O.C. gets fewer venture capital deals, more dollars

January 24th, 2009, 6:00 am · Post a Comment · posted by Jan Norman, small-business columnist

The number of Orange County companies receiving venture capital declined 20% to 56 in 2008. However the money they raised increased 19.2% to $660.5 million, according to the MoneyTree Report released today by PricewaterhouseCoopers and the National Venture Capital Association.

The data are provided by Thomson Reuters and differ from a report released Jan. 17 by Dow Jones VentureSource.

Venture-backed firms traditionally drive job growth and economic development in a region. Their ability to attract the money they need to develop and market their innovations is an indication the direction of the local economy.

Here are the major O.C. deals during the fourth quarter noted by the Money Tree Report:

Source: PWC, NVCA, ThomsonReuters

Nationally, venture capitalists invested $28.3 billion in 3,808 deals, an 8% drop in money invested and 4% decrease in number of deals. It was the first yearly decline in total investments nationally since 2003.

Here’s a look at the regions with companies receiving investments from venture capitalists in the fourth quarter. (Click on image for larger view.)

The fourth quarter showed a significant drop in venture capital investments, a slowdown likely to continue into 2009, because fundraising by venture capitalists and private equity funds dropped significantly in ‘08.

In Q4 in Orange County, 10 companies received $81.1 million, a 25% drop from the same period of 2007 and the lowest quarterly investment in four years.

Nationally, investments totaled $5.4 billion, down 26% from a year earlier and the lowest amount since the first quarter of 2005.

“The quarterly decline was not unexpected as market uncertainty took its toll on venture activity,” said NVCA President Mark Heesen.

Randy Churchill, a partner at PricewaterhouseCoopers in Los Angeles, noted that the Southern California 2008 investments were the 5th highest in 14 years. “At this point, venture capitalists are doing what everyone else is doing, assessing and reassessing … every investment carefully in order to make prudent decisions on what companies have the brightest outlook for the long term. The silver lining is that history has proven that true innovation can surface under very challenging circumstances.”