Senior Vice President
Southwest Market Manager
City National Technology Group
L.A. County saw venture capital investors write bigger checks but to fewer companies in the first quarter of 2015.
Paced by a continued slowdown in financings for startups in the hot “Silicon Beach” area of Santa Monica, Venice and Marina del Rey, a total of 28 L.A. County companies got venture funding last quarter, down from 38 in the first quarter of 2014 and 32 in the fourth quarter.
The dollar amount invested rose to $220.3 million from $157.2 million a year earlier, according to data firm CB Insights. But the latest quarter total was down from $270.0 million in the fourth quarter, excluding the huge $486.0 million infusion that Venice-based messaging platform Snapchat got in December.
L.A. is mirroring a nationwide deceleration in the number of venture deals since last spring, according to CB Insights data. But Billy O’Grady, Southwest market manager for City National’s Technology Group, noted that data for VC firms don’t include venture investments made by other investors, such as firms that invest for wealthy families.
Still, there may be other factors at work in slowing business startup opportunities in L.A., at least temporarily, O’Grady said. One is the lack of affordable offices in Silicon Beach, as booming tech companies already there have swallowed up space, he said. And in general, the high valuations of many California tech firms are scaring off some venture investors.
Whatever the reasons, the number of Silicon Beach companies receiving new VC fundings totaled nine last quarter, down from a high of 16 in the summer quarter last year and 15 in the first quarter of last year.
But L.A. companies that made the cut received larger average VC investments last quarter than a year ago. The biggest single funding was a $30 million Series C investment in Santa Monica-based Tradesy, a two-year-old online marketplace for buying and selling women’s fashions. Second on the L.A list was a $24 million Series E financing for Machinima, a West Hollywood-based video network aimed at young males and gamers. The company is old by L.A standards: It was founded in 2000.
Overall, the quarter’s top 10 L.A. venture recipients illustrated the range of business ideas incubating here, including diet-soda-maker Zevia in Culver City, cybersecurity firm InAuth in Venice and high-speed transportation systems developer Hyperloop in downtown L.A.
“A key strength of L.A. is the diversity,” O’Grady said.
EQUITY FINANCINGS FOR LOS ANGELES COUNTY VENTURE-BACKED COMPANIES
|1 Q 2015||4 Q 2014||3 Q 2014||2 Q 2014||1 Q 2014|
|Number of Financing Deals||28||32||32||43||38|
|Amount Invested ($MM)||$220.3||$755.7||$312.7||$381.3||$157.2|
TOP 10 DEALS IN LOS ANGELES COUNTY
|COMPANY NAME||DESCRIPTION||CITY||ROUND TYPE||RAISED ($MM)||INVESTORS|
|Tradesy||P2P marketplace for fashion for women||Santa Monica||Series C||$30||Kleiner Perkins Caufield & Byers, Rincon Venture Partners, Richard Branson|
|Machinima||Video entertainment network for video gamers||West Hollywood||Series E||$24||Redpoint Ventures, MK Capital, Coffin Capital & Ventures, Warner Bros. Entertainment, Allen DeBevoise|
|InAuth||Global solutions provider of cybersecurity for enterprises||Venice||Series A||$20||Bain Capital Ventures|
|Nasty Gal||e-commerce platform and brand for fashion-forward women||Los Angeles||Series C||$16||Index Ventures, Ron Johnson|
|Oblong Industries||Develops spatial operating system that provides data visualization, analytics and integration across multiple applications||Los Angeles||Series D||$15||Foundry Group, DG Incubation|
|MiTu||Multichannel YouTube network dedicated to Latino content||Culver City||Series B||$15||Northgate Capital, Upfront Ventures, AMC Networks, Daher Capital|
|Zevia||Manufactures sugar-free, natural diet soda||Culver City||Series D||$11.8||Northwood Venture Partners|
|The Black Tux||Online tux and suit rental platform||Santa Monica||Series A||$10||Menlo Ventures, First Round Capital, The Raine Group|
|ChowNow||Online food ordering platform built for mobile and Facebook||Venice||Series B||$10||Upfront Ventures, Daher Capital, Karlin Ventures, Steadfast Venture Capital|
|Hyperloop Technologies||Developing technology to make hyperloop transportation a reality||Los Angeles||Series VC||$8.5||Formation 8, Sherpa Ventures|
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|The content of Venture Capital Report is compiled from data and sources believed to be reliable, but is not guaranteed as to accuracy or completeness. Opinions expressed are those of the authors or the interviewees and are not necessarily the opinions of City National Bank, member FDIC. This publication is intended to be a source of general information regarding subject matters of interest to our clients. The effectiveness of the advice or suggestions presented, if any, will depend on the reader’s situation and are for the reader to determine. If investments are discussed, the discussion should not be considered or relied upon as specific investment advice directed to the reader’s specific investment objectives, nor should any discussion of specific securities be taken as a solicitation or recommendation for any reader to buy or sell such securities. City National Bank (and its clients or associated persons) may at times have positions in securities and investments discussed from time to time in this publication and may make additional purchases or sales inconsistent with the discussion. City National Bank, as a matter of policy, does not give tax, accounting, regulatory or legal advice. Rules and regulations in the areas of law, tax and accounting are subject to change and open to varying interpretations. The reader is encouraged to consult his or her own tax, accounting or legal adviser.|