Venture Capital Funding Declines in Southern California

The Los Angeles Times reported that venture capital funding has declined considerably in Southern California.  The article sourced data compiled from Dow Jones VentureSource, which provided the following statistics:

  • Southern California companies raised $507.6 million from venture capital investors for Q1 2013, a 42% decline from Q1 2012
  • The amount raised in Q1 2013 was the smallest amount raised since Q2 2009, when the stock market was bottoming out from the global financial crisis
  • Nationwide, companies raised $6.4 billion in Q1 2013, only a 11.8% decline from Q1 2012

The article indicates that,

The decrease may be due in part to VC firms raising less money from investors. Nationwide, firms have taken $4.2 billion into their funds this year. That’s down from $6.3 billion in the first quarter of last year, but up from the anemic $2.6 billion in the fourth quarter.”

The article does not go far enough in addressing what is causing this decline.  There are other factors that may also be contributing to the decline, especially in the Southern California area. such as:

  • New company growth may be slowing down in Southern California due to the higher cost-of-living and tax rates, and entrepreneurs are looking to start companies in different parts of the country
  • Although the stock market has done well in Q1 2013, there is still much economic uncertainty in the market domestically and globally, causing investors to be reluctant to make investments

Venture capital funds are critical to start-up companies’ growth and the overall growth of the economy.

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