Senior Vice President
Southwest Market Manager
City National Technology Group
Venture capital investments in Los Angeles County surged in the third quarter, bucking a downtrend in Silicon Valley to the north.
And on paper at least, the list of businesses attracting the most cash reads like classic L.A.: organic products, self-produced videos, real estate and a meditation app.
VC firms invested a total of $581 million in L.A. County companies in the third quarter, up 51% from $386 million in the second quarter and nearly double the amount in the third quarter of 2014, according to data firm CB Insights. The number of companies funded totaled 38 last quarter, down 7% from the second quarter but up 19% from a year earlier.
By contrast, VC investments in Silicon Valley slowed to $6.93 billion last quarter from $9.32 billion in the second quarter. New York City also saw a modest pullback in funding.
L.A. County's venture capital investment total in the quarter was bigger than the amounts received by most states, including Florida ($480 million), Illinois ($477 million) and Texas ($462 million).
Of the 10 largest L.A. venture deals last quarter, eight were early-stage financings, meaning Series A or B. "That tells you that VC firms are willing to take a chance on some of the region's freshest business ideas," said Billy O'Grady, Southwest market manager for City National’s Technology Group.
L.A.'s summer funding rush was led by Honest Co., the Santa Monica firm that actress Jessica Alba created in 2011 to sell eco-friendly baby products, cosmetics and other merchandise online. The company picked up its fourth round of VC funding last quarter, totaling $100 million. Alba now is testing the brick-and-mortar format with a new pop-up store at L.A.'s Grove shopping center.
Another eco-friendly L.A. business got its first venture money last quarter: Thrive Market, which sells natural and organic products online via a membership system, took in $33 million in Series A funding. The Culver City-based company launched one year ago under CEO Gunnar Lovelace, who has founded several other tech and eco-oriented businesses.
L.A.'s second-biggest VC deal last quarter was a $70 million Series B infusion for Flipagram, an app that allows users to create short online videos using their favorite photos and music. The two-year-old Rolling Hills Estates firm has attracted millions of fans and some tech heavy-hitters: Silicon Valley VC legend John Doerr sits on Flipagram's board.
Realty Mogul, a two-year-old West L.A. company, nabbed $35 million in Series B funding. The company is a crowdfunding marketplace for real estate, connecting investors (minimum: $5,000) with property owners and borrowers.
On L.A.'s Silicon Beach, Headspace received its first venture infusion, totaling $34 million. The five-year-old Venice company produces online guided meditation sessions and "mindfulness training" exercises. The business is the brainchild of Andy Puddicombe, a former Buddhist monk.
EQUITY FINANCINGS FOR LOS ANGELES COUNTY VENTURE-BACKED COMPANIES*
|3 Q 2015||2 Q 2015||1 Q 2015||4 Q 2014||3 Q 2014|
|Number of Financing Deals||38||41||28||32||32|
|Amount Invested ($MM)||$580.96||$386.4||$220.3||$755.7||$312.7|
TOP 10 DEALS IN LOS ANGELES COUNTY
|COMPANY NAME||DESCRIPTION||CITY||ROUND TYPE||RAISED ($MM)||INVESTORS|
|The Honest Company||Non-toxic, eco-friendly consumer goods||Santa Monica||Series D||$100||AllianceBernstein, Wellington Management, Fidelity Investments, Institutional Venture Partners, Glade Brook Capital|
|Flipagram||Mobile applications for sharing visual stories||Rolling Hills Estates||Series B||$70.0||Kleiner Perkins Caufield & Byers, Sequoia Capital, Index Ventures, Galeo Ventures, K5 Ventures|
|Whipclip||Mobile app for creating clips of TV moments||Santa Monica||Series C||$40.0||Institutional Venture Partners, Raine Ventures, Eminence Capital|
|Realty Mogul||Real estate crowdfunding marketplace||Los Angeles||Series B||$35||Canaan Partners, Sorenson Capital|
|Headspace||Online membership platform for free guided meditation||Venice||Series A||$34.05||Allen & Company, Deerfield Management, Broadway Video Ventures, Advancit Capital, The Chernin Group, William Morris Endeavor, Breyer Capital, Seacrest Global Group, Cash Warren, Jessica Alba, Freelands Ventures|
|Thrive Market||A socially conscious online store offering natural and organic products||Culver City||Series A||$32.9||Greycroft Partners, e.ventures, Undisclosed Angel Investors, Scripps Networks Interactive, Jessica Alba|
|Ring||Developer of a WiFi-enabled doorbell||Santa Monica||Series B||$28||Shea Ventures, True Ventures, Upfront Ventures, American Family Insurance|
|The Black Tux||Online tuxedo and suit rentals||Santa Monica||Series B||$25||Menlo Ventures, First Round Capital, Stripes Group|
|Laurel & Wolf||Online interior design platform||West Hollywood||Series B||$25||Benchmark Capital|
|Bkstg||Artist and fan social media platform||Culver City||Series A||$20||Deep Fork Capital, Lerer Hippeau Ventures, Live Nation Labs|
|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 and legal adviser.|