After starting 2020 with one of the strongest periods on record, Los Angeles venture capital deal-making took a big hit in the second quarter.
Total local deal value fell by 50% to $1.3 billion between April 1 and June 30, down from roughly $2.6 billion the three months prior, according to data from Pitchbook Data Inc. provided to the Business Journal.
The total number of deals fell to 117, down from 165 in the first quarter.
Yet, while the Covid-19 pandemic and ensuing shutdowns slowed activity in the local venture capital space, deal-making did not come to a complete halt.
Los Angeles saw a number of significant fundraises over the second quarter, concentrated among companies with pandemic-resistant business models.
L.A. County’s largest second-quarter raise transcended the reach of the coronavirus — as well as the rest of the planet. Hawthorne-based Space Exploration Technologies Corp., better known as SpaceX, closed just over $346 million in new funding in late May, boosting Elon Musk’s ambitious space venture to a nearly $36 billion valuation, according to Pitchbook.
The announcement came one day before the company launched its Crew Dragon spacecraft with two astronauts on a mission to the International Space Station — the first manned space launch from U.S. soil in nearly a decade.
Sustainable spending
Two financial technology, or fintech, raises also stood out among Los Angeles’ largest venture deals in the second quarter.
Marina del Rey-based Aspiration Partners Inc., a financial services company with a focus on sustainability and conscious consumerism, raised $135 million in late May.
The company is among a group of digital startups, dubbed neobanks, that are looking to upend the traditional retail banking space.
Aspiration Partners has set itself apart from other competitors, such as San Francisco-based Chime Financial Inc., by developing offerings designed to help clients spend in more environmentally friendly ways.
Some of the company’s features include providing account holders with an individual “Aspiration Impact Measurement” score, which tracks how their spending habits line up with their sustainability goals, and the option to round up debit card purchases to fund tree planting.
Actors Orlando Bloom and Leonardo DiCaprio are both financial backers of the company.
Pipe dream
In June, Hollywood-based Pipe Technologies Inc. raised $66 million in an extension of its seed round earlier this year. The startup, which provides financing for software as a service, or SaaS, technology businesses, simultaneously launched its financing platform on the open market.
Pipe’s target clients have been among the least impacted by the Covid-19 pandemic. With remote work still a safety-driven necessity, companies’ dependence on Pipe’s software services have only increased.
Pipe allows software businesses with monthly or quarterly subscription revenues to get up-front capital. The platform packages the subscriptions as assets, which it trades on to banks and other financial institutions in a manner similar to fixed-income products.
Pipe markets its service as an alternative to venture capital or equity financing for subscription software businesses looking to raise funds for growth. With the slowing of venture funding flows, the company and its investors are betting the offering will be even more popular than originally anticipated.
“Even for much larger companies, given the black swan events of 2020, shoring up your balance sheet and cash flow is top of mind for everyone right now,” Pipe co-founder and Chief Executive Harry Hurst said in a June interview with the Business Journal.
Despite the deal-making slowdown, L.A. venture capital fund closures actually increased significantly in the second quarter to nearly $1.2 billion, according to Pitchbook.
The vast majority of this came from just two firms — B Capital Group and 3L Capital. B Capital, which closed a $820 million fund in June, spreads its operations across four global offices, with an L.A. headquarters in Manhattan Beach. 3L Capital, which is dual-headquartered in Westwood and New York, closed a $217 million in April.
The firms have released limited details about the raises, but both target the types of technology companies set to succeed in the post-Covid world.
Top VC Deals in L.A. County in Q2 2020
| Company | Business Type | Date Deal Closed | Deal Amount |
|---|---|---|---|
| SpaceX | Commercial Products | May 26, 2020 | $346 Million |
| Aspiration | Capital Markets/Institutions | May 26, 2020 | $135 Million |
| ServiceTitan | Software | May 8, 2020 | $74 Million |
| Pipe | Capital Markets/Institutions | June 24, 2020 | $66 Million |
| Kernel | Health Care Services | June 29, 2020 | $53 Million |
| 55 Foundry | IT Services | April 15, 2020 | $51 Million |
| Headspace | Health Care Technology Systems | June 10, 2020 | $48 Million |
| FazeClan | Apparel and Accessories | April 9, 2020 | $40 Million |
| UpKeep | Software | May 12, 2020 | $36 Million |
| Wave | Software | June 10, 2020 | $30 Million |
