Explaining Southern California's economy

Venture capital is on pace to beat 2011 fundraising

CFF VC Panel

Venture Capital in Southern California panel. From right, KPCC's Matthew DeBord, Rustic Canyon Partner's Nate Redmond, Idealab's Alex Maleki, and Ben Kuo from socalTECH.

California is the capital of venture capital, so trends in the industry are vitally important to our state. In the aftermath of the financial crisis, VC fell off a cliff, declining from a high of $25.3 billion in 2008 to a low of $13.8 billion in 2010, according to Thomson Reuters and the National Venture Capital Association. So far in 2012, however, fundraising is looking up, with a first quarter total of almost $4.9 billion. 

This is a pace that could deliver a $20-billion year in 2012.

But there's some bad news. Only 42 VC funds participated in these raises, waaayyy down from the 212 funds that were raising money in 2008. Also, a winner-take-all mentality is taking hold, decisively, in VC as five funds have accounted for 75 percent of total first-quarter fundraising — $3.6 billion. That leaves 37 other funds fighting over just over a billion in remaining funding. 

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