Venture capital firms with operations in Orange County decreased their local investments last year by about 20%, the second straight year of declines.
The largest 13 firms here had 19 area investments totaling $56.9 million in 2022, down from $71.5 million in 2021 and $101.6 million in 2020, according to the Business Journal’s annual alphabetized directory of venture capital firms.
The largest investment was from Cambridge Companies SGP, which has a Newport Beach office and made one local investment totaling $20 million.
The firm, co-founded by siblings Filipp Chebotarev and Polina Chebotareva in 2010, invests in real estate and various consumer packaged goods concepts, from health food company Tosi Foods of Anaheim to vegan frozen treat brand Modern Pop of Laguna Beach.
Newport Beach’s Toba Capital, the largest VC based in Orange County with $1.4 billion in funds under management, reported two OC investments totaling $6 million. It committed $40 million in local investments in 2021 and $52 million in 2020.
Toba was “a little bit quiet” in 2022, Partner Matt Gless told the Business Journal in mid-February.
“We slowed down to allow the market to provide better pricing for where these businesses should be priced,” he said.
“We were just being prudent, given the market volatility. We are excited about ’23.”
Vinny Smith created Toba in 2012 after selling Quest Software in Aliso Viejo to computer maker Dell Inc. (NYSE: DELL) for $2.8 billion. Smith received about $800 million in the sale. Toba makes seed-and late-round investments in software companies, including in recent years Tustin-based fintech Happy Money and Irvine-based security software maker Netwrix Inc. The size of rounds it participates range from as low as $500,000 to $75 million.
Packer Connection
One VC firm growing quickly is San Juan Capistrano-based RX3 Partners, which grew its assets fourfold to $200 million in 2022. Its founders include Aaron Rodgers, the Green Bay Packers quarterback; Byron Roth, chief executive at Newport Beach-based investment bank Roth Capital; and RX3 Principal Nate Raabe.
The firm, which has had several big hits in recent years like Irvine protein supplier Orgain Inc., trimmed its investments last year.
“We continue to see a pullback in VC and PE funding across the board due to the broader macro environment, which is forcing founders and brands to build healthier, more profitable businesses,” Raabe said. “Though there are still more challenging times ahead, we believe this correction is ultimately healthy and will benefit the broader consumer category in the long run.”
The company is optimistic about future local investments.
“There are so many new and established brands based in Orange County, making it the perfect place for a consumer-focused growth equity fund like RX3 to call its home,” Raabe said.
Costa Mesa-based CerraCap Ventures also saw its assets climb to $265 million. It made three local investments last year totaling $3 million.
“We are continuing our focus on investing in companies that enable a healthier, secure planet, backing innovators in healthcare, cybersecurity and planet tech,” Chief Executive Saurabh Ranjan told the Business Journal in an email. “We believe that this is the best time to deploy and invest with a long-term view in mind.
“As the markets see unprecedented uncertainty, VC is seeing an unprecedented opportunity. On the one hand VC is sitting on record amounts of dry powder. On the other we see valuations being corrected post the high marks in 2020-21.”
