Los Angeles lands solid summer of investment in tech start-ups
After an impressive first half of 2014 for investments in start-ups, the lack of any mega-deals led to a cool summer in the venture capital world.
U.S.-based companies raised $11 billion through nearly 900 venture capital deals from July through September, a fall-off of 24% in investment dollars compared with the previous quarter, according to a Dow Jones VentureSource report issued Wednesday night.
A $1.2-billion round of investment in ride-sharing app Uber in June had stoked worries that the technology industry was getting carried away like back in 1999. But the summer prompted a return to a stable growth trend line with the two largest deals going to a pair of Los Angeles County companies living outside the traditional tech world.
Film studio Legendary Entertainment picked up $250 million led by South Korean giant Softbank Corp. Billionaire Patrick Soon-Shiong’s health tech start-up NantHealth received the same sum in a round led by the Kuwait Investment Authority, according to Dow Jones VentureSource.
The big sums provided the Los Angeles metro region a landing back to solid footing. The San Francisco Bay Area had raised 24 times more money than Los Angeles in the first half of 2014, according to the Dow Jones VentureSource data. But the margin dropped to just five times over in the third quarter.
Analytics provider Qualtrics, payment processing start-up Square and mobile security developer Lookout rounded out the top five with raises of $150 million to $200 million.
Data provider PitchBook counted nearly 50 deals involving Los Angeles-based companies this summer. They captured $1 billion, or about 5% of worldwide venture capital investment, in the quarter as Southern California remained the third most active region in the country for investment.
Here’s a look at the five most valuable Los Angeles County start-ups that raised money in the third quarter based on their value before the new investment, according to PitchBook.
The Honest Co. – The maker of home and family products, founded by Jessica Alba, raised $70 million and had an estimated pre-investment valuation of $930 million. The company began as an online retailer of cleaning supplies and diapers free of toxic chemicals. Honest‘s ongoing expansion is expected to include organic formula and nontoxic makeup products in the first half of next year. Also in consideration are “experiences centers” where patrons would be greeted by a store, café, family play area and classrooms for parenting classes, Alba and Chief Executive Brian Lee recently said.
JustFab – JustFab received $85 million after an estimated $915-million valuation. The clothing retailer with several brands says it has 35 million members in its community and generates annual revenue in the low hundreds of millions of dollars.
Tradesy – The online marketplace to buy and sell fashionable used clothing had a pre-money valuation of $37.7 million. Tradesy takes a 9% commission. The website counted 1.3 million members as of May, when it announced a $13-million round of fundraising.
Club W – The service that sends users a curated set of wines each month based on the individual’s preferences had a pre-investment valuation of $30.2 million. Last month, Club W said the new investment was worth $9.5 million and would help the company expand its California winemaking operations and advertise.
Workpop – The recently launched start-up raised $7.9 million and had a pre-money valuation of $19.6 million. Workpop is setting out to build a “smart” job board that lets job seekers, including those looking for hourly positions, see what skills they might be missing for a certain position or whether another opportunity might be a better fit.
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