Venture Funding Pulled Back Again in ’02
By ANDREW SIMONS
Local venture capitalists saw their investments in Orange County startups drop 14% to $91 million in 2002 from a year earlier, according to this week’s Business Journal list.
Six of the 22 venture capital firms on the list, including two Business Journal estimates, didn’t invest any money in OC companies last year. Six upped their investing from 2001.
Two firms, Laguna Niguel-based Cardinal Partners and Corona del Mar’s Miramar Venture Partners, invested in OC companies for the first time.
Eleven firms, including one estimate, invested less money in OC startups than they did in 2001.
The list ranks venture firms operating here by the amount invested in 2002. It includes firms based here and those with offices here.
The list doesn’t include investments in OC companies made by firms that don’t have offices here. Nor does it tally investments made by out-of-area offices of OC-based firms.
In all, OC startups raised $447 million in 2002, according to the Money Tree survey from PricewaterhouseCoopers, Venture Economics and the National Venture Capital Association. That was the lowest tally in five years and less than a third of 2000’s record $1.5 billion.
Healthcare and medical device companies grabbed much of last year’s funding by local venture capitalists (see related story, below).
The top firm on the list, Newport Beach’s Versant Ventures, invested $21 million in OC medical device makers last year,up from $4.2 million in 2001. Versant portfolio companies include San Clemente’s Cameron Health Inc., Laguna Niguel’s Cogent Healthcare Inc., Laguna Niguel’s Glaukos Corp. and Irvine’s IntraLase Corp.
“The new companies we fund are often here in Orange County, but the total number of companies funded by any VC firm in a single year is not large,” said Barbara Lubash, a managing director with Versant Ventures. “With small numbers of investments per firm, annual swings are expected. What you are seeing here is a normal variation year to year.”
But not all healthcare-focused firms stepped up their investments.
No. 2 Laguna Niguel-based Domain Associates LLC pulled back its funding by 29% to $20.9 million last year. Among those that did get Domain’s backing: heart treatment startups Laguna Hills-based Volcano Therapeutics Inc. and Lake Forest-based Orqis Medical Corp.
Firms that invest in software, chips and communications startups largely sat out last year.
No. 8 Costa Mesa’s InnoCal Venture Capital cut its investing by half from 2001, putting $3 million in companies including TCI Solutions Inc., a maker of software for grocery stores that recently moved from Irvine to Tucson, Ariz.
There were exceptions. In its first full year of investing, No. 11 Miramar Venture Partners put about $1 million in OC tech startups, including Irvine chip designer SolarFlare Communications Inc., which has raised $26 million to date.
SolarFlare makes chips allowing older networking devices to transfer data faster so they can interact with newer gear. That could save companies from a costly overhaul.
“Anything that is disruptive will have a hard time,” getting venture funding, said Bob Holmen, a Miramar partner. “Businesses don’t want to be disrupted right now. They want to do business cheaper.”
The Irvine office of Woodside-based Crosspoint Venture Partners, which ranked No. 3, trimmed OC investments by 9% to $11.7 million last year.
The Irvine office of Los Angeles-based Riordan, Lewis & Haden came in at No. 4 with $11.5 million invested in OC companies, down 4% from last year.
Riordan bills itself a private equity investor, not a venture capital firm. We include the firm because it has done venture-style investments in tech startups such as Mission Viejo network security software maker Foundstone Inc. and Irvine-based networking company Axcelerant Inc.
