Los Angeles is still a hot market for VC backed ventures (Seed – Series C). Yes, COVID-19 has slowed down the growth of many companies, but surprisingly the Median Deal Size this summer was up 29.2% and the Median Post Valuation is up 50.9%. To me this shouts:
“If your company is doing well the VCs are going to fight like hell to get you”
Just like you, Venture Capitalists did not take the summer of 2020 off. Close to a Billion Dollars was invested in LA for early-stage ventures (Seed – Series C). Yes, there was a 38.8% decrease in the number of LA deals this summer, but the invested capital was only down 23.5%.
In LA, the top 3 verticals invested in, remained:
- Technology, Media, and Telecom (TMT)
- Mobile
- Software as a Service (SaaS)
While the number of deals was off, the Median Deal Size and Post Valuation increased significantly. And trending up was AI. There was nothing hotter in the LA market than AI. There was a 50% increase in deals with invested capital for the summer exceeding $76M (a 29.7% increase over last summer). The AI Median Deal Size was up 8.8% and the Median Post Valuation was up a sweltering 41.1%. Big Data and LOHAS & Wellness also burst on the scene with 10 deals and almost $160M invested over the summer.
Our VC partner Crosscut shared some very good news:
“We are still seeing a strong pace of investment in the LA market. We even made our first three fundings without an in-person meeting recently. The process went well and we are looking forward to a strong Q4 to end 2020.” – Rick Smith, Co-Founder & Managing Director, Crosscut
Los Angeles/Southern California
Companies funded in July & Aug 2020 vs 2019 (from Pitchbook)
| July 2020 VC Deals | July 2019 VC Deals | |||||||
| $ in Millions | # Deals | Invested Capital | Median Deal Size | Med. Post Valuation | # Deals | Invested Capital | Median Deal Size | Med. Post Valuation |
| Seed | 16 | $57.2 | $3.2 | $12.0 | 28 | $46.1 | $2.0 | $12.0 |
| Series A | 10 | $72.0 | $8.2 | $30.0 | 9 | $69.6 | $6.5 | $37.0 |
| Series B | 6 | $202.0 | $20.0 | $100.0 | 14 | $327.2 | $21.5 | $80.5 |
| Series C | 5 | $301.0 | $36.0 | $981.7 | 4 | $62.8 | $13.3 | $108.3 |
| Total | 37 | $632.2 | $8.4 | $41.2 | 55 | $505.7 | $4.9 | $17.5 |
| Aug 2020 VC Deals | Aug 2019 VC Deals | |||||||
| $ in Millions | # Deals | Invested Capital | Median Deal Size | Med. Post Valuation | # Deals | Invested Capital | Median Deal Size | Med. Post Valuation |
| Seed | 8 | $17.5 | $2.8 | $7.1 | 17 | $57.2 | $2.6 | $15.7 |
| Series A | 8 | $55.9 | $8.5 | $30.2 | 17 | $232.3 | $9.1 | $34.4 |
| Series B | 5 | $60.0 | $19.0 | 12 | $344.7 | $25.6 | $108.0 | |
| Series C | 5 | $147.3 | $30.0 | $165.0 | 2 | $53.3 | $26.7 | $23.2 |
| Total | 26 | $280.7 | $6.9 | $30.2 | 48 | $687.5 | $9.1 | $30.7 |
| Summer | July – Aug 2020 VC Deals | July – Aug 2019 VC Deals | ||||||
| $ in Millions | # Deals | Invested Capital | Median Deal Size | Med. Post Valuation | # Deals | Invested Capital | Median Deal Size | Med. Post Valuation |
| Seed | 24 | $74.7 | $2.9 | $11.4 | 45 | $103.3 | $2.2 | $12.5 |
| Series A | 18 | $127.9 | $8.2 | $30.2 | 26 | $301.9 | $9.0 | $35.5 |
| Series B | 11 | $262.0 | $20.0 | $100.0 | 26 | $671.9 | $23.7 | $95.5 |
| Series C | 10 | $448.3 | $32.5 | $165.0 | 6 | $116.1 | $14.9 | $100.0 |
| Total | 63 | $912.9 | $8.4 | $35.0 | 103 | $1,193.2 | $6.5 | $23.2 |
| Summer | Summer 2020 vs 2019 VC Deals | |||
| $ in Millions | # Deals | Invested Capital | Median Deal Size | Med. Post Valuation |
| Seed | -46.7% | -27.7% | 31.8% | -8.8% |
| Series A | -30.8% | -57.6% | -8.9% | -14.9% |
| Series B | -57.7% | -61.0% | -15.6% | 4.7% |
| Series C | 66.7% | 286.1% | 118.1% | 65.0% |
| Total | -38.8% | -23.5% | 29.2% | 50.9% |
| Key Verticals | July – Aug 2020 VC Deals by Vertical | July – Aug 2019 VC Deals by Vertical | ||||||
| $ in Millions | # Deals | Invested Capital | Median Deal Size | Med. Post Valuation | # Deals | Invested Capital | Median Deal Size | Med. Post Valuation |
| TMT | 21 | $549.3 | $11.6 | $47.4 | 42 | $667.8 | $9.5 | $33.3 |
| Mobile | 10 | $111.3 | $10.0 | $41.7 | 15 | $294.5 | $10.0 | $29.9 |
| SaaS | 8 | $100.9 | $10.0 | $55.3 | 15 | $245.9 | $6.4 | $21.0 |
| E-Commerce | 16 | $151.7 | $6.2 | $49.0 | ||||
| FinTech | 12 | $126.9 | $6.8 | $36.1 | ||||
| HealthTech | 5 | $113.1 | $20.0 | $61.1 | 10 | $96.1 | $10.6 | $36.6 |
| Cannabis | 10 | $60.7 | $2.6 | $49.0 | ||||
| AI & ML | 9 | $76.0 | $7.4 | $26.1 | 6 | $58.6 | $6.8 | $18.5 |
| Big Data | 6 | $77.4 | $14.2 | $38.8 | ||||
| LOHAS & Wellness | 4 | $81.6 | $20.0 | $100.0 | ||||
| Key Verticals | Summer 2020 vs 2019 VC Deals | |||
| $ in Millions | # Deals | Invested Capital | Median Deal Size | Med. Post Val. |
| TMT | -50.0% | -17.7% | 22.1% | 42.3% |
| Mobile | -33.3% | -62.2% | 0.0% | 39.5% |
| SaaS | -46.7% | -59.0% | 56.3% | 163.3% |
| HealthTech | -50.0% | 17.7% | 88.7% | 66.9% |
| AI & ML | 50.0% | 29.7% | 8.8% | 41.1% |
So Founders…… if your company has thrived during the last two quarters, now is the time to get out and pitch the VCs. Don’t wait. They want to put their money to work. If your story is strong because of or despite COVID, don’t wait for the storm to clear; get out there and pitch the VCs you are interested in reaching. A virtual pitch will be different than what you are used to, but not that much. They are still investing in you, your product-market fit, and the readiness to scale.
As the summer recedes and the fall awakens, get that deck ready and pitch.
About the Author: Marc Zablatsky heads Burkland’s “Rest of US” practice. Marc and his team have been working with startups throughout Los Angeles, Austin, Chicago, Seattle, and other cities.