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L.A. VENTURE CAPITALISTS CHOOSIER IN FIRST QUARTER.

Byline: Evan Pondel Staff Writer

Venture capitalists were more picky when investing in the first quarter, a survey of investors released Monday shows.

In the first quarter, venture-backed companies in Los Angeles raised $234 million vs. $999 million from the same period a year ago, according to Pricewaterhouse Coopers MoneyTree Survey.

``Clearly, as you can see with the numbers, venture capitalists have reacted pretty violently in this quarter,'' said Richard Withey, a managing partner at Pricewaterhouse Coopers. ``With the IPO market shut down, venture capitalists have pulled back dramatically.''

A year ago, a novel idea and a bare-bones business plan could clinch a solid deal. But today, the bar is much higher and the allure of a budding technology company raises fewer brows.

Peter Hartz, a partner and lab manager at Woodland Hills-based Fortune Lab, screened more than 400 companies in a year before finding one that fit his criteria.

``There's no question that there has been downward pressure and its harder to fund companies,'' Hartz said.

Fortune Lab provides the first round of funding for companies, often referred to as the ``angel round.'' In addition to supplying an injection of capital, Fortune Lab also manages and develops software for companies.

While incubators appeal to many start-ups that haven't established a foundation in a particular niche, some companies just lack potential.

``Many companies don't have enough traction to appeal to an angel round,'' Hartz said. ``They think they're beyond the incubator round.''

But the 101 Corridor - a commercial belt that parallels the Ventura Freeway, stretching from Sherman Oaks to Camarillo - remains a hotbed for up-and-coming companies that are involved with communications and networking products.

``For L.A. and the corridor, we're well positioned because there are a number of companies that are focused on infrastructure plays,'' Withey said.

Lynx Photonic Networks, a 2-year-old Calabasas Hills-based manufacturer of optical switches, received around $30 million in the first quarter.

``We had 40 potential suitors looking at the company, and we had to turn some away,'' said Kelly Williams, director of marketing and communications for Lynx. ``But we were one of the last companies to receive funding.''

Despite a tightening market, Lynx Photonic was able to amass capital from Morgan Stanley Dean Witter, Enron North America and Infineon Ventures.

The reason: ``We're producing solid-state stuff: fiber-optic networks,'' Williams said.

The company plans to go public by the second quarter of next year. Until then, Lynx is ``holding a tight ship,'' with 80 employees in Israel and 20 in the United States.

As companies such as Lynx continue to extract capital from a seemingly dry market, there are still wells to tap.
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Title Annotation:Business
Publication:Daily News (Los Angeles, CA)
Article Type:Statistical Data Included
Geographic Code:1USA
Date:May 15, 2001
Words:438
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