By Billy O'Grady
Senior Vice President
Southwest Market Manager
City National Technology Group
A slowdown in funding for new businesses in the Silicon Beach area paced a modest pullback in venture capital investment across Los Angeles County in the fourth quarter.
The decline in dollars invested followed the trend in other favorite VC money destinations, including Silicon Valley, New York City and Boston. The rough start for global financial markets in 2016 also is raising concern about VC funding this year.
L.A. County companies took in $534 million in venture capital funds last quarter, down 12% from $607 million in the third quarter, according to data firm CB Insights.
The latest quarter also was off sharply from the final quarter of 2014, when the L.A. area garnered $744 million in VC funds. But that total had been swelled by a $486 million investment in ephemeral-messaging application Snapchat.
While L.A. County saw fewer total VC dollars last quarter, the number of companies getting financing inched up to 48 from 46 the previous quarter. "That shows VC investors continued to find new ideas with attractive prospects in L.A.," said Billy O'Grady, Southwest market manager for City National’s Technology Group.
L.A.'s weak link in the fourth quarter was the Silicon Beach region centered in Santa Monica. VC firms invested $170 million in 13 companies in that region, down 42% from $292 million in 15 companies during the third quarter.
Real estate affordability has been a concern for young companies hoping to launch in Santa Monica. But O'Grady noted that one option for startups has been to locate further down the coast or a bit more inland. Indeed, L.A. County's 10 largest VC deals last quarter included companies based in El Segundo, Manhattan Beach, Beverly Hills and Culver City.
The No. 2 deal overall was a $49 million, Series D investment in SteelHouse, a five-year-old Culver City firm that has developed a cloud-based platform for customizing e-commerce companies' marketing.
In El Segundo, Beyond Meat got $17 million in Series E funding. The six-year-old firm turns 100% plant protein into food products "with the taste and texture of meat." The company says its products, manufactured in Missouri, now are sold in 10,000 stores nationwide.
InvestCloud, based in Beverly Hills, received a $45 million growth-equity infusion. The firm, launched in 2010, has developed cloud-based business platforms for investment managers and wealth advisors, allowing them to customize office functions and communications with clients.
Still, L.A. County's biggest VC funding beneficiary in the fourth quarter was a Santa Monica firm: Tiger Text, a five-year-old company whose technology allows organizations and individuals to securely communicate via mobile phones, got $50 million in Series C financing.
Also in Santa Monica, Tastemade took in $40 million in Series D funding. The company, founded in 2012, has become a major network of food- and travel-related videos aimed at millennials.
Gil Elbaz’s Factual, a location data provider, raised $35 million in Series B financing to expand its operations in Century City.
EQUITY FINANCINGS FOR LOS ANGELES COUNTY VENTURE-BACKED COMPANIES*
|3 Q 2015||2 Q 2015||1 Q 2015||4 Q 2014||3 Q 2014|
|Number of Financing Deals||38||41||28||32||32|
|Amount Invested ($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|
|TigerText||Secure, real-time enterprise messaging||Santa Monica||Series C||$50||Accolade Partners, Invus Group, Norwest Venture Partners, OrbiMed Advisors, Reed Elsevier Ventures, Shasta Ventures|
|SteelHouse||Advertiser targeting software||Culver City||Series D||$49||Mercato Partners, Silicon Valley Bank, Staley Capital Advisers|
|InvestCloud||Cloud-based collaboration tool for institutional investors||Beverly Hills||Growth Equity||$45||FTV Capital|
|Tastemade||Food-focused digital media||Santa Monica||Series D||$40||Comcast Ventures, Goldman Sachs, Liberty Media, Raine Ventures, Redpoint Ventures, Scripps Networks Interactive, Tohokushinsha Film|
|Factual||Location data provider||Los Angeles||Series B||$35||Altpoint Ventures, Andreessen Horowitz, Data Collective, Haystack Partners, Heritage Group, Index Ventures, Michael Ovitz, Miramar Venture Partners, Saif Mansour, Tamarisk Global, Tom Unterman, Upfront Ventures|
|Hyperloop Technologies||Developing technology for improved cargo and people travel speeds||Los Angeles||Convertible Note||$26||Caspian VC Partners, Formation 8, Khosla Ventures, Sherpa Capital, ZhenFund|
|DataScience||Data analytics provider||Culver City||Series A - II||$22||Whitehart Ventures|
|Ticket Manager||Ticket and invitation management applications||Calabasas||Series B||$20||Kayne Anderson Capital Advisors, Point Judith Capital|
|3PL Central||Third party logistics provider||Manhattan Beach||Growth Equity||$17.5||Mainsail Partners|
|Beyond Meat||Produces a plant protein that acts as a meat replacement||El Segundo||Series E||$17||Collaborative Fund, DNS Capital, Kleiner Perkins Caufield & Byers, Seth Goldman, Union Grove Venture Partners|
|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.|