As LA’s community of tech talent, entrepreneurs, and founders continues to grow, the area is seeing a gradual maturing of the investment landscape. A smaller share of deals were invested in early-stage VC-backed tech startups this year than any previous year since 2012. Using CB Insights data, we outlined this trend and many others shaping LA’s tech industry.
Specifically, we analyze:
Yearly funding trends
Equity funding to VC-backed tech companies in the LA-metro area saw a 25% increase from $2.8B in 2015 to $3.5B in 2016. However, deals tumbled to a 5-year low this past year, down to 160 from a high of 219 in 2015.
The largest deals of the past year include Snap‘s $1.3B Series F in May 2016, Time Warner’s $580M corporate minority stake in Hulu in August, and Verizon’s $159M corporate minority stake in AwesomenessTV in May.
More recently, GOAT, an online sneaker marketplace, closed a $25M Series B that included Accel Partners and Upfront Ventures in February 2017 and Comparably, a job placement platform, raised $7.25M from investors including Lowercase Capital, Upfront Ventures, and Greycroft Partners.
Monthly funding trends: 2016 vs. 2017
Los Angeles is off to a strong start this year. Funding to VC-backed tech companies in the LA-metro area during the first month of 2017 was up significantly over January 2016, reaching $309M across 12 deals.
January saw large $100M+ deals to ad-tech company Centerfield and Wi-Fi-enabled doorbell maker Ring. The largest deal of January 2016, NantHealth‘s $52.5M round, pales in comparison to Centerfield’s $156M private equity round in January 2017 from investors including Falcon Investment Advisors and H.I.G Growth Partners.
Deal share by stage
Overall, investment into VC-backed tech companies in the LA metro area has been heavily concentrated in early-stage rounds (seed & Series A), with these deals accounting more than half of deal share every year since 2012. However, investors have slowly been shifting funds away from such early rounds and into more mature startups.
Once occupying 75% of all deals, early-stage rounds have been trending downwards and landed at 59% in 2016. Seed-stage rounds fell to a 5-year low in 2016 while Series B rounds reached a 5-year high. Further, mid- to late-stage deals (Series B+), at 17% in 2012, shot to 31% of total deal flow for 2016.
Most active investors
From 2012-2016, Santa Monica-based Upfront Ventures has been the most active investor in VC-backed tech companies in the LA metro area. In a distant second is New York-based Greycroft Partners, followed by Wavemaker Partners and 500 Startups.
Upfront Ventures, led by Mark Suster and Yves Sisteron, has been consistently active in the early-stage LA tech scene. Just this month Upfront participated in the $9M seed round of LA-based Stem Disintermedia, which tracks artist revenue streams. And in December, Upfront joined First Round Capital, Lowercase Capital, Mucker Capital, NEA, and SV Angel in VidMe‘s $6M Series A. Vidme is a video platform that lets users donate money to content creators and create curated video categories.
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