It appears that venture capital dollars flowing into Los Angeles have finally started to catch up with the growth in startup activity in the region.
After a sluggish start to the year, Los Angeles County companies raised $247 million during the second quarter, according to a report from City National Bank. That put an end to a downward trend that began during the third quarter last year.
While the nearly quarter-billion dollars in funding represents a 34 percent increase from the first quarter, it is still a 9 percent drop from $271 million raised during the same period last year.
City National Bank provided the report exclusively to the Business Journal using data from Dow Jones VentureSource.
The bank's report largely aligns with the commonly referenced MoneyTree report from PricewaterhouseCoopers and the National Venture Capital Association. That report, released July 19, found that Los Angeles County companies raised $240 million in funding during the second quarter.
According to City National, activity in the Silicon Beach submarket was key to the venture capital recovery.
The largest concentration of venture capital deals came from companies headquartered in the beachside strip from Santa Monica to Playa Vista. A handful of the Top 10 deals from the quarter also came from those technology startups, including Snapchat Inc.'s $60 million round and Ouya Inc.'s $15 million round.
Los Angeles ranked fourth in the country in deal flow behind traditionally strong tech hubs San Francisco, New York and Boston, according to the City National report.
But the region still bucked the national trend, which saw venture capital funding decline 2 percent from the start of the year, to $7.2 billion for the quarter.
In Los Angeles, only 15 of the 32 deals during the quarter were locally funded, indicating both the dearth of local venture capital firms and an increased willingness among Silicon Valley firms to look south for deals.
Take, for instance, Jeremy Liew of Lightspeed Venture Partners in Menlo Park. Of his six portfolio companies, five are based in Los Angeles.
"I'm an outlier, but this does reflect the sort of innovation that companies like Snapchat, ShoeDazzle, The Honest Co., Whisper and ZestFinance are generating in L.A.," he told City National for the report. "L.A. has the finger on the pulse of the rest of America and always has, thanks to its roots in the entertainment business…and this insight is creating products that appeal to millions of people, not just the technorati."
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