Survey Puts Third-Quarter
Investment at $212M, a Record
We’re in the money, and according to some who’ve seen recent venture capital activity, Orange County’s got a lot of what it takes to get along in the technology arena.
According to PricewaterhouseCoopers’ latest Money Tree survey of investors, OC growth-stage companies raised a record $212.3 million in 17 venture capital deals from July through September. That’s OC’s best quarter ever, in a year already on track to double last year’s record venture capital total. Nationally, VC firms invested $9 billion in the third quarter, PwC said.
The news comes a few days after another survey by San Francisco research firm VentureOne reported a similar third quarter rise for Southern California venture capital investments to $710 million.
While the Money Tree survey is not an exhaustive listing of venture capital deals, but only a piece of total investment activity, the numbers are considered a barometer of the area’s economic growth, particularly in the tech sector.
OC has already posted 59% more in VC funding this year than in all of 1998, a growth rate that outpaces the U.S. as a whole, as well as the vaunted Silicon Valley. Though Northern California is still king when it comes to wooing VC investments, its total has risen a mere 27% this year, to $3.34 billion.
Regionally, Los Angeles is doing even better than OC, boasting a 75% jump from last year’s totals to $925.6 million. San Diego has risen 48% to $553.6 million.
More than half of the OC total in the third quarter went to Irvine discount PC maker eMachines, which snagged $119.5 million in first-round financing from a group of investors led by Crosslink Capital Inc., Rho Management and Technology Crossover Ventures.
But even without the eMachines investment, the remaining $92.8 million would have made for a strong quarter, said Luis Puncel, a partner for PricewaterhouseCoopers’ global technology industry group practice in Costa Mesa.
“If you look at the past deal flow, the money was coming in at the rate of about $50 million per quarter,” he said. “So even taking out eMachines, $92 million is very respectable.”
Puncel notes that last year Orange County was held back by its concentration of biotechnology and medical equipment firms, which have lost much of their luster for investors in recent years. But with more dot-com firms emerging from Orange County addresses, that’s already changing, he said.
On the other hand, Tim Cooley, managing partner for the recently announced Tech Coast Superfund, said biotech and medical-related investments are undervalued and offer some potentially lucrative opportunities.
“Right now, e-commerce is gathering so much attention because it’s sexy and you can flip your money so quickly. Wall Street is just enamored with it,” he said. “But there’s going to be huge growth in biotech.”
Business service providers, most of them technology-related, dominated Orange County deals, taking in more than 19% of the total. Healthcare secured 9.6% and software attracted 5.1%.
Puncel said he expects a strong showing for the fourth quarter, typically the largest of the year. A healthy nexus of emerging technology companies should keep the venture money flowing, he added.
“The things that will attract venture capital investments are successful companies and successful management teams,” he said. “It all starts with a few companies and kind of feeds on itself after that.”
Orange County companies funded in the third quarter include:
? Novacell Inc., which is developing an artificial pancreas to treat diabetes, for $1.65 million
? Mesa Agency Group, a consolidator of high-end insurance agents and agencies, for $100,000 in bridge funding
? NetBase Computing, an information technology company, for $35 million in third-round funding
? PrintNation, a printing supply and equipment seller, for $5.75 million in first-round funding
? inBuilding Systems Corp., which provides high-speed Internet access to multi-tenant buildings, for $900,000 in seed funding
? RaceSearch.com, an information search utility for the racing industry, for $3 million in first-round funding
? TeleCore Inc., a telecommunications contractor that serves competitive telephone companies, for $6.5 million in first-round funding
? A Better Way of Learning, which develops curricula for home-based education, for $581,194
? 877 NetFuel, a commercial fuel distributor, for $250,000 in seed funding
? Dental X Change, a dental commerce company, for $3.485 million
? PMD Holding Corp., a medical supply and equipment company, for $17 million
? Endocare, a medical equipment maker, for $348,750
? MicroVention Inc., which is developing devices to treat neurovascular disorders, for $7.5 million in second-round funding
? IndX Software Corp., which makes software for back office applications, for $250,000 in bridge funding
? Object Animation, which makes software to automate industrial processes, for $4.5 million in first-round funding
? Total Control Information, which makes enterprise resource planning software for drug stores, for $6 million in first-round funding.
