Los Angeles has a new venture capital firm focused on early stage startups.
Fika Ventures, co-founded by Eva Ho and TX Zhuo, has raised a $40 million seed fund to invest in business-to-business companies developing software products for finance companies, online marketplaces, and the health care industry. Ho and Zhuo were founding general partners at Susa Ventures of San Francisco and West L.A.’s Karlin Ventures, respectively.
Sawtelle-based Fika plans to invest predominantly in startups based in Los Angeles and the Bay Area, while opportunistically backing Seattle and New York ventures as well.
Several seed funds have closed in Los Angeles within the last several months, including a $10 million fund for Venice accelerator Amplify.LA and a $45 million fund for Embark Ventures of Miracle Mile, led by Baroda Ventures Managing Partner Peter Lee, according to a Securities and Exchange Commission filing. Bam Venture Partners, co-founded by Honest Co. Chief Executive Brian Lee, started raising a $30 million fund in December.
“I still think the talent-to-capital ratio (in Los Angeles) is in the favor of the VC,” said Zhuo, noting that startups are fighting over a limited amount of seed money. “I feel that there is still a lot more room for VCs at the early stage in Los Angeles.”
There are still relatively few seed funds in Los Angeles when compared with the Bay Area, said William Hsu, managing partner of seed fund Mucker Capital of Santa Monica.
“The Bay Area has something close to 100 seed funds,” he said. “There are no more than five institutional seed funds (in Los Angeles).”
More seed funds in Los Angeles could impact local businesses in several ways, said Hsu.
“I think the valuations will go up, for better or worse,” he said. “It will be easier to get companies funded, for better or worse.”
Fika plans to focus more on taking an equity stake in startups rather than being guided by dollar amounts, said Zhuo.
“When we lead an investment, we will try to own about 10 percent. When we co-invest, we will try to own about 5 percent,” he said. “That translates into an average check size from $250,000 to $1.2 million.”
While the bulk of the Fika fund came from limited partners such as Cross Creek Advisors of Salt Lake City and Knollwood Investment Advisory of Hunt Valley, Md., some 20 percent came from local tech industry leaders and entrepreneurs. Notable backers include Gunnar Lovelace, chief executive of Culver City’s Thrive Market Inc.; Gil Elbaz, chief executive of Century City’s Factual Inc.; and Jilliene Helman, chief executive of West L.A.’s Realty Mogul Co.
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