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Peter Mueller, co-founder of Breakwater Ventures, discussed the challenges facing Seattle’s startup ecosystem on the Startup Project podcast. He identified a missing “middle layer” of Series A, B, and C companies hindering growth due to insufficient capital deployed at the pre-seed and seed stages. Mueller believes this gap is driven by risk-averse angel investors and a tendency towards over-analysis, discouraging founders who need quick funding to build momentum.

Mueller’s journey to venture capital began in financial services before transitioning to tech in San Francisco and eventually settling in Seattle. He recognized the city’s growing tech talent pool and saw the potential for a thriving startup scene. Upon realizing the shift towards specialized roles in product and sales, he saw an opportunity to contribute to the ecosystem’s development.

Breakwater Ventures, Mueller’s latest venture, aims to fill the funding gap in Seattle by providing institutional risk capital at the pre-seed stage. The firm focuses on software-centric founders in Seattle and Vancouver, particularly in fintech, AI/ML, marketplaces, and vertical SaaS. They seek founders who are hyper-focused on specific use cases and demonstrate an aggressive approach to problem-solving.

Mueller voiced concerns about the rise of generative AI companies lacking defensibility and emphasized the importance of technical depth and understanding the evolving technology landscape. He advised founders to consider bootstrapping options and avoid the VC treadmill of large rounds and inflated valuations. Mueller highlighted Vancouver’s startup scene, citing Canada’s welcoming immigration policies and government support for startups as significant factors driving its growth.

Mueller compared Seattle’s angel investing landscape to other markets where decisions are made faster and with quicker due diligence. He believes this approach discourages founders in need of decisive funding to build momentum. Breakwater Ventures seeks to invest in founders with domain expertise and a focus on specific use cases to drive innovation in Seattle and Vancouver’s startup ecosystems.

Mueller’s insights reflect his experience in venture capital and his efforts to address the challenges facing Seattle’s startup ecosystem. By providing institutional risk capital at the pre-seed stage, Breakwater Ventures aims to support founders who demonstrate a strong understanding of their market and a proactive approach to problem-solving. To listen to the full conversation and learn more about Mueller’s views on investment trends and the evolving technology landscape, check out the Startup Project podcast episode featuring him.

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