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New Companies Lean on Older Funds for Money

Venture capital investment in L.A. companies was up sharply in the third quarter, but not everyone is ready to celebrate the news.

According to the Dow Jones VentureSource report released last week, more than $687 million was invested in local startups. That’s nearly three times higher than the second quarter total and the largest single-quarter total since the financial crisis hit. The number of deals rose slightly to 36.

Through the first three quarters of the year, L.A. companies have received $1.2 billion in venture funding, which has already surpassed the $1.1 billion invested for all of last year.

However, some analysts note that recent activity seems to be driven primarily by investments from older funds. The problem with that? Mark Sogomian, a partner with Ernst & Young who specializes in public offerings in the Western United States, said investment activity could decline in future quarters since many venture capital firms are struggling to raise funds.

“Deals and dollars invested – VC investment in L.A. companies – were both up significantly in the third quarter of 2011,” Sogomian said. “The big question is: How long can this be sustained?”

In the quarter’s largest deal, TrueCar Inc., a Santa Monica company that provides vehicle pricing information, secured $200 million in equity and debt financing last month from a group of investors including GRP Partners, a Century City-based venture capital firm.

Among the other local deals, ZestCash Inc., a Hollywood startup founded by Doug Merrill that helps underbanked individuals, raised $11 million in July.

PricewaterhouseCoopers and the National Venture Capital Association released their quarterly MoneyTree Report last week. That roundup of local venture capital investment, which did not include the TrueCar investment or several other deals, showed a decline in third quarter activity.

Fund Launch

Nimes Capital Partners, a newly created investment vehicle started by David Nazarian, will partner with Avante Mezzanine Partners to launch a private-equity fund.

Under the agreement, Nimes, headquartered in Century City, will provide capital and other resources to the West L.A. fund manager, which specializes in debt and equity investments in middle-market companies. Nimes did not say how much it will invest in the new fund.

“As institutional capital increasingly focuses most of its allocations on larger, more established investment managers, Nimes Capital Partners has identified a unique market opportunity to partner with top-caliber emerging managers, such as Avante,” Nazarian said in a statement.

David Nazarian is the brother of L.A. nightclub owner Sam Nazarian and is also chief executive of Nazarian Enterprises, the family’s investment firm.

Nimes intends to form partnerships with other investment firms for future funds.

Poor Credit

L.A. residents have some of the poorest credit in California, according to a new study.

Angelenos have an average credit score of 738, which ranks eighth among 10 California markets, according to credit report provider Experian. Los Angeles also falls in the bottom half of cities nationwide, ranking No. 96 out of 143 markets.

Local residents have an average of $23,145 in outstanding debt, which is down slightly from a year ago.

San Francisco was the highest-ranking California market and the fifth highest nationwide, with an average score of 781.

C-Suite News

West L.A. investment banking firm B. Riley & Co. announced that it has hired 12 traders and research analysts. Most of the new hires will be based in the firm’s San Francisco office. … Manhattan Bancorp, the El Segundo holding company for Bank of Manhattan, announced that Kyle Ransford resigned for undisclosed reasons from the boards of both the company and bank subsidiary. … Broadway Financial Corp., parent of L.A. thrift Broadway Federal Bank, announced that Elrick Williams stepped down from the boards of the company and the bank to avoid any appearance of a conflict of interest. Broadway said in a statement that his departure was “due to the perception caused by his family’s investment in a credit of the bank.” … Matthew Olsen has been appointed vice president in Boston Private Bank & Trust Co.’s Santa Monica office. … First Foundation Advisors, a wealth management firm in Irvine, has hired Grant Withers as a managing director for the West L.A. market. Withers is working out of the Irvine office until the firm finds a permanent location in West Los Angeles.

Staff reporter Richard Clough can be reached at rclough@labusinessjournal.com or at (323) 549-5225, ext. 251.

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