Venture Capital Outlays Rise 32% in Southland

Investors last year put 32% more money into new and promising Southern California companies than they had the year before, but venture funding tapered off significantly in the last six months, according to a survey by the Price Waterhouse LLP accounting firm.

Venture capital firms poured $446.4 million into mainly health care and software companies in the Los Angeles-Orange County region last year, compared to $337.2 million in 1995.

The big investments tend to show that venture firms believe the stock market will remain strong, leading eventually to what they hope will be large payoffs when the companies go public.

“Venture capital had an exceptional year,” said Carl Thoma, president of the national Venture Capital Assn. “Many emerging technologies and industries are providing excellent investment opportunities.”

Thoma and Price Waterhouse partners say it will be difficult to maintain such a high level of funding this year. In fact, numbers began going down during the last half of 1996. In California alone, venture funding for the fourth quarter fell 15% statewide and 28% in Southern California, compared to the previous year’s final three months.

Interest in initial public offerings cooled in the summer, which coincided with the pullback in venture funding.

Investors, however, simply appeared to be putting less money into the same number of companies. For instance, while venture capital investments in the fourth quarter fell from $123 million to $88 million in Southern California, the number of companies garnering venture funding increased by one to 23.

Among the companies that recently got large investments are Long Term Care Group, an El Segundo managed-care firm that picked up $16 million, and Subscriber Computing Inc., an Irvine billing software company that gathered $15 million in fresh funds.

Nationwide, funding grew 25% last year as venture firms infused 2,057 companies with more than $9.5 billion. Venture funding the previous year provided $7.6 billion to 1,586 promising companies.

California companies accounted for about a third of the total investment, garnering $3.1 billion last year. The total for the previous year was $2.35 billion.

Price Waterhouse has been tracking venture capital investments nationwide for the last 2 1/2 years. Venture funding is private money that is typically invested in new, young or growing companies. Investors usually take their gains when their companies go public or are sold.