Investments in L.A. tech more than triple since 2009

It turns out Snapchat, Tinder and Oculus Rift are not the only hot tech companies in Southern California.

There’s so much startup action in the Los Angeles and Santa Monica that the region has become a new favorite for venture capitalists and angel investors. Investments in the greater Los Angeles area tech have more than tripled in the last five years, for a total of $4.71 billion in 1,081 deals since 2009, according to a new report from CB Insights, a research firm that tracks venture and angel investments.

That marks a 163 percent increase in funding and 180 percent increase in deals since 2009. And 2013 was the biggest year yet, by far — 302 deals for a total of $1.55 billion invested. Much of the money came from Silicon Valley VCs, signaling the growing interest Bay Area firms have in L.A. as a thriving startup community that could offer big returns. Of the ten most active VC firms in L.A., half are based in Silicon Valley.

There were some big deals during the second quarter of this year, including Swagbucks, an online rewards and gift card platform, which raised $60 million. In all, the second quarter of the year produced 82 deals for $560 million, the largest quarter by dollar amount so far.

But when compared to Silicon Valley, L.A. investments look like peanuts. VCs in Silicon Valley made 1,114 deals that totaled $7.09 billion during the second quarter.

“Silicon Valley is the mecca for tech startups and it’s going to remain that way,” said Sam Teller, co-founder and managing director of Launchpad LA, and startup accelerator and early-stage investor based in Santa Monica. “Every other city around the world is increasingly becoming a tech hub, and L.A. is at the top of that list.”

And perhaps one of the largest deals is yet to come — messaging app Snapchat is reportedly in talks with Chinese behemoth Alibaba to raise a funding round that would value the company at $10 billion. The company is already the fifth best-funded company in greater LA. At $10 billion, Snapchat’s value would match Airbnb’s and Dropbox’s, exceeded only by Uber among U.S. startups, according to data from Dow Jones and the Wall Street Journal.

Unlike Silicon Valley, where investments have shifted to later-stage and established companies are getting the bulk of the cash, early-stage investments make up the largest share of funding rounds in L.A., with Series A capturing 32 percent of deals last year.

The L.A. region is also seeing more diverse startups. Traditionally, gaming, fashion and media companies have dominated, but now more software, security and hardware upstarts are joining the beach-tech scene.

“We’re seeing lots of great b-to-b, hardware, software and unsexy businesses,” said Teller. “To me, that’s really exciting because it says that engineers with big ideas are comfortable starting their companies here, and recruiting  from or this pool of engineers.”

 

 

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