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Big-data start-ups become target for investors

StartupsFinanceBusinessEconomy, Business and FinanceThomson Corporation
The number of venture capital funds that raised money in the last quarter reaches 7-year high
Start-ups that collect large data sets have new group of angel investors to turn to
Five Bay Area venture capital firms raised more than 70% of $3.7 billion total raised by California funds

A new Los Angeles venture capital fund was among 78 funds nationwide to raise money in the second quarter of 2014, the largest number of funds pulling in money since 2007, according to the National Venture Capital Assn. and Thomson Reuters.

Though the funds raised 19% less money than in the previous quarter, the $7.4 billion raised still points to a strong market for start-ups to snag investments, the association said Wednesday. The growing number of successful initial public stock offerings of technology companies is paying off for venture capital firms, and likely spurring them to re-invest.

"This reinvestment cycle is not only good for the venture firms and their limited partners, but for the next crop of American innovators that want to take their businesses to the next level,” said Bobby Franklin, president and chief executive of the association.

In Los Angeles, four angel investors announced last week that they have formed Susa Ventures, which will split $25 million among about 50 start-ups that are collecting large data sets or developing ways to act on such information.

Susa has already invested in 17 startups, including Whisper, the Los Angeles-based anonymous message sharing app. Online search app Vurb and crowd-sourced jukebox app Rockbot are among other non-traditional data companies that have received early funding from Susa.

Eva Ho, one of the four Susa founders, said Whisper has a huge amount of user posts. But how to analyze them and make money from it? That’s the help she hopes the Susa team can provide because of their engineering backgrounds. Ho formerly worked at Google and YouTube. Leo Polovets worked at LinkedIn, and Chad Byers at AdHQ. The fourth partner, Seth Berman, previously worked in marketing.

Susa Ventures joins data-focused venture capital funds including Data Collective and IA Ventures.

“The theme for us is looking for someone building and amassing valuable data that can be used by lots of companies,” Ho said. “Or it’s others building the tools and analytics on top of someone else’s data.”

There's far more big data-focused companies located in San Francisco than in Los Angeles, Ho said. But she's interested in funding start-ups in Los Angeles and New York.

Venture capital activity in California remains centered on the Bay Area, according to the NVCA and Thomson Reuters data. Five venture capital firms based in either Palo Alto or Menlo Park raised more than 70% of the total $3.7 billion collected by California funds during the last three months, led by Norwest Venture Partners' nation-leading $1.2 billion in fundraising.

At least two other Los Angeles funds saw commitments in the last quarter: Double M Partners II L.P. reported about $8 million and Trust Co. of the West/Craton Equity Investors II L.P. about $51 million.

Chat with me on Twitter @peard33

Copyright © 2014, Los Angeles Times
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