Southern California Venture Totals Drop in Q4

PricewaterhouseCoopers and the National Venture Capital Association (NVCA) released their 2008 Q4 MoneyTree Report this evening, reporting that $28.3 billion was invested in 3,808 deals in the fourth quarter of 2008. The report, based on data from Thomson Reuters, found that 2008 investments declined by 8 percent in terms of dollars, and 4 percent in terms of deal volume, with fourth quarter results seeing a 26 percent drop to $5.4 billion in 818 deals, down from $7.3 billion in the third quarter.

Most sectors saw drops in investment during the year, with the exception of few--including a couple of sectors where Southern California has a significant presence, in Clean Technology and Media & Entertainment. Clean Technology saw a 52 percent increase in terms of dollars, and 16 percent growth in deal volume over 2007, reaching an investment level of $4.1 billion in 277 deals. Media & Entertainment also saw an increase, up 3 percent to $2.0 billion and 407 deals in 2008. The only other sector seeing an increase was IT Services, up 17 percent to $1.8 billion and 262 deals.

For Southern California as a region, funding totaled $485M in 74 deals for the quarter, a significant drop from both Q4 of last year, which had $829M and 102 deals; and also from the prior quarter, when there was $779M invested in 84 deals. San Diego led in the report for the quarter, with $205M in 24 deals; Los Angeles had nearly $198.6M in 40 deals; with Orange County totaling $81.1M in 10 deals. Year to year, Los Angeles actually had an increase in investments, up from $168.8M in 37 deals in 2007.

"Over the past several months, as you are all aware, the economic sitution forced all venture capitalists to review their allocations," according to Pascal Levensohn, a venture capitalist at Levensohn Venture Partners, commenting on the dropoff in investments in Q4 in conference call. However, Levensohn said "It's an excellent time to put money to work," saying that the best investments his firm made were during at the bottom of the last cycle, in 2002 and 2003.

In terms of last quarter's activity by industry in Southern California, Industrial/Energy led, with $76.4M in deals, followed closely by Biotechnology, which had $74.85M in deal totals. Interestingly enough, Semiconductors came in third, with $62.1M in funding, driven in a large part by a $32M round for Solarflare Communications.

According to the report, the most active Southern California investors (those with their headquarters in Southern California) were Clearstone Ventures, with 6 deals; followed by Miramar Ventures, Rustic Canyon Partners, Amgen, Shepherd Ventures, Avalon Ventures, NGEN Partners, and Anthem Ventures, all with 3 deals each.