Like the rest of the country, startups in-and-around Los Angeles saw a decrease in VC funding in the second quarter.
Companies within the Los Angeles-Long Beach-Orange County region raised approximately $4.8 billion last quarter, down from about $7.1 billion in the first quarter, according to PitchBook, a firm that tracks venture capital deals.
The Q2 numbers are also down from the same quarter last year, which saw about $7.7 billion in VC funding in the region.
The most recent quarter saw 278 deals in total, which fell behind the first quarter's deal volume of 337 investments and 353 deals from the same quarter one year ago.
As far as seed-stage investing goes, Brian Mac Mahon, the head of Expert Dojo accelerator in Santa Monica, told LA Inno that he’s witnessed the numbers in this stage decrease, “as this money was deployed more slowly by angel investors.”
“This was expected,” Mac Mahon said. “Going forward, Expert Dojo is advising our startups that we need to be more aggressive on growth than ever before. The market has changed and even though there is more investment money on the sidelines than ever before, it's more cautious than it used to be. Investors want to be sure that the companies they invest in can grow.”
Nationally, startups saw VC funding decline 24% in the second quarter compared to the first quarter, raising only $62.3 billion in Q2.
They also saw a 23% decline from the second quarter of last year.
U.S. venture activity, while down quarter-over-quarter, still outpaced what startups raised in any quarter pre-2021, a sign of just how frenzied the deal pace was last year.
"2021 was a remarkable year and perhaps an unusual benchmark for VC investment activity," the PitchBook report said.
The report added that the pace of VC activity is likely to slow further in the second half of 2022 "as the threshold for closing deals rises and pricing uncertainty extends to the early stages of the investment cycle."
Venture funds making a priority of their existing portfolio companies, rather than increasing their flow of new investments, is also likely to slow overall VC activity, according to PitchBook.
Initial public offerings were virtually nonexistent last quarter, with just eight VC-backed companies going public in the second quarter. That represented a 13-year quarterly low, PitchBook said.
But there's reason for some optimism. U.S. venture funds have collectively raised $120 billion this year, which is on pace to eclipse last year's record of $139 billion.
"While this activity is likely mainly a continuation of momentum from 2021, it’s still an encouraging sign around the level of capital availability through the uncertainty that the next few years may bring," the report said.
