Seattle, with its tech giants like Amazon and Microsoft, has the potential to be a top-tier startup ecosystem. However, according to Peter Mueller, co-founder and managing partner at Breakwater Ventures, there’s a missing “middle layer” hindering its growth.
In a recent episode of the Startup Project podcast, Mueller discussed his experience in venture capital, the gaps in Seattle’s funding landscape, and Breakwater’s investment thesis.
Listen below, and continue reading for highlights from his comments, edited for context and clarity. Subscribe to Startup Project and hear more episodes at thestartupproject.io.
From financial analyst to startup champion
Mueller’s journey to venture capital began unconventionally. Starting in financial services, he witnessed the rise of tech companies and realized he wanted to be in the business of technology. Drawn to the building and innovation in the tech world, he made his way to San Francisco and landed at Carta, where he helped build their valuation business segment.
After a stint in private equity, Mueller arrived in Seattle, attracted by the city’s growing tech talent pool. He observed a shift from a primarily developer-focused environment to one with specialized roles in product and sales, indicating the potential for a thriving startup scene.
Filling the gaps in Seattle’s funding landscape
Despite its potential, Seattle’s startup ecosystem lacks a crucial element: a robust “middle layer” of Series A, B, and C companies. This gap, according to Mueller, is primarily due to insufficient capital being deployed at the pre-seed and seed stages. He argues that the current risk-averse nature of angel investors and the tendency towards over-analysis are hindering the growth of promising startups.
He contrasts Seattle’s angel investing landscape with other markets, where decisions are made faster and with an emphasis on faster due diligence. This difference, he believes, discourages founders who need quick and decisive funding to build momentum.
Breakwater Ventures: Investing in velocity and domain expertise
Breakwater, Mueller’s latest venture, seeks to fill this funding gap by providing institutional risk capital at the pre-seed stage of startup investments. The firm focuses on software-centric founders in Seattle and Vancouver, primarily in fintech, AI/ML, marketplaces, and vertical SaaS.
Breakwater VC seeks to identify founders who are “hyper-focused” on specific use cases and demonstrate an aggressive approach to problem-solving. Additionally, the firm sees significant potential in Vancouver’s startup scene, fueled by Canada’s welcoming immigration policies and government support for startups.
Investment trends and AI
Mueller believes that the rise of generative AI and LLM hype led to many “GPT wrapper” companies without defensibility. He also believes there will be more focus on multi-agent, multi-modal AI applications.
While storytelling remains important, technical depth and a strong understanding of the evolving technology landscape are becoming increasingly crucial. He encourages founders to be more deliberate about fundraising, considering bootstrapping options and avoiding the “VC treadmill” of large rounds and inflated valuations.
To listen to the full conversation and learn more about Peter Mueller’s insights, check out the Startup Project podcast episode here. Subscribe in Spotify, Apple Podcasts, and YouTube.
