Venture capital investment stays robust across U.S., in Los Angeles
Patrick Soon-Shiong is a doctor and entrepreneur whose start-up company, NantHealth, seeks to use medical data and genetic information to find personalized cancer treatments.
Despite concerns that some start-ups are getting more investment than their business plans merit, venture capitalists don’t appear ready to slam the brakes.
From April through June, they gave about $19.2 billion to U.S. start-ups, or 24% more than in the same time frame a year ago, Dow Jones VentureSource said Thursday.
The figure was about double what it was during the same time frame three years ago, and the most in a three-month period since technology stocks began to collapse in 2000.
The numbers came in strong for start-ups in greater Los Angeles too.
Even excluding a $1-billion investment into rocket builder SpaceX this year, start-ups in Los Angeles raised nearly as much money in the first half of this year — more than $2 billion — as in all of 2014.
“If you look at the ability of technology to enable a lot of different industries, a lot of capital is coming in because there’s a lot of opportunities emerging,” said Jeff Grabow, U.S. venture capital leader for the consulting firm EY.
“If there’s no opportunities to innovate,” he said, “there’s no need for venture capital, but the horizon shows lots of opportunities.”
The excitement has led to worries that certain investments are getting too pricey and that too much money is chasing businesses lacking a solid footing.
“It’s really easy for companies to get ahead of their skis,” said Tomasz Tunguz, a partner with Redpoint Ventures in Silicon Valley. “There are going to be a lot of companies that raise a lot of money at high valuations and can’t grow into it.”
Yet others say that because it’s more affordable to start a company now and easier to reach a global audience because of smartphones, that more deals can be justified than once imaginable.
Some of the largest technology investments in Los Angeles last quarter went to companies focused on industries such as finance, health and real estate.
Tunguz said that the biggest risk in the market is that some external shock, such as worsening economic situations in China or Europe, could slow investment into venture capital funds. Start-ups seeking capital would find mostly dry wells.
That’s partially why advisors such as Grabow are telling companies to raise money while it’s both cheap and bountiful.
“You raise it when you can get it, not when you need it,” he said. “Because when you need it, it might not be there or might not be there at friendly terms.”
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