How SoCal’s VC Community is Grappling With a 'Brittle' Economic Climate

Samson Amore

Samson Amore is a reporter for dot.LA. He holds a degree in journalism from Emerson College. Send tips or pitches to samsonamore@dot.la and find him on Twitter @Samsonamore.

How SoCal’s VC Community is Grappling With a 'Brittle' Economic Climate
Evan Xie

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2021 was a record year for venture capital, but the bull run is petering out. As the national economy weathers rising inflation rates, a looming credit crunch, bank collapses and a continuing crush of tech layoffs, venture investors are getting skittish.

PitchBook Data, an analytics service that publishes quarterly reports on the American venture capital community, found that VC fundraising, overall deal count and exit value in the first quarter of this year are all trending downward.

The recent report proved what VCs have been saying behind closed doors: the risk-taking that used to define their careers is now a liability, and they’re eager to sit on their dry powder (financial reserves kept on hand) rather than deploy it as investments into potentially risky startups.

Here’s a couple trends in the VC ecosystem worth noting.


“Deal flow is down”

The first quarter of 2023 saw far fewer deals than the previous two years – around 3,000 deals, compared to about 5,000 during the first quarter of 2022.

“Deal flow is down, valuations are down, and VCs are focused more on supporting their own portfolio companies than on investing in new companies,” explained Paul Voois, managing partner at the Cove Fund, an Irvine-based pre-seed and seed-stage venture fund that invests mainly in local tech startups.

Voois said in his experience, deal flow from VCs to companies in Southern California is “significantly down,” and added it’s “overall a very tough environment for companies to raise money.”

VCs are finding fundraising difficult

PitchBook estimates VCs in 2022 raised $170.8 billion, the highest in eight years. But 2023 appears so far to be on the downswing.

PitchBook’s data found that if funding trends continue as they have for the first quarter of this year, then “2023 is on pace to have the lowest fundraising total since 2017.” So far this year, VCs across the U.S. have only raised $11.7 billion across 99 funds.

That said, Rashmi Gopinath, general partner at Manhattan Beach-based B Capital Group, told dot.LA her firm hasn’t had any issue raising capital, and announced a new $500 million fund to invest in healthcare startups in March. B Capital Group is also accelerating its investment in artificial intelligence and cybersecurity startups, Gopinath said.

Jordan Noone, co-founder of Malibu-based Embedded Ventures, told dot.LA PitchBook’s recent data tracks with what he’s seen in LA’s venture community.

Noone added that he has seen “the taming down of the mega-fund” in recent months as VCs realize they don’t need to raise as much capital if they’re not going to invest it all.

“It’s a very brittle fundraising process,” Noone said, noting that companies “going to zero overnight,” alongside bank failures and “big examples of fraud in the industry” don’t help. There’s ample VCs and ample startups, Noone said, “but the matchmaking process is just brutal.”

Exits are minimal

This lined up with data about later stage companies seeking exits – when companies either go public or undergo a merger or acquisition. The mega-exit, once the gold standard for VCs, is not as attainable.

Fewer deals overall led to fewer exits in the first quarter of this year. PitchBook reported $5.8 billion in exit value was closed in 2022. That might sound like a lot, but it’s less than 1% of the total exit value generated in 2021. Indicating that this year is on track to have much fewer (and, potentially, less valuable exits) than before.

“There will likely be a shift away from late-stage investing and a refocus on early-stage [and] growth-stage investment where valuations and capital requirements will be more manageable,” said Harpreet Walia, an attorney and venture capital chair at Los Angeles-based Michelman & Robinson.

There is, however, still time for this trend to correct itself. In a recent report, Morgan Stanley predicted that industries like energy, healthcare and some tech companies will see a resurgence in mergers and acquisitions since private equity and venture firms have a “record amount of uninvested capital.” Gopinath noted that B. Capital Group is focused on generative AI and healthcare, and added, “we have a number of late-stage portfolio companies getting ready for public filings once the markets get to a more stable position.”

SPAC deal slowdowns could affect valuations

But the reticence to go public via a blank-check or SPAC deal will likely endure. “SPACS were used by VCs as a mechanism to have an exit outcome in a company that otherwise was not necessarily positioned for a strong exit,” Noone said, noting that most SPAC deals have come “crashing back to reality over the last 12 months” as many have lost most of their value.

Valuations are also dipping. PitchBook reported that in Q1 2023, the average late-stage VC pre-money valuation (the value of the company excluding a pending investment or deal) was down nearly 17% from 2022. The average pre-money valuation for late-stage companies fell more than $100 million to an average value of about $159 million, according to data from PitchBook.

To that end, Walia said he thinks valuations are more important to late-stage companies that are “looking for a shorter path to IPO,” but aren’t as key of a metric for early-stage startups.

But even if valuation isn’t the end-all measurement of a company’s worth, it is still something investors pay attention to, Voois said.

“Valuation is always important, and we’re in a ‘buyers market,’ meaning investors have more negotiating leverage than a year ago,” Voois said. “Even so, it is taking time for the drop in valuation in the public and later stage VC markets to trickle down to seed stage. We are still seeing overinflated expectations.”

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⚖️FTC’s "Click to Cancel" Rule and Its Ripple Effect on Tech

🔦 Spotlight

Happy Friday Los Angeles,

The FTC’s new “Click to Cancel” rule is shaking up subscription-based tech. Now, instead of navigating a maze of cancellation hurdles, users can cancel subscriptions as easily as they signed up—with a single click. This shift is a wake-up call for SaaS, streaming, and app-based companies, where once-hidden exit options often kept users around simply because canceling was a hassle.

The rule also requires businesses to send regular renewal reminders, ensuring customers stay informed about upcoming charges. It's more than a cancellation button—it’s about transparency and giving users control over their decisions.

For startups, the impact goes deeper than UX adjustments. Many have relied on "dark patterns," which subtly discourage cancellations by hiding the exit. Now, companies must shift toward building genuine loyalty by delivering real value, not by complicating exits.

While this might affect retention rates initially, it could lead to more sustainable business models that rely on satisfaction-driven loyalty. Investors may start prioritizing companies that emphasize transparent, long-term engagement over those that depend on dark patterns to maintain retention metrics.

The rule opens the door to more ethical UX design and a truly user-centered approach across the tech industry. It may even set a precedent against manipulative design in other areas, such as privacy settings or payment methods.

Ultimately, the “Click to Cancel” rule presents an opportunity for the tech industry to foster trust and build stronger customer relationships. Startups and established companies that embrace transparency will likely stand out as leaders in a new era of customer-centric tech, where trust—not tricky design—is what retains users.

As the tech landscape continues to evolve, LA Tech Week 2024 offers a chance to explore these shifts in real-time. Check out the upcoming event lineups to stay informed and make the most of your time:

For updates or more event information, visit the official Tech Week calendar.


🤝 Venture Deals

LA Companies

  • Ghost, a company supporting top brands and retailers with streamlined logistics and fulfillment solutions, raised a $40M Series C funding round led by L Catterton to fuel its continued growth and innovation. - learn more

LA Venture Funds
  • Assembly Ventures participated in a $27M Series A round for Monogoto, a provider of software-defined connectivity solutions that enable secure, cloud-based IoT and cellular network management on a global scale. - learn more
  • Angeleno Group participated in a $32M Series C round for REsurety, a company that recently launched an innovative clean energy marketplace aimed at providing better financial and operational insights to support renewable energy transactions. - learn more

    Download the dot.LA App

    🌴🧑‍💻 Your Guide to LA Tech Week 2024

    🔦 Spotlight

    Happy Friday Los Angeles,

    As many of you know, LA Tech Week is right around the corner, kicking off next Monday October 14th bringing together founders, creatives, investors, and engineers for a week of immersive events, panels, and socials across the city. From blockchain and AI to biotech and design, LA Tech Week is a chance to dive into the ideas shaping today’s technology landscape.


    What to Look Forward To

    Insights from Visionary Leaders: Hear firsthand from industry trailblazers as they share stories, challenges, and key lessons from their experiences. Expect fresh perspectives on AI, venture capital, biotech, and the ethical questions around emerging technologies.

    Interactive Panels: This week isn’t about watching from the sidelines; it’s about engaging directly with the tech community. Participate in hands-on panels discussing everything from startup scaling to ethical AI, with honest insights from those actively shaping these fields.

    Networking Mixers & Social Events: Meet and connect with founders, VCs, developers, designers, and fellow techies across LA. Rooftop mixers, lunch meetups, and creative gatherings offer the perfect chance to spark ideas and collaborate.

    Plan your week with the daily lineup, organized by location for easy navigation:

    For updates or more event information, visit the official Tech Week calendar.

    Enjoy LA Tech Week 2024!!


    🤝 Venture Deals

    LA Companies

    • Clout Kitchen, a Los Angeles and Manila based startup, has raised $4.45M in seed funding, co-led by a16z SPEEDRUN and Peak XV’s Surge, to develop AI-powered digital twins, which enables gaming creators to produce realistic virtual avatars for content and fan engagement. - learn more
    • MeWe, a privacy-focused social media platform, has raised an initial $6M in Series B funding led by McCourt Global to support Web3 integration and expand its decentralized network for 20 millions users. - learn more

      LA Venture Funds
      • EGB Capital participated in a $10M Series A funding round for MiLaboratories, which develops software that enables biologists to independently analyze complex genomic data, accelerating research and discovery in fields like drug development. - learn more
      • Crosscut Ventures participated in the $13.75M seed round for Airloom Energy, a company focused on developing airborne wind energy technology to harness high-altitude winds, with plans to accelerate a pilot project in Wyoming. - learn more
      • Overture VC participated in a $5.5M Seed funding round for Molg Inc., a company developing robotics and software for circular manufacturing, designed to disassemble electronics efficiently and recover valuable materials to reduce e-waste and support sustainable production. - learn more


        LA Exits

        • Options MD, a Los Angeles based telemedicine platform that provides care for people suffering from severe and treatment-resistant mental illness, is set to be acquired by Resilience Lab, an AI-driven provider focused on enhancing mental health care access. - learn more

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        LA Tech Week 2024: Saturday-Sunday Event Lineup
        tech-week

        Here’s what’s happening during the closing weekend (Oct 19 - Oct 20) of LA Tech Week 2024! Events are organized by location so you can easily catch the sessions that interest you most.

        SATURDAY EVENTS

        BEVERLY HILLS

        12:00 PM

        • BIG Showcase (Invite Only):

        BIG Showcase (Invite Only)

        2:00 PM

        Light Dao

        Struck Capital, Seahorse Express

        EAGLE ROCK

        12:00 PM

        Sunrise Integration, Shopify

        EL SEGUNDO

        9:00 PM

        Administratum, Valar Atomics

        HOLLYWOOD

        10:00 AM

        Passes

        MALIBU

        6:00 PM

        • Malibu Beachfront Investors Networking & Wine Tasting:See Details

        Gaya Ventures

        MARINA DEL RAY

        6:00 PM

        • Awaken Your Spirit: A Journey of Transformation (Invite Only)

        Sagos Distro, Alma Wellness

        SANTA MONICA

        7:00 AM

        Founders Running Club

        8:30 AM

        Techstars

        9:00 AM

        Magic Mind

        StartupStarter, Inc., City of Santa Monica

        10:00 AM

        Gen She

        AI LA

        Crea, Barry's, Unsubscribe

        10:30 AM

        Plantologist

        11:30 AM

        • Pickleball Palooza (Invite Only)

        YouTube

        1:00 PM

        • Realfren Games: From strangers to an inner Realfren within 52 weekends: See Details

        Office for Humanity and Circuit Works

        • Talking blockchain technology with special guests: See Details

        LadyDayDao

        5:00 PM

        KARD, What's Plots

        THE VALLEY

        7:00 AM

        Camino5

        VENICE

        9:00 AM

        Westside Yogis

        11:00 AM

        Open App

        1:00 PM

        Ripe and Teddy's Hot House

        4:00 PM

        • Fashion Forward: How AI is Redefining the Fashion Industry: See Details

        VIAVIA, BNTO.RENT, ALMA.AI

        VIRTUAL

        11:00 AM

        BLCK UNICRN

        WEST HOLLYWOOD

        7:00 PM

        Next Sequence

        SUNDAY EVENTS

        INGLEWOOD

        12:00 PM

        Entrepreneur Ventures, VCPE GROUPS

        PLAYA DEL RAY

        2:00 PM

        AI LA, DELL, NVIDIA

        SANTA MONICA

        10:00 AM

        • Women Founders, Cold Brew & Beach View, Rooftop: See Details

        Clutch Talent

        11:00 AM

        11DollarSunglasses.com, Less Litter Foundation

        12:00 PM

        Data in LA, Amplitude

        12:30 AM

        New Moon, Warner UK Innovations

        TOPANGA CANYON

        3:00 PM

        Dreamore

        VENICE

        8:00 AM

        • Surf session with founders, investors, creators: See Details

        Surfed Club, Bow Shock

        12:00 PM

        • Podcast Panel and Brunch: LA Tech Community Builders: See Details

        WeAreLATech.com, Blankspaces.com

        VIRTUAL

        2:00 PM

        BLCK UNICRN


        For updates or more event information, visit the official Tech Week calendar.

        Enjoy LA Tech Week 2024!


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