At the WSA investment panel last week, Madrona Venture Group's Matt McIlwain indicated that the firm was close to completing its "27th exit" -- meaning that an acquisition was in the works. McIlwain declined to disclose details when I pressed him later.

But now it looks like the deal is done, with Microsoft announcing that it has acquired Ballard startup Seadragon, according to this post from Microsoft blogger Alex Barnett.

Seadragon, which was founded in 2003 by former Princeton University researcher Blaise Aguera y Arcas, has developed technology that allows individuals to view and interact with high resolution images. The technology could be used in telemedicine, blogging, mapping, virtual books and other areas, according to the company Web site.

Formerly known as Sand Codex, Seadragon scored $2 million in financing from Madrona and others last summer. So, this might be one of the quicker exits in Madrona's history.

The sale also is good news for Madrona, which is attempting to wrap up its third venture fund. Terms of the Seadragon deal weren't disclosed, but an acquisition by the world's largest software company certainly will be a boost to Madrona's fundraising efforts.

UPDATE: Well, it looks like the cart may have been put in front of the horse on this deal. P-I reporter Todd Bishop reports today that Microsoft's references to the Seadragon deal have now been removed from the company's Live Labs Web site and team leader Gary William Flake declined to comment about the deal over the weekend.

So is it a done deal or not? I have calls into the folks at Seadragon and Madrona to get their take, but it looks like Flake may have prematurely announced the deal.

Microsoft's Robert Scoble talked about the "rumored acquisition" in this post on Saturday.