‘Dot-Coms’ Rich With 4th-Quarter Venture Funds
Internet-related companies in the e-commerce, entertainment and business-to-business fields garnered the bulk of the increasing amounts of venture capital invested in the Southland during the fourth quarter, according to a report to be released today by PricewaterhouseCoopers.
“The amount of money was unbelievable, and most of it went to the young ‘dot-coms,’ ” said Massoud Entekhabi, managing partner with PricewaterhouseCoopers. “It goes to show that this area has good entrepreneurs with good ideas. The community that invests in these [venture] funds has figured that out.”
A record $3.3 billion went to Southland start-ups in 1999, according to Pricewaterhouse (data firm Venture Economics earlier calculated the figure at $4.2 billion, as both trackers do their own independent tally). During the quarter, venture firms invested $1.4 billion in the Southland. The firms invested in 53 Los Angeles-area companies, 22 start-ups in Orange County and 47 in San Diego County.
In the L.A. area, 43% of venture funds went to online retail and distribution companies, such as Carparts.com, a Santa Monica online retailer of car parts to both businesses and consumers; ENutrition, a Woodland Hills vitamin and health products online retailer; and ETeamz, a Los Angeles online sports company, the Pricewaterhouse report says.
Business-to-business Internet companies and new media ventures also took in loads of cash, each area getting nearly 20% of the investments here.
Here is a look at some of the L.A.-area start-ups that got capital in the period:
* Rotor.net, a Los Angeles firm that expects to offer proprietary software designed to enable two-way communication between producers, such as a broadcasting company, and consumers of Internet programming. The company, which has about 80 employees, was formed in 1997 to help large entertainment companies including movie and TV studios create a new type of online programming, such as shows that allow a viewer to help direct the action in a fictional story.
With advertising slogans such as “Your Computer Is Not a Television,” the firm expects to launch its technology in the next two months. Rotor.net got $12 million as part of a second round of funding.
“What Rotor will do is provide the technology to make events and entertainment on the Internet more interesting to an audience,” said David Goldhill, 39, the company’s chief executive. “We’re not a site--we make our clients Web sites and content more interesting.”
* HomePage.com, which was incubated in Bill Gross’ Idealab, helps users create and manage business-to-business and personalized consumer home pages. The Pasadena firm, soon to move to the Westside, got $12 million in a second round. Start-ups normally get at least two rounds of venture financing before launching an initial public offering, though of course, many never make it to the IPO stage.
* EIndia.com is a Simi Valley Web site that targets the international Indian community. The firm, which plans to sell CDs and DVDs featuring music and movies from India and allow customers to send money back to India via the Net, got $3 million in its first round. The money will be used for marketing, hiring and developing technology for the site. Chief Executive Rajeev Tandon, 29, co-founded the firm last year.
“It’s more than just an Indian portal--it’s an Indian community targeting the huge number of Indians who live outside of India worldwide,” said Sonu Malhotra, vice president of marketing. He estimated that community of nonresident Indians at 30 million people.
* Thirsty.com, a Los Angeles online youth information network aimed at teenagers and young adults. Formed last May, the firm’s $12-million financing will help fund the launch of its Web site in June.
“It sounds like there’s a lot out there [in the competitive marketplace for Generation Y eyeballs],” said Jeff Pollack, 36, chief executive and a co-founder. “But there’s really nothing that will compare with our site. If you’re into Goth or techno-rave, we’ll have the information that you are interested in. Once you’re there, you’ll be able to find a community to help complement your passion.”
* Creative Planet, a North Hollywood-based Internet community, provides news, features and retail products to the film production community. The company, formed in 1998, got $25 million in its second round.
Allen DeBevoise, the chief executive and a co-founder, said his firm will link film producers with financiers to improve the process of making movies, commercials and other ventures.
“You look at a movie or a commercial, and it’s like a small new business that exists for a certain period of time and then it’s disbanded,” said DeBevoise, 44. “We want to improve the process.”
* Expert City, a Santa Barbara firm formed in 1998 by Klaus Schauser, a computer science professor at UC Santa Barbara, is an online marketplace for computer help.
For instance, if a business person is stuck in a hotel room and is having trouble printing a crucial presentation, he or she can log on to Expert City and an “expert” will help them.
“This allows people to use independent experts to solve a problem with their computer for a fee,” said Schauser, 37. “Everyday people have trouble with their computers, and right now they go next door to a neighbor--or call Microsoft, and they put you on hold.”
Expert City got $30 million in its second round, a large portion of which will go toward marketing, Schauser said.
* CarsDirect.com, the Culver City online car seller, received $280 million in its fourth round, the largest local venture financing of the quarter. The company, another brainchild of entrepreneur Gross, allows customers to buy their new cars and trucks online and have them delivered to a home or office in California, New York and Florida. Launched last May, the firm has more than 500 employees. Bob Brisco, 36, formerly a senior vice president of advertising, marketing and new business development with the Los Angeles Times, is the firm’s chief executive.
* During the fourth quarter, only one L.A.-area biotech company got funding: Ceres, a Malibu developer of technology designed to identify genes that would improve agricultural crops, received $17 million.
Debora Vrana covers investment banking and the securities industry for The Times. She can be reached at debora.vrana@latimes.com or at Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053.
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Southland Start-Ups
Venture Capital flowed into Southland companies at a record pace during the fourth quarter. Here are the largest investments in the Los Angeles area, which includes Ventura and Santa Barbara counties:
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Company City Amount (in millions) CarsDirect.com Culver City $280.0 EBiz.net El Segundo 60.0 E-Style Los Angeles 45.0 Property First.com Alhambra 44.3 Carparts.com Santa Monica 42.0 BizBuyer.com Santa Monica 38.5 Expert City Santa Barbara 30.0 PayMyBills.com Pasadena 30.0 IExchange Pasadena 28.4 Creative Planet North Hollywood 25.0 IWin.com Santa Monica 25.0
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Source: PricewaterhouseCoopers
