Second solid quarter in row bodes well for venture firms.Venture capitalists Venture Capitalist An investor who provides capital to either start-up ventures or support small companies who wish to expand but do not have access to public funding. Notes: Venture capitalists usually expect higher returns for the additional risks taken. turned optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op in the third quarter with a 14 percent jump in funding to Los Angeles-based companies compared with the year-ago period, although biotech and health care firms in San Diego San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. continued to capture the largest portion of capital in Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, . In L.A. County, 15 companies attracted $138.1 million in venture capital during the third quarter, up from $121.5 million a year ago, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Growthink Research, a market research firm in Venice. The third quarter's showing was six percent lower than the second quarter's $147 million in funding. San Diego received 49 percent of all funding channeled to Southern California companies in the quarter, compared with 29 percent for Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. and 19 percent for Orange County. Venture capitalists said they believe funding levels are rebounding from the first half of this year, when the war in Iraq and an uncertain economy kept investors on the sidelines On the sidelines An investor who decides not to invest due to market uncertainty. on the sidelines Of or relating to investors who, having assessed the market, have decided to avoid committing their funds. . Deal volume and pricing in the third quarter returned to levels of early 1999, when the dot-com craze was approaching its heyday. "There's a glimmer of light now after virtually no competition for the past two to three years," said Timothy Draper, founder and managing director of Draper Fisher Jurvetson Draper Fisher Jurvetson (DFJ) is a venture capital firm based in Menlo Park, California with affiliate offices in more than 30 cities around the world and over $4.5 billion in capital commitments. , a Silicon Valley venture firm with $3 billion invested in various venture funds. "We're starting to see a few deals get snapped up ahead of us if we don't move quickly enough." [GRAPHIC OMITTED] Because Growthink compiles information from news reports and surveys sent to companies and venture firms, not every deal is captured in its data. Also, many firms refuse to disclose pricing, which can skew (1) The misalignment of a document or punch card in the feed tray or hopper that prohibits it from being scanned or read properly. (2) In facsimile, the difference in rectangularity between the received and transmitted page. the total tally. Wireless, semiconductor and some software firms received the bulk of investments in Los Angeles. The biggest winner was Telasic Communications of El Segundo El Segundo (ĕl sēgŭn`dō), industrial city (1990 pop. 15,223), Los Angeles co., S Calif., on Santa Monica Bay; inc. 1917. Its products include navigation and computer systems, aircraft parts, office machines, telephone apparatus, and , a spin-off from Raytheon Corp. that received $35 million in its second round of financing. That was far above the average deal size in the quarter of $8.7 million. Telasic, which has 70 patents in the design of high-performance analog and mixed-signal circuits, received follow-up financing from venture firm Redpoint Ventures and an investment from Agilent Technologies This article needs sources or references that appear in reliable, third-party publications. Alone, primary sources and sources affiliated with the subject of this article are not sufficient for an accurate encyclopedia article. Inc., the Palo Alto Palo Alto, city, California Palo Alto (păl`ō ăl`tō), city (1990 pop. 55,900), Santa Clara co., W Calif.; inc. 1894. Although primarily residential, Palo Alto has aerospace, electronics, and advanced research industries. maker of test and measuring equipment. "We turned away twice as much money that we could have raised because we consider equity in the company to be precious," said John LaValle, Telasic's chief financial officer, who said the funds will be used to beef up Telasic's sales and marketing operations in Europe and Asia. Over the past two to three years, most venture firms went into triage triage Division of patients for priority of care, usually into three categories: those who will not survive even with treatment; those who will survive without treatment; and those whose survival depends on treatment. by writing off poor-performing investments in technology and telecommunications, sometimes choosing not to further fund companies they've already invested in. Venture firms now want proof that a company can deliver quickly on an investment and there's a big push to get start-ups to break even. Many venture funds hit the wall when they were forced to write off as much as 50 percent of their investments over a two-year period. That, in turn, has caused some start-ups to simply die. "Investors are saying: 'Go show me you can sell a product,'" said Frank Creer, a founder and managing director of Zone Ventures in Los Angeles. "People are staying very lean and are coming into the market with a plan in place." Venture funds are still under enormous pressure to get returns for their limited partners, even during a period of skepticism in the market. As a result, some venture firms are adding "pay to play" provisions to deals, which essentially force angel investors An individual who invests his or her own money in a private company, which is typically a startup. An angel investor is not an employee or member of a bank, venture capital firm or other financial institution that normally makes such investments. and founders to continue investing in new rounds of financing or lose their equity positions. Often the follow-up investors are getting in at a price that is lower than the original founders and such provisions ensure that equity in a company will not be diluted at the same ratio. "Basically it's the 'see another day' theory--and that's what the companies that were at higher valuations in 2000-2001 are going through because the reality has hit," said William Woodward William Woodward may refer to:
Nationally, Northern California Northern California, sometimes referred to as NorCal, is the northern portion of the U.S. state of California. The region contains the San Francisco Bay Area, the state capital, Sacramento; as well as the substantial natural beauty of the redwood forests, the northern received the largest portion of venture funding in the third quarter with $1.3 billion, or 32 percent of the total $4.1 billion invested in 457 companies. Southern California ranked fifth with a total of $472 million, or 11.6 percent of the total, with investments in 54 companies. San Diego received $230 million in funding for 26 companies in the quarter while Orange County got $76.7 million for 10 firms. "There are fewer deals in Southern California and probably more going on in Northern Cal with follow-on financings and recaps of existing companies," said Todd Springer, a and managing director of Trident Capital in Los Angeles. "Some venture capitalists have pulled in their reins and are investing closer to home. In a bear market, there's less of a willingness to go beyond your borders."
Tech, Biotech Rule
L.A.-area companies that received venture funding in the third quarter.
Company Headquarters Sector
BBB Biotechnologies Los Angeles Biotech/Pharmaceuticals
Boingo Wireless Santa Monica Telecom
Clearant Los Angeles Biotech/Pharmaceuticals
eStyle Los Angeles Online Commerce
FrontBridge
Technologies Marina del Rey E-mail
Fulcrum
Microsystems Calabasas Hills Semiconductors
Intersperse Pasadena Online Services
Metapa Sherman Oaks Market Research
PhatNoise Los Angeles Consumer Products
Quintessence
Photonics Sylmar Networking
SiWave Arcadia Networking
Telasic
Communications El Segundo Semiconductors
Investment
Company (millions) Partial Investor List
BBB Biotechnologies $2.1 Domain Associates
Boingo Wireless 10 Infonet Services Corp.
Clearant 18 Affinity Capital
eStyle 9 Zone Ventures
FrontBridge
Technologies 8 BA Venture Partners
Fulcrum
Microsystems 14 Palomar Ventures
Intersperse 9.3 Palomar Ventures
Metapa 3.7 Soundview Ventures
PhatNoise 3.5 Ascend Venture Group
Quintessence
Photonics 6.5 Undisclosed
SiWave 1 Zone Ventures
Telasic
Communications 35 Raytheon, ComVentures
Source: Growthink Research
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