Q3 2006 Southern California VC Investments Hit $835.3M

PricewaterhouseCoopers and the National Venture Capital Association have released the Money Tree venture capital results for Q3 of 2006, showing that Southern California investments reached $835.3M in the quarter, second only to Silicon Valley in the total dollars invested in the region. (Disclosure: PricewaterhouseCoopers is a sponsor of socalTECH). Nationally, there was $6.2 billion invested in 797 deals, down by 8 percent from Q2, but the best third quarter since 2001. The quarter also marked the third successive quarter where there was more than $6B invested nationally. Nationally, the combined investments in Los Angeles, Orange County, and San Diego ranked second in the nation, behind $1.988 billion in deals in Silicon Valley, but well ahead of New England, which saw $578.1M in investments. Southern California was at the center of several of the fastest growing segments of the market, including Industrial/Energy, Telecommunications, and Media and Entertainment. According to the report, the Southern California area saw $214.2M in investments in the Industrial/Energy category, $107.3M in Telecommunications, and $81.6M in the Media/Entertainment area.

Among most active areas of investment, both nationally as well as in the area was the Life Sciences sector, which nationally saw $1.8B going into 177 deals. Locally, $203.9M of those Life Sciences investments came from Southern California, led by a $48M investment in San Diego-based NovaCardia. Software continued to slip, and saw a 19 percent decline in investment dollars, and a 24 percent decline in deals from Q2, with $1.09B in 186 deals. Despite the overall decline, Southern California's share of the software deals equaled $101.46M in 15 deals. Other interesting information from the report was that there was a 10 percent increase in early stage deals during the quarter, with twenty-three percent of the dollars going to first stage investment. On a conference call commenting on the results, John Taylor, VP of Research at the National Venture Capital Association said that "Startup and seed investments are at the highest since any quarter since 1999," attributing the shift to venture capitalists who are "finally turning attention to new deals and looking forward."

On an area-by-area basis, the Los Angeles area led the region with $415M in 41 deals, followed by San Diego with $292.5M in 27 deals; then Orange County with $127.7M in 15 deals for the quarter.

The largest investments reported by PwC and the NVCA were the funding of Cilion, a Goshen-based producer of biofuels (which was categorized in the Los Angeles area in the report). with $160M raised; Boingo Wireless, which raised $65M for its wireless broadband Internet access services; and San Diego-based Novacardia, a provider of drug development services.

The Money Tree also reported, for the first time, venture deals funded by U.S. venture capital firms in China, India, and Israel. The report showed there was $221M invested in 18 deals; $203M in 18 deals in Indian companies, and $47M in 11 deals in Israel.