Venture Funding Picked Up in Fourth QuarterBy RAJIV VYAS
By RAJIV VYAS
Orange County venture funding rebounded in the fourth quarter after hitting its lowest level in three years in 2001.
Twenty OC companies raised $204.5 million in the fourth quarter, according to the PricewaterhouseCoopers LLC Money Tree Survey done with Thomson Financial’s Venture Economics and the Arlington, Va.-based National Venture Capital Association.
That was up from 17 companies raising $89 million in third quarter and 22 startups raising $160 million in the second.
“Venture capitalists have problems behind them now and everyone is focusing on new deals,” said Randy Lunn, general partner at Irvine-based venture capital firm Palomar Ventures.
But venture capitalists still weren’t as busy in the fourth quarter as they were a year earlier. In the fourth quarter of 2000, they invested $326 million in 26 OC companies.
For all of 2001, OC saw 90 deals, down from 130 in 2000 and 110 in 1999. OC companies raised $678 million last year, down from $1.34 billion in 2000 and nearly $1 billion in 1999.
“Venture capitalists were very cautious last year and this year they are being selective,” Lunn said.
Palomar is looking at closing six to eight deals in 2002, Lunn said.
Medical device makers took the bulk of venture money last year. Twenty-two device makers got $126 million in 2001, down from $221 million raised in 25 deals in 2000.
Software companies bagged $123 million of funding in 10 deals in 2001, down from $263 million in 25 deals in 2000.
Biotechnology companies also got money last year. Venture capitalists put $48 million into nine biotech companies last year, up from three deals in 2000 worth $14.4 million.
“Biotech and healthcare funds were making fewer investments in the prior year, but (in 2001) they were active,” Lunn said.
OC also saw some big private equity deals in the fourth quarter, according to Venice-based Growthink Inc., a research firm that also helps companies raise money. Private equity funds mainly invest in profitable, later-stage or turnaround companies.
In November, Santa Ana-based GeoLogistics Corp., a struggling freight forwarder, raised $67.5 million from Questor Management Co. to help with its restructuring. GeoLogistics counts annual sales of about $1.5 billion.
In October, Irvine-based Caliber Collision Centers, an operator of collision repair shops, raised $40 million in private equity. The company plans to use the funding to acquire and open repair shops, possibly in states other than California and Texas, where it has facilities.
“For private equity business the factors are totally different,” said Murray Rudin, a partner at Los Angeles-based private equity firm Riordan, Lewis & Haden and head of its Irvine office. “We are not affected by technology meltdown.”
The biggest private equity deal of the quarter was the $125 million investment in Newport Beach-based-InSight Health Services Corp., a medical imaging company.
In October, the publicly traded company was taken private in a deal financed by J.W. Childs Associates LP of Boston and Washington D.C.-based The Halifax Group LLC.
“The healthcare market is tremendous,” said Corey Lavinsky, director of research at Growthink. “For every quarter in 2001, healthcare has received greater percentage of funding.”
