Venture Capital: On a roll, Cascadia eyes overseas opportunities

SEATTLE POST-INTELLIGENCER | Friday, August 12, 2005 | JOHN COOK

[nickcarraway]

Seattle investment bank Cascadia Capital has been on a growth tear in the past two years, structuring more than a dozen acquisitions and helping privately held companies such as Speakeasy, World Wide Packets and Integrated Healthcare Systems attract large rounds of venture capital financing.

But Chief Executive Michael Butler, who co-founded Cascadia in 1999 after returning from Wall Street gigs at Lehman Brothers and Morgan Stanley, believes more opportunity lies ahead. And much of that opportunity, he said, is overseas.

That's why the 44-year-old investment banker recently hired Scot Land, a veteran Seattle venture capitalist who previously backed companies such as Bsquare, F5 Networks and RealNetworks. In his new role, Land will scour the planet for new ideas, technologies or distribution partners on behalf of Cascadia's clients.

In the past, boutique investment banks such as Cascadia simply served as matchmakers -- connecting companies with sources of funding or buyout opportunities.

Now, with Land's help, the firm hopes to take a more active role with its clients. For example, it could connect a Seattle medical device maker with a distributor in China -- potentially unlocking a huge market. Or it could identify promising technologies in eastern Europe for a Vancouver, B.C.-based fuel cell maker, technologies that could be cobbled into a subsidiary.

"The structure of an investment bank is to provide capital advisory services. It can be private equity, debt or public -- any source of capital," said Land, who previously worked at Encompass Ventures in Bellevue. "The next evolution is to think strategically in how to match strategic ideas with strategic capital."

The concept is still in the early stages. Land, who joined Cascadia in the past two weeks, declined to discuss specific deals he is working on.

But Butler believes there is money to be made in leveraging Cascadia's existing contacts to help create new business ideas -- especially those that might occur overseas.

"You look at the U.S. market and you say where is growth? Is it going to be in tech and telecom? We don't think so," said Butler. "... I think it is in Asia and central and eastern Europe. For a firm like Cascadia that is focused on growth opportunities, we think you have to start accessing the international markets."

Cascadia, which works in conjunction with venture capital and private equity firms, is not the only one looking at ways to tap into this global wave of innovation.

In June, Intel Capital established a $200 million China Technology Fund to invest in semiconductor, broadband and wireless communications companies. Last month, Accel Partners and International Data Group formed a $250 million fund earmarked for China. And just yesterday Yahoo! paid $1 billion for a 40 percent stake in Alibaba.com, a Chinese online auction and commerce site. That followed last week's stock market debut of Baidu.com, the Chinese search engine company partially owned by Google.

With that kind of money flowing overseas, Butler said the writing is on the wall. U.S. firms -- both money managers and technology companies -- must have a global strategy.

What does this mean for the Seattle technology community?

Land said he has been studying that idea for the past two years. And he is convinced that Seattle companies can benefit from the globalization trend if they find the right partners or technology.

"The quality of intellectual property creation here is world class," said Land, citing the number of Nobel laureates in medicine and physiology living in Seattle. "That is extraordinary, there is something really powerful here."

Though Butler said firms on the East Coast and in Silicon Valley are more aggressively targeting overseas opportunities, he said there is room for Seattle technology companies "to take advantage" of the trend.

Many venture-backed startups in the Seattle area have already tapped into the talented labor supply in India and China. Just yesterday, Seattle-based Aventail announced a new office in Korea. Others, such as Seattle wireless Internet company Mforma, have made strategic acquisitions in China and Korea.

And larger, publicly traded companies, such as InfoSpace, RealNetworks and Getty Images, all have made acquisitions in either Europe or Asia in recent months.