Venture capital investing in young companies increased in 2011 both in Orange County and nationwide, according to two reports released today.
Although the specific data vary in the two reports because of different methodology, the results are similar.
First up is the Money Tree Report says 69 Orange County companies received $921.4 million in 2011. The number of deals was down 6.8% and the dollars invested were up 40.8%. These numbers reflect several nine-figure investments during the year in Fisker Automotive, Anaheim maker of electric hybrid vehicles. The most recent was $108.3 million, ranked as one of the largest investments of the fourth quarter.
This report is from from PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.
Among the Orange County companies receiving venture capital in the fourth quarter:
- Fisker Automotive, Anaheim, $108.3 million (45% of the O.C. total)
- AcuFocus Inc., Irvine eye company, $41.9 million
- Uptake Medical Corp., Tustin medical tech firm, $35.1 million
- Red 5 Studios Inc., Laguna Hills gaming software, $15 million
- Avir Inc., Irvine cardiovascular test developer, $10 million
- Kareo Inc., Irving medical billing software, $10 million
- LoneStar Heart Inc., Laguna Hills heart therapies, $7.5 million
- BlueCava Inc., Irvine device identification technology, $5.6 million
- Food Collective Inc., Irvine food products, $4.3 million
- WaveTech Vision Systems Inc., Aliso Viejo eye devices, $2.8 million
- YouMail Inc., Irvine smart phone applications, $1.8 million
The second report is from Dow Jones VentureSource, which reports that 48 Orange County companies received $876 million in 2011. That’s 7.7% fewer deals and 4.5% increase in dollars. In the fourth quarter, eight Orange County companies received $108.8 million. The fourth quarter data do not include Fisker.
Nationally, venture capitalists invested $6.6 billion in 844 companies during the fourth quarter, compared to $5.3 billion in 848 companies in the same period of 2010, according to the Money Tree Report. However, PricewaterhouseCoopers notes that the fourth quarter is usually one of the strongest of the year but investments were down significantly (10% in money and 11% in deals) from the third quarter.
VentureSource also noted a fourth quarter drop-off in deals and dollars nationwide from the third quarter.
“The fourth quarter may have seen a temporary slowdown as venture capitalists reset their expectations for the exit market and entrepreneurs adjusted their companies’ valuations to suit the current climate,” said Jessica Canning, global research director for Dow Jones VentureSource. “Overall, venture investment continued its steady post-recession ascent.”
Randy Churchill, director of PricewaterhouseCoopers Southern California Emerging Company services, agreed that 2011 was stronger. “Venture capital investing in 2011…ranks in the top three years for VC investing in the past decade… We saw a resurgence in investments in clean technology and Internet-specific companies. However, venture capitalists…are acting prudently and not chasing excessive valuations. Accordingly…we’re unlikely to see these sectors overheat like we saw in the 1999 to 2000 era.”
Venture capitalists are making larger investments in a fewer number of companies, both reports agree. The reasons vary by industry, said Mark Heesen, president of the National Venture Capital Association.
“For some (industries) the higher rounds are driven by the challenging exit market which requires venture capitalists to fuel their existing portfolios longer and at greater investment levels than in the past. This is particularly acute in the life sciences and clean tech sectors. In other sectors — such as Internet, software and media — the higher rounds speak to increasing valuations.”
He added that this industry difference is likely to continue in 2012 “as our industry sectors are impacted differently by the continued economic uncertainty and ongoing opportunities in the market.”
Despite the focus on larger, later-stage companies, smaller firms seeking seed or early-stage funding had their best quarterly showing since 1995, capturing 49% of the deals, said John Taylor, director of research at the National Venture Capital Association. “This suggests that even with a lot of later stage companies still in venture capital portfolios, venture capitalists are able to turn attention to the next crop of companies.”
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