Download the 2010 OC’s VENTURE CAPITAL FIRMS List (pdf)
Orange County’s biggest venture capital firms held on to their money for much of last year amid the economic slump.
The 18 largest venture capital firms with offices or headquarters here invested about $54 million in local companies in 2009, down 20% from 2008, according to this week’s Business Journal List.
The list ranks the companies by the dollar amount they’ve invested in OC during a 12-month period—a figure that swings pretty wildly from year to year. It doesn’t include investments in local companies by firms with offices outside the county.
Last year’s list saw a 64% jump in 2008 investments due to a lot of activity by No. 1 Sail Venture Partners LLC of Costa Mesa, which invested $33 million mainly in local startups in green technologies and alternative energy.
The pendulum swung in the other direction in 2009 amid the financial crisis.
Investment Lull
The list, with more than half of the entries showing no new investments here, reflects a lull in the venture capital investing cycle.
What’s happening now is that venture capitalists are generally nursing along their past and current investments, according to Bruce Hallett, managing director at No. 4 Corona del Mar’s Miramar Venture Partners, which invested $3 million in local companies last year (see story, page 12).
“What I see happening is that VC firms are looking closely at their existing portfolios of companies,” he said. “What you are seeing them do is cut future funding to the companies on life support. The ones at the top will continue to get funding. The ones in the middle are a struggle.”
Another big factor behind the lull in new investments is that investors aren’t seeing a way to get their money back with a sluggish market for initial public offerings.
“There are some signs of a few IPOs coming back, but the aftermarket performance hasn’t always been good,” Hallett said. “VCs are looking at a longer time investing to get to a good exit.”
Another constraining factor is that venture capital firms are having a harder time raising money to invest in startups.
“I’m not sure it’s so much a choice that VCs haven’t loosened the purse strings,” Hallett said. “It’s a factor of how much money is allocated to VC investments in the whole economy. I think that overall number has shrunk by about 50% over the past few years.”
It shows on the list, which had nine companies report no investments here in 2009 and another three estimated to have not invested anything new here last year.
Top Investors
The two standouts on the list were the top venture capital firms here, which held tight to their spots despite decreasing their local investments.
No. 1 Sail Venture invested $23 million in OC companies, down 29% from 2008. Sail is an anomaly on the list that invests solely in a particularly hot niche—alternative energy.
Sail had $150 million under management, up 20% from 2008.
“In clean energy, those projects continue to get a lot of backing,” Hallett said. “There is a lot of venture funding that’s been raised on the theme of investing in alternative energy.”
No. 2 Versant Ventures, which is based in Menlo Park and has an office in Newport Beach, was the only venture capital firm that increased its investment in OC companies last year.
It put in nearly $23 million, up 37% from 2008.
Versant has a stake in some 75 healthcare-related companies with $1.6 billion under management, roughly flat from 2008.
The list, always a work in progress, had two additions.
No. 11 Newport Beach’s Miven Venture Partners Inc., which is run by Victor and Janie Tsao, the founders of Irvine-based router maker Linksys LLC, joined the list this year despite making no investments in 2009.
Ties and companies with no OC investment in 2009 are ranked by funds under management companywide.
The Tsaos sold Linksys to Cisco Systems Inc. for $500 million in 2003. After spending a few years at Cisco, they decided to do their own thing.
The Tsaos are a tag team for Miven, which Victor Tsao started in 2005 with Jawad Ansari, founder of Irvine-based Corporate Metrix Inc., a family office business. Ansari left in 2008.
Victor Tsao is general partner—he spends most of his time on the road scouting investments in Silicon Valley, China, India, Israel and Vietnam.
Janie Tsao is president of Miven and runs day-to-day operations. She also does startup advisory work and heads the Tsaos’ family foundation.
Miven, which runs a $100 million venture fund, is big on investing in consumer technologies in software, wireless, chips, the Web and other areas.
Miven doesn’t disclose its investments. A few have been made public, including Santa Clara-based TZero Technologies, which was bought at the brink of closure last year by NDS Surgical Imaging of San Jose.
Others include Santa Clara’s VivoTech Inc., which makes technology for wireless payments, and Israeli chipmaker Celeno Communications Ltd.
No. 17 Irvine’s Dima Ventures should have been on the list in past years. It closed up shop at the end of 2009, so it’s included on this list for the record.
Dick Allen, founder of Dima Ventures, was a cofounder of Caremark Rx Inc., now part of CVS Caremark Corp.
Dima invested in startup companies in the medical device and healthcare technology markets. Allen couldn’t be reached for comment.
Biggest Mover
The biggest mover on the list was Newport Beach’s Transmeridian Capital Services, which shot up nine spots on the list to No. 6 with a $500,000 investment here.
Transmeridian’s principal, Malcolm Green, declined to name the local company he invested in.
“It’s a Newport Beach firm that I’m a partner in, and we aren’t ready to make it public,” he said.
The company deals with a technology that allows projectors to display 3-D images for use in classrooms, trainings, corporate presentations and sales, he said. The product also has some medical applications, such as to display test results.
The company does manufacturing in engineering in Little Rock, Ark., and has a small engineering group in San Diego, Green said.
