Late Microsoft co-founder Paul Allen’s Vulcan spins off VC group with new name, broader investor base

Vulcan Capital, the venture capital group founded in 2003 as an internal division of Paul Allen’s Seattle-based Vulcan Inc. holding company, has been spun off into a standalone firm as part of a broader reassessment of the late Microsoft co-founder’s far-flung interests and investments following his October 2018 death.

Going by the name Cercano Management, the group is now “a separate and distinct entity from Vulcan,” a Vulcan spokesperson confirmed. The first sign of the change came earlier this month, when Cercano was named as an investor in a $5.9 million funding round for Seattle startup Pendulum, a Madrona Venture Labs spinout.

It’s a new era for a group that has been a quiet powerhouse in tech, internet and life sciences investing, operating for nearly two decades inside Vulcan’s headquarters on the southern edge of downtown Seattle.

With an estimated $10 billion in assets under management, Vulcan Capital has made 470 investments over that timeframe, in companies with a median valuation of $65 million, with an active portfolio of more than 100 companies, according to statistics compiled by venture capital database PitchBook.

Cercano is Spanish for “nearby,” and the company is, indeed, staying close to its roots. Based in Bellevue, Wash., Cercano will continue to work with Allen’s estate.

It’s also sticking to Vulcan’s tradition of secrecy. Numerous people affiliated with Vulcan Capital and Cercano declined to comment or didn’t respond to GeekWire’s inquiries. So far, the only content on Cercano’s website is its logo.

However, Cercano’s online profile signals a move to a broader investor base as a newly independent company. Whereas Vulcan Capital described itself as “the multi-billion dollar investment arm of Microsoft co-founder and philanthropist Paul Allen,” Cercano’s corporate LinkedIn page says, “Privately held investment management firm working exclusively with ultra-high net worth investors and family foundations.”

Vulcan described the change in pragmatic terms.

“Cercano continues to manage the investment assets of the Paul G. Allen estate, and those of the Paul G. Allen Family Foundation,” the Vulcan spokesperson said. “This transition started in early 2021, and while it is common for an investment management group to operate inside a family office, with Paul’s passing it made sense to separate that function for legal and tax reasons.”

Vulcan declined to provide further details about Cercano’s ownership structure or leadership, but public records offer additional clues about the change.

Cercano Management LLC and Cercano Management Holdings L.P. were officially established in September 2021, according to Washington state corporations filings. The records list former Vulcan Capital executives Chris Orndorff, Yongbai “YB” Choi, and Albert Hwang as corporate governors of the new entities.

Orndorff, who was previously Vulcan chief investment officer, is now Cercano’s CEO and chief investment officer, according to his LinkedIn profile.

Steve Hall, a mainstay of the Seattle tech scene who was Vulcan Capital’s longtime managing director before shifting into a role as venture partner several years ago, has also made the shift to Cercano, his profile indicates. Vulcan Capital director Stuart Nagae is also believed to be shifting to the new firm.

Vulcan Inc. is led by chair Jody Allen, the late Microsoft co-founder’s sister; and CEO Bill Hilf, a tech industry veteran known for his past roles at Microsoft and Hewlett-Packard Enterprise.

They have been going through a lengthy process of scaling back Allen’s many investments and projects following his death in October 2018 at the age of 65, after he was diagnosed with a recurrence of non-Hodgkin’s lymphoma.

Vulcan Capital has had “a clear and positive impact” on Seattle’s startup ecosystem, said Bill Bryant, Seattle-based general partner at Threshold Ventures, citing its investments in Blokable and Rad Power Bikes as examples.

“However, I’d say that Vulcan is also a story of unmet promise in that they weren’t more active backing PNW companies,” Bryant added via email. “They obviously had the capital to deploy but for whatever reason were not prolific investors [at the local level]. Part of this stems from their national strategy but I believe they could have played a key role in providing locally sourced follow on capital for growth stage startups that had to resort to seeking investors from other geographies.”

Some Seattle-area investors who have worked with and invested alongside Vulcan Capital over the years said its leaders could have more leeway under the new structure in defining their investment focus.

But overall, given the continuation in leadership from Vulcan Capital to Cercano Management, the standalone firm’s general approach is expected to remain much the same, as a reliable behind-the-scenes player.

Matt McIlwain, managing director at Madrona Venture Group, said Vulcan has been a “lower profile, but prolific partner in building companies with their capital and expertise over many years.” He said Madrona is looking forward to continuing its collaboration with the longtime Vulcan Capital leaders under the Cercano name.

“They’ve been very methodical … and they’ve been very patient,” said entrepreneur and investor T.A. McCann, managing director at startup studio Pioneer Square Labs in Seattle.

McCann worked with Vulcan’s Steve Hall to start Vulcan Labs as an entrepreneur in residence at Vulcan Capital from 2006 to 2008. That effort led to the creation of companies including Seattle startup Gist, which McCann led as founder and CEO before its acquisition by Blackberry in 2011.

Vulcan Labs provided a mechanism to turn Allen’s startup ideas into companies. His nickname of “Idea Man,” the title of his 2011 memoir, was well-deserved. Although the Vulcan Labs initiative later dissolved, Vulcan Capital continued to support startup incubation and creation as an investor in groups including Pioneer Square Labs and the AI2 incubator, an initiative of the Allen Institute for AI in Seattle, another of Paul Allen’s many creations.