right around the corner.

But I've noted in the past that we've seen a lack of groundbreaking ventures emerging in the Seattle area in recent years, the kinds of companies that could go public of get acquired for hundreds of millions of dollars.

Some like to blame Seattle VCs for not supporting entrepreneurial teams in the Northwest. But that's not quite fair, since a number of firms have continued to invest in startups in the Pacific Northwest. (Perhaps the biggest Seattle area startup deal of the year was the purchase of mobile software startup Cequint -- backed by Benaroya Capital -- for up to $112.5 million).

Nonetheless, it is not the VCs' mission to serve as an economic development operation for the region. Instead, they are charged with finding great entrepreneurs who will produce spectacular returns. And it really doesn't matter if those people are in Seattle or San Francisco or San Antonio.

For whatever reason, it just appears that some of the most promising companies in the Seattle VCs' portfolios (based on recent or pending exits and subjective lists like the one from Dow Jones and another recent list published by Alley Insider) aren't located here.

The concern for the Seattle startup community is that once the VCs have tasted success in other markets -- whether Silicon Valley or China -- the likelihood of them going back to that entrepreneurial well increases.

[Flickr photo via Cristiano Betta]