Venture capital flows less freely in L.A.
Venture capital funding in the Los Angeles area dipped in the third quarter but remained on track to surpass last year’s investments, according to a report issued Friday.
L.A.-based firms, in 31 deals, reaped $367 million in the third quarter, down 12% from $417 million a year earlier, according to Ernst & Young and Dow Jones VentureOne. The report attributed the decline to an unusually strong result for last year’s third quarter, when one energy company landed a whopping $183-million investment.
A total of $1 billion has been invested in L.A.-area firms so far this year, compared with $1.3 billion for all of last year.
“It’s going gangbusters here,” said Los Angeles-based Michael Schoenfeld, Ernst & Young’s director for the Pacific Southwest venture capital advisory group. “We’re going to surpass where we were in 2006.”
Nationally, companies received $8 billion in the third quarter, up 8% from $7.5 billion a year earlier. The quarterly total was the highest since 2001.
As usual, firms in the San Francisco Bay Area, which includes Silicon Valley, received the most funding of any region with $2.5 billion, an 8% dip from $2.7 billion.
For the fourth consecutive quarter, Southern California held on to the No. 2 spot in the national venture capital rankings. The region received $961 million, a 2% increase from $936 million in 2006.
San Diego County companies raised $325 million, down slightly from $337 million last year. Orange County pulled in $76 million, down 40% from $127 million.
In the L.A. area, information technology firms scooped up the most money with $198 million, up 32% from $150 million.
Retail in Los Angeles was a surprising hot spot, reaching $49 million in investments from essentially zero a year before. Pinkberry Inc., the dessert chain, led the way with $27.5 million, and Santa Monica-based Zag Inc., which creates software used by auto sellers, received $13.5 million.
“This is the last outside capital we need to get to positive cash flow,” Zag Chief Executive Scott Painter said.
