L.A.-area Web firms getting more funding
Los Angeles is gaining on Silicon Valley as ground zero for the current Internet boom.
Information services companies in Greater L.A. reaped $167 million in venture capital investment during the second quarter, according to a report scheduled for release today by Ernst & Young and Dow Jones VentureOne.
The region, which includes Los Angeles, Ventura and Santa Barbara counties, trailed only the high-tech hub to the north, which pulled in $262 million.
Los Angeles has emerged as a Silicon Valley south, said Teena Touch, a spokeswoman for L.A.-based Reunion.com. The company, whose website helps people find lost friends and family members, raised $25 million to fund its marketing activities.
“It’s so crowded in Silicon Valley, it’s hard to find an identity,” she said. “In L.A., you’re not competing with all the dot-coms.”
Southern California continued to rank second nationally in overall venture funding, receiving $1 billion in 2006, up from $625 million a year before. The San Francisco Bay Area, which includes Silicon Valley, received $2.5 billion. The New England region, which ceded the No. 2 spot to Southern California late last year, received $795 million.
“We have a tremendous amount of growth so far, and we’re only halfway through the year,” said Michael Schoenfeld, Ernst & Young’s director for the Pacific Southwest venture capital advisory group. “We’re on a run to far exceed a terrific year for VC investing that was 2006.”
Nationwide, VC firms invested $7.4 billion in the second quarter, up 8%. There were 717 rounds of financing in the quarter, also up 8%, marking the highest quarterly deal volume since 2001, according to the report.
Information technology firms, which include software, electronics and semiconductors, received the largest slice of the venture pie: $4.18 billion, up 12% from $3.74 billion.
Of that, software companies received the biggest chunk at $1.5 billion, up 1%.
The next-largest amount went to firms in the information services category, which covers a range of Internet businesses, such as social networks, blogs and online advertising. Funding in that category rose to $978 million from $644.7 million, or 52%.
Venture firms invested $2.35 billion in healthcare, up 7% from $2.2 billion. One of the biggest deals in the quarter was the $85-million first-round financing of Sientra Inc. of Santa Barbara, which produces devices used in plastic surgery.
Companies based in Los Angeles received $459 million, up from $182 million last year. About 35% went to Internet companies.
“A lot of companies here are at the convergence of media and technology,” Schoenfeld said.
Gorilla Nation Media, a Los Angeles online advertising firm, received $50 million in late-stage funding. Co-founder and President Brian Fitzgerald said the company, which represents the Huffington Post and other sites, planned to use the money to expand internationally.
