Region’s Venture Capital Investment Soars

The value of venture capital deals in Southern California doubled in the first quarter as the surging economy drew investors to promising communications, software, biotechnology, retail and Internet-related companies, a survey found.

Venture capital firms invested $231.5 million in businesses in the Los Angeles-Orange counties region in the first three months of the year, up from $113.8 million in the same period of 1997 and 24% above the fourth-quarter total of $187 million, the accounting firm Price Waterhouse said Monday.

The first-quarter total is only slightly lower than the record set in the third quarter last year, when venture capitalists poured $250.7 million into local firms.

The investment is still a dribble compared with the flood of funds that goes to Silicon Valley firms, but venture capital activity in Southern California has been growing at a faster clip.

In the first quarter, venture capital investments in Silicon Valley totaled $821.4 million, up 46% from a year ago but down 16% from the fourth quarter, Price Waterhouse found.

Venture capitalists have in the past largely ignored Southern California in favor of high-profile Silicon Valley. But today they are increasingly looking for deals in this region, said Mike Larrenaga, a partner in Price Waterhouse’s Southern California technology industry group. “The economy is coming back up, and people are looking to Los Angeles and Orange County for opportunities,” he said.

The level of funding should continue to grow, he said, in part because venture capital funds are bulging with cash as a result of the soaring stock market. Venture capital investors typically make a profit when a company’s stock is sold to the public.

But many local entrepreneurs are still hungry for cash, Larrenaga said. “There’s a lot of money out there, but there are still a lot of opportunities that are going unfunded,” he said.

A total of 36 Southern California firms, including a few in Ventura and Santa Barbara counties, received funding in the first quarter, the survey found.

The largest amount, $69 million, went to Fountain View Inc., a Los Angeles nursing home operator. 3 Day Blinds Inc., an Anaheim maker of window coverings, raised $30.4 million.

Two Irvine biotechnology firms also received funding: Cytovia Inc. raised $10.1 million and Reprogen got $5.1 million.

College Enterprises Inc., a Woodland Hills retailer that operates Pulse Copy & Technology Stores on college campuses, received $5.1 million. Culver City-based RDL Commercial Technologies Corp., which makes transmission mechanisms for fiber networks, raised $7.5 million.

Sonoma Systems, a Marina del Rey maker of automated teller machine equipment, received $9 million. An equal amount went to IndeNet Inc., a Los Angeles firm that is building a network to distribute commercials digitally. Calabasas-based Digital Insight Corp., an Internet banking service provider, raised $8 million.