Los Angeles: Ready for its closeup?

It's that time again: CB Insights has released its quarterly VC report. The money's still big, though with a focus on seed deals. Quarter three closed with 835 deals totaling $7.5 billion invested. But CB Insights is quick to dispel any bubble talk, pointing out that unless Q4 brings $9.2 billion in funding, 2012 will show an overall drop in VC investments.

On the regional front, California, New York and Massachusetts are still the big three. Massachusetts is in the number-two spot overall, but in the Internet sector, California gets seven out of every ten deals, New York two and Massachusetts one. Not too shabby.

However, this time around--after getting complaints that Southern California was "the Rodney Dangerfield of VC markets"--CB Insights broke out its California stats to see how the region that would be Silicon Beach fares all on its lonesome. Turns out, having made 70 deals totaling $695 million, it's quite well:

Based on VC funding, SoCal was actually the 3rd biggest market ahead of NY and just behind Silicon Valley and Massachusetts.

Looks like we've just been bumped. Pause for sad trombone noises from the direction of downtown.

Otherwise, New York fared well, hitting a five-quarter deal-count high. And this time around, the good folks at CB Insights allowed that maybe, just maybe, New York isn't a consumer-Internet obsessed one-trick pony, after all:

Although still very tech dominated, the quarter did see NY register signs of life in both green tech and healthcare which typically are nowhere to be found.

The report also notes that, on a national level, seed funding continues to increase. It accounts for 31 percent of overall deal volume; in combination with Series A, it's 55 percent. But don't worry yourself into a bubble-induced case of dyspepsia just yet. The report also points out that these are

Seed VC is a low risk call option for most VCs. If all Seed VC deals failed, it’d be the equivalent of a single medium-sized VC fund going out of business. That happens all the time and presents no risk to the entire VC ecosystem. When it becomes easy to raise big Series C and D rounds, then we’ll talk about a bubble.

Thank goodness. We wouldn't want it all to burst and end up with the Winklevii shut away in their glorious Hollywood Hills home, like latter-day Gloria Swansons.

(cbinsights.com)

News flash: it is not 1999 anymore, and it appears that corporate venture capitalists have adjusted accordingly. CB Insights released its Q1 Corporate Venture Capital Report yesterday, revealing that CVCs participated in just 84 deals totaling $1.09 billion, a record low for the past five quarters.

But while overall CVC funding is down 20 percent, funding for the Internet sector is up 30 percent, with CVC deals in that sector increasing for the third straight quarter.

Corporate venture capital refers to the direct investment of corporate funds into external startups—as opposed to corporate venturing, which involves internal innovation support. For example, AOL Ventures, the venture capital arm of AOL, which invested in TastemakerX last quarter, and Time Warner Investments, which made deals with Conviva and Bluefin Labs this spring.

CB Insights analyzed data on the activity of over 200 corporate venture capital arms, concluding that corporate deal and funding volume continue to fall. CVCs participated in only 11 percent of all venture deals for the first quarter. CVC funding in the mobile and telecom sector fell 45 percent from last quarter, although CB insights expects to see an increase in Q2’12. Corporate funding for the green sector is also at a five quarter low.

The report found that when CVCs do invest, they tend to be involved in larger deals. According to CB Insights, CVCs spent, on average, $5.5 million more per deal than traditional VCs in Q1 2012.

CVCs were also found to be later stage investors—only 32 percent of all CVC deals were early stage investments in Q1 2012—as well as frequent co-investors. The average CVC deal in Q1 had 4.3 investors, and over 90 percent of CVC deals involved at least one co-investor.

Findings revealed that CVC activity in New York and Massachusetts has fallen for the fourth consecutive quarter, with Texas nearly overtaking New York for the third place spot. California remains in the lead, having received 60 percent of national corporate funding in Q1.

“CVCs are not partying like it’s 1999,” concluded CB Insights CEO and co-founder Anand Sanwal.

So how much have these enterprising Facebookers convinced investors to give them? $271 million since 2006, with $130 million of it all in the first half of 2012 (Quora is responsible for $50 million of that). Momentum "appears to be accelerating," the report says. Doesn't it always?

The impact of the Facebook Mafia is hard to see as of yet—only a few companies such as Path, Asana and Quora seem to stand a chance of making a dent in the universe. But with the IPO imminent (it's tomorrow! it's tomorrow!), even more Facebookers will cut loose to start their own companies—and invest in each others'—in a sort of Facebook Spring.

"With Facebook’s impending IPO and the resulting number of employee millionaires it will mint, there is every reason to believe that this is just the beginning of a lot more venture funding to Facebook alumni," CB Insights notes. "As happened with Google, VCs will be keen to to build relationships and fund Facebook staff (especially engineers) if said engineers decide to scratch their entrepreneurial itch and found a startup."

CB Insights prepared the report as part of a wider research paper on the alumni networks of Facebook, Google and PayPal.

The report also shows the venture capitalists who were most active in funding ex-Facebookers. CB Insights identified 67 different investors who’ve invested in at least one Facebook Mafia company, but only six VC firms have invested in two or more Facebook Mafia ventures:

• Greylock Partners – 3 companies
• Benchmark Capital – 2 companies
• First Round Capital – 2 companies
• Index Ventures – 2 companies
• Redpoint Ventures – 2 companies
• SV Angel – 2 companies

More like Facelock Partners, Facemark Capital, and Face Round Capital, arewerite?

via CB Insights

The data service whizzes at CB Insights released a new report today on venture capital financing in the first quarter of 2012. On first glance, the news doesn't look great for New York. The data shows that funding in New York dropped to a five-quarter low. "But the state’s deal activity stayed strong so we don’t think the decline is a problem (yet)," says the report.

Eep, was the parenthetical really necessary? Not likely. "NY remains a hub for early stage investment with 30% of deals in the seed stage and another 30%+ in the Series A stage," the firm added, assuaging fears.

In fact, a closer look at New York (you can access the full report for free) also shows that while the dollar volume may be down, the number of deals are up from last quarter. That's the same trend CB Insights reports nationally. VCs invested $5.9 billion domestically last quarter, the lowest amount since Q1 2010, thanks to fewer "mega deals." However, they also made 785 investments overall, the second highest tally in the past nine quarters. Nationally, seed investing "hit a historical high," with one out of every five VC deals being made at the early stage.

All told, funding in New York fell 41 percent from Q4 2011, while the number of deals climbed 11 percent. The report identified rounds raised by Aereo, Buzzfeed, and Peek among the "top deals."

The report also shows that NYC took the third spot, after San Francisco and Mountain View, for "Internet VC deals" with 47 deals totaling $153 million. In terms of mobile VC investments, New York was fourth--after San Francisco, Palo Alto, and Mountain View--with 10 deals for a total of $39.37 million.

Keep your eye on that mobile sector, urges CB Insights, predicting an "Instagram Effect." Although the Facebook deal was announced when first quarter had closed, they say, "We expect that the coming quarters will be interesting for the mobile sector as companies and investors try even more aggressively to ride the mobile wave."

image via CB insights

Some fresh data out this morning from CB Insights shows New York slipped backed behind Beantown in terms of overall venture capital. But that is largely due to the deals in biotech and medical companies that Boston did. When it comes to tech, and more specifically the web companies Betabeat covers most, New York is still second only to Silicon Valley.

It's a trend that will likely continue, as CB notes, "California and NY account for 59% of internet VC deals and 66% of funding. Internet investments took over 1/3 of venture dollars in 2011 and Massachusetts fell to a five quarter low on internet deal share."

The total number of deals and capital invested reached its highest level in a decade, topping even the peaks of the pre-credit crisis 2007-2008. The folks from CB are prediciting a crunch at the series B and C stage, as an ever greater numbe of young companies vie for funding and the funnel narrows to those who can show serious traction. While seed stage reached new highs and series A saw an uptick, later rounds declined.

Fab, Outbrain and Knewton were the big deals in New York over the last quarter, with Imagen Biotech, which works on cures for blindness, rounded out the pack of top funding. Given that Fab has only been working its current company for seven months, it's astonishing to see the company it's keeping.

Another interesting note, while Manhattan had the most activity with 61 deals, Brooklyn nabbed five investments worth $7 million in total. Not suprisingly with the explosion of tablets and smartphones, the share of venture going into mobile deals rose compared to more traditional web companies.

Not a fan of start-up fever.

If the tenants at the city's NYU-Poly incubator are any indicator, Wall Street is soooooo 2006. A number of the 20 tenants working out of 160 Varick Street are now wantrepreneurs who have given up finance salaries--by force or choice--for "fin-tech" start-ups.

These former suits are leveraging what they learned on the Street to create financial products and services that, in theory, their old employers will have to compete with, or buy into.

Crain's New York points to Michael Chuang, who used to sell bonds and mortgaged-back securities for Lehman and then UBS. In March 2008, he founded iTB Holdings, an online brokerage dealing exclusively with bonds, relying on his parting gift from Wall Street ($3 million in savings) as well as funding from friends, family, and angel investors. He now has five full-time employees at the Varick Street incubator and ten more in Eastern Europe.

Raj Udeshi, a Latin American derivatives broker laid off in late 2008, now operates HiddenLevers, a market analsyses start-up for small investment advisers, along with his three full-time staffers. Mr. Udeshi told Crain's that “Meritocracy is absolutely dead on Wall Street,” citing his own dismissal while senior, but less productive workers were retained. He says there are no hard feelings, pointing out that his new firm is designed to help the old guard.

With this sector bubbling up (for example: CB Insights, another Varick St. start-up--this one launched by a former Amex business strategist--was one of six local start-ups awarded funding and mentoring through the city's FinTech Innovation Lab) and another round of layoffs on the horizon, Wall Street might want to be extra careful not to leave future innovators with an ax to grind.