Funding deals for some fast-growing online businesses helped boost venture capital inflows to Los Angeles County in the third quarter, bucking a national downtrend.
L.A. County firms took in $341.6 million in venture money last quarter, up 3% from the second-quarter total, according to data firm CB Insights. By contrast, venture financing nationwide slumped 30% last quarter from the 13-year high reached in the second quarter.
L.A.'s total VC funding in the third quarter was shared by fewer companies, a total of 28, down 20% from 35 in the second quarter. Nationwide the number of companies funded fell 10%.
More than half of the venture dollars flowing to L.A. went to companies in the hot start-up area dubbed Silicon Beach, including Santa Monica, Venice and Marina del Rey. The second-biggest deal in the period was a $70-million investment inThe Honest Co., a Santa Monica-based e-commerce firm co-founded by actress Jessica Alba in 2012. The company designs and sells eco-friendly personal-care and cleaning products, including baby diapers.
The quarter's biggest L.A.-area venture investment was an $85-million infusion for JustFab, an El Segundo-based online retailer. The four-year-old company sells shoes, jewelry and other items via a subscription service, and claims 35 million members worldwide.
While The Honest Co. and JustFab now have received multiple rounds of financing from VC firms, five of the top 10 L.A. deals last quarter were first-round, or Series A, investments. That's an encouraging sign for start-ups, said Billy O’Grady, managing director of City National's Technology Group. "The A-round deals are getting some big dollars," he said.
The largest Series A financing in L.A. County last quarter was a $63-million investment in ZipRecruiter, an online job-posting platform aimed at small- and medium-sized businesses. The Santa Monica firm, launched in 2010, says it's adding 30,000 employers a month to its database.
Among smaller deals, three-year-old L.A.-based Club W raised $9.5 million in Series A financing. The subscription service selects and sends artisanal wines to customers monthly based on how they describe their palate.
O’Grady said L.A. entrepreneurs increasingly are benefiting from the area's strong base of "angel" investors - wealthy individuals who typically provide initial financing for new business ideas before the companies have enough heft to attract venture capitalists. "Angel investors are the key to success for L.A. start-ups," O’Grady said. "They provide not just money but expertise."
EQUITY FINANCINGS FOR LOS ANGELES COUNTY VENTURE-BACKED COMPANIES
|3 Q 2014||2 Q 2014||1 Q 2014||4 Q 2013||3 Q 2013|
|Number of Financing Deals||28||35||36||32||25|
|Amount Invested ($M)||$341.6||$332.6||$174.5||$270.5||$214.6|
TOP 10 DEALS IN LOS ANGELES COUNTY
|COMPANY NAME||DESCRIPTION||CITY||ROUND TYPE||RAISED ($MM)||INVESTORS|
|JustFab||Fashion retail and styling platform||El Segundo||Series D||$85||Passport Capital, Matrix Partners, Technology Crossover Ventures, Shining Capital|
|The Honest Company||Online eCommerce and subscription service for family essentials||Santa Monica||Series C||$70||Lightspeed Venture Partners, General Catalyst Partners, Wellington Management, Institutional Venture Partners, Iconiq Capital|
|ZipRecruiter||Online job postings||Santa Monica||Series A||$63||Industry Ventures, Institutional Venture Partners, Basepoint Ventures|
|NantMobile||Technology platform that recognizes images, objects, and more via cameras||Culver City||Series B - II||$30||Verizon Ventures|
|Digital Entertainment Corporation of America||Makers of Kin Community: An online community for women||Santa Monica||Series C||$12||Mayfield Fund, Rustic Canyon Partners, General Catalyst Partners, Emil Capital Partners, Corus Entertainment|
|Club W||Direct to consumer winery company||Los Angeles||Series A||$9.5||Bessemer Venture Partners|
|Telesign||Mobile identity verification platform||Marina del Rey||Series B - II||$9||Telstra Ventures|
|Workpop||Online marketplace for employers and job seekers||Los Angeles||Series A||$7||Trinity Ventures, Obvious Ventures, SV Angel, Cornerstone OnDemand|
|Retention Science||Data-based marketing strategies||Santa Monica||Series A||$7||Baroda Ventures, Upfront Ventures, Undisclosed Angel Investors, Mohr Davidow Ventures, Forerunner Ventures|
|Agent Ace||Real estate agent data analysis||Santa Monica||Series A||$6||Triangle Peak Partners, March Capital Partners|
*Equity financings include cash investments by professional venture capital firms, corporations, other private equity firms, and individuals into companies that have received at least one round of venture funding.
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