Los Angeles County startups have borne the blows of the economic downturn, but they’ve been faring better – and regaining strength faster – than the nation on average. But the road to recovery will be a long one, experts say, and will prove particularly difficult for late-stage companies.
That’s bad news in the short term for most of these companies, but it could actually work in the favor for a few of them in the long term, according to Paul Bricault, founder and managing partner of the early-stage venture capital fund and startup accelerator Amplify.LA., based out of Venice.
“The market currently is in slow recovery from the downturn that really started in the first quarter of last year, where there was a significant decline in investment activity after the incredible year that was 2021,” said Bricault, noting a 75% decline in investment activity between the fourth quarter of 2021 and the second quarter of 2022. “The downturn really hurt the late-stage companies first, and the ball kept rolling down the hill from there.”
Start-ups at the Series D stage were affected immediately by the downturn, said Bricault, who also serves as a venture partner at the New York-based Greycroft Partners. Earlier stage start-ups were largely unaffected initially, but the continued lack of liquidity eventually caught up to them.
“It trickled down to Series B, and then to seed and pre-seed, both in terms of the cadence of the deals and the number of deals getting done,” said Bricault. “That in turn had an effect on the pre-money valuation of the deals. They weren’t seeing triple digit declines like late-stage companies, it was more like a 30 to 40% for early stages, but it was significant.”
Early money available
Fortunately, it appears investment activity may have hit a bottom in the early months of this year and has begun tracking upward. PitchBook, a private equity activity researcher, reported in November that while overall venture capital valuations…
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