Billy O’Grady
Senior Vice President
Southwest Market Manager
City National Technology Group
(650) 812-8311
Billy.OGrady@cnb.com

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

To read the reports for Silicon Valley, New York and Boston, click here.

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