VCs Catch Wave To Silicon BeachTECHNOLOGY: Silicon Valley dives into local investment boom. Monday, May 19, 2014
When online consumer rewards site Swagbucks last week took its first outside investment, a $60 million infusion from Palo Alto’s Technology Crossover Ventures, it was the latest indication that L.A.’s booming tech industry is coming of age.
Not only has the amount of money pouring into local tech firms surpassed sums raised at the same point last year, Silicon Beach is getting far more attention from the top tier of Silicon Valley’s venture capital community.
L.A. information tech companies have raised more than $620 million in roughly 50 deals thus far this year, according to data collected by SoCalTech.com. That’s 78 percent more than the amount raised at the same point last year. And it’s more than any other comparable period since Silicon Beach was more or less established in 2009.
Exits are healthier, too.
Sixteen local tech companies have been acquired or gone public this year, reaping more than $1.7 billion. That number could spike much more if Apple Inc.’s rumored $3.2 billion purchase of Santa Monica’s Beats Electronics goes through. The deal flow does not include some private transaction for which terms were not disclosed.
The activity, particularly the influx of cash from Menlo Park, signals a change from a few years ago, when top Silicon Valley venture capitalists pigeonholed L.A.’s tech founders as entrepreneurs who didn’t think big enough, said Dan Chen, managing director at Siemer & Associates in Santa Monica, a boutique merchant bank serving the tech community.
Venture firms in Silicon Valley expect companies they invest in to make billion-dollar exits, Chen said, and their interest in investing in the L.A. market reflects a growing confidence that their goals can be achieved here.
The momentum started last year, when Silicon Beach companies Snapchat, JustFab, Honest Co. and OpenX had funding rounds led by Bay Area VCs. It has continued this year as anonymous messaging app Whisper and enterprise messaging app developer TigerText raised $30 million and $21 million, respectively, mostly from Silicon Valley investors. In addition, Zefr, co-founded by Zach James and Richard Raddon in 2009, netted $30 million in a February Series D round from four Bay Area firms: Institutional Venture Partners, US Venture Partners, First Round Capital and Shasta Ventures. A London firm, Richmond Park Partners, also joined.
The activity is a reflection of the increasing credibility and viability of businesses being built in the region, said Rod Werner, managing director of City National Bank’s tech and venture capital banking group in Palo Alto.
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