Even a raging pandemic and sagging economy could not slow down startupland, which set new records for deal value, exit value and capital raised.
Investors deployed $156.2 billion into startups, liquidated $290.1 billion of value via exits and closed on $73.6 billion in traditional VC funds, according to the PitchBook-NVCA Venture Monitor released Thursday, which is jointly produced by PitchBook and the National Venture Capital Association (NVCA). Firms are starting this year with $152 billion in dry powder at their disposal.
"The unprecedented macro events of 2020 did not deter the overall VC industry, which reached another banner year across the venture cycle," said Bobby Franklin, president and chief executive of NVCA, in a prepared statement.
At least one out of every 10 venture investment dollars flowed through Los Angeles, which continued to demonstrate its heft as a tech hub, trailing only the Bay Area in total deal value. That was tied with New York, but whereas that city saw a 16.9% decline in deal value, Los Angeles saw a 38.9% increase.
<p>"I don't see any slowing down in the Los Angeles ecosystem," Kelly Perdew, co-founder and managing general partner of Moonshots Capital told dot.LA. "I see it growing and growing."</p><p>L.A. did see 10% fewer deals in 2020, which was emblematic of a national trend of fewer but bigger deals.</p><p>L.A ended the year on a strong note with $3.2 million worth of deals in the fourth quarter, more than double the same period as 2019 and more than any quarter in 2020 except the third quarter.<br/></p><p>Relativity Space, <a data-linked-post="2645826015" href="https://dot.la/relativity-space-tim-ellis-2645826015.html" target="_blank">which uses 3-D printers to make rockets</a>, led the list. Founded by SpaceX alum Tim Ellis in 2015, the Long Beach company <a data-linked-post="2648971175" href="https://dot.la/relativity-space-soars-reportedly-landing-a-500m-investment-2648971175.html" target="_blank">raised a $500 million Series D round</a> led by hedge fund Tiger Global Management in November that values the company at $1.8 billion. </p><p>Another infusion came from Scopely investors, who poured <a href="https://dot.la/doubling-valuation-scopely-is-now-one-of-the-top-la-tech-startups-2648525465.html" target="_self">$340 million in Series E funding </a>into the video game company in October at a $3.3 billion valuation, nearly doubling the company's $1.7 billion post-money valuation from a $200 million deal in March.</p><p><a href="https://dot.la/top-venture-capital-funds-2649623434.html" target="_self">Los Angeles fundraising was also robust </a>in the fourth quarter, with nearly $2.5 million raised across 18 vehicles, almost tripling the haul raised in the last quarter of 2019. </p><p>Those included <a href="https://dot.la/jordan-fudge-sinai-ventures-2649474421.html" target="_self">Sinai Capital Partners, which announced</a> in November a $600 million second fund, $500 million of which will go towards the tech-focused <a href="https://sinaivc.com/" target="_blank">Sinai Ventures</a>. There was also <a href="https://ilovetheupperwestside.com/netflix-co-founder-to-judge-contest-for-uws-brightest-kids/" rel="noopener noreferrer" target="_blank">Westlake Village BioPartners</a>, the two-year-old firm focusing on life science and therapeutic companies. In December, it announced the raise of two new funds together worth $500 million.</p><p>This year is already off to a promising start with Santa Monica-based March Capital announcing Thursday it has closed its third fund, a $450 million vehicle to continue the firm's focus on enterprise software companies. </p><p>If there was a downside to 2020's venture activity it would be that most capital is going towards bigger firms, harming efforts by women and founders of color to gain a toehold in the industry. Established firms secured nearly 75% of total capital raised in 2020, the highest share since 2012.</p><p>"In times of uncertainty people like to go with a known quantity," Perdew said.</p>
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The pandemic has paused a substantial amount of venture activity for women entrepreneurs in Los Angeles. This year is on track to record the sharpest drop in investment in female-led startups in nearly a decade.
Female-founded companies in L.A. closed 2019 with 234 deals worth $1.4 billion. As of September 30, there have been 141 deals and $900 million invested, according to a report from Pitchbook released this week.
<p class="shortcode-media shortcode-media-rebelmouse-image">
<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDk0MjEwNy9vcmlnaW4ucG5nIiwiZXhwaXJlc19hdCI6MTY0OTk1MTIxMH0.1v9oEMBLukMU8urEKOYsG83RMMOMUJEnulijYVpRvNs/img.png?width=980" id="f3d59" class="rm-shortcode" data-rm-shortcode-id="de2b6bd9564b4e1b791b06015e45f1fb" data-rm-shortcode-name="rebelmouse-image" alt="VC deal activity in female founded companies 2006-2020" data-width="1448" data-height="902" />
<small class="image-media media-caption" placeholder="Add Photo Caption...">VC deal activity for female-founded companies from 2006 through 2020.</small></p><p>The figures, though not complete for the year, show the pandemic is <a href="https://dot.la/women-in-venture-capital-2648494064.html" target="_blank">disproportionately hurting female entrepreneurs</a>, eroding strides made in recent years. Across the economy, the pandemic has hit women harder.<br/></p><p>In November there were 2.5 million fewer women in the workforce compared to the same time last year, according to <a href="https://www.bls.gov/news.release/empsit.t01.htm" target="_blank">U.S. Bureau of Labor Statistics</a>. And economists worry the inequity caused by the pandemic could have long-term impacts. </p><p>This setback comes after years of progress for women-owned startups. Last year, investments in female-founded companies hit over $20 billion — 10 times the amount of a decade ago.</p><p class="shortcode-media shortcode-media-rebelmouse-image">
<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDk0MjExNC9vcmlnaW4ucG5nIiwiZXhwaXJlc19hdCI6MTY1MzIwMjU5MX0.oYL4AT_eMrB258FFduQLM4oZadiauO8p-7nFonuvhLc/img.png?width=980" id="83e4b" class="rm-shortcode" data-rm-shortcode-id="fd393e5e2cd5192ebceafded48cc224f" data-rm-shortcode-name="rebelmouse-image" alt="" data-width="1442" data-height="890" />
<small class="image-media media-caption" placeholder="Add Photo Caption...">Female-founded companies as a proportion of all VC deal activity from. 2006 through 2020</small></p><p>The report did not take into account race, but Los Angeles is notable as a popular city for Latina and Black women founders to begin startups along with New York and San Francisco, according to a survey by digitalundivided, a nonprofit that tracks female entrepreneurs of color across the country. These entrepreneurs tend to have a harder time accessing capital.<br/></p><p>Beatriz Acevedo, the co-founder of a new <a href="https://dot.la/mitu-founder-launches-fintech-company-aimed-at-latinos-2648554334.html" target="_blank">fintech company for Latino youth</a>, was one entrepreneur on the hunt for funding mid-pandemic. She was able to double the pre-seed amount she sought, but she attributed that to her investors. 90% of them are Latina and all are women.</p><p>"Even in the middle of a pandemic, of an economic downturn, they saw the need," she said. "I didn't have to oversell myself."</p><p>Acevedo, the founder of millennial media company mitú, which was sold to Latido Networks earlier this year, said she had a much harder time when she sought to raise money from traditional investors, most of whom were white men.</p><p>"I'm kind of like an outlier," she said. "I'm incredibly grateful and I understand I'm in a position of privilege because not only am I a woman, but I'm a woman and I'm an immigrant. I'm over 50. I've never been in FinTech."</p><p>Funding for female founders across the country dropped 31% from the first three quarters of 2019. That's compared to a 16% drop to all-male founders. </p><p>Yet, female-founded companies exited faster than the overall market. Pitchboook found that 2020 was on track to mark the 10th straight year of that trend. </p>
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'All the Progress We've Seen Could Be Erased': Data Shows the Pandemic Has Hit Women Harder
Oct 26 2020
If the rule is to follow the money, then VC deal flow shows how singularly bad this pandemic has been for female entrepreneurs compared to their male peers.
By and large, anytime a woman was involved in the founding of a company, venture capital investment dollars dropped significantly and there were fewer dollars per deal overall, according to a dot.LA analysis of year-over-year Q3 PitchBook data for Los Angeles, the Bay Area and Seattle.
<p>Notably, PitchBook does not have data that accounts for <a href="https://dot.la/pledgelas-2nd-annual-survey-finds-women-non-whites-still-lack-equity-representation-2646415502.html" target="_self">the race of founders in their analysis</a> and it has not previously been formally tracked. A spokesperson said the company is working on it.</p><p>Much has been <a href="https://dot.la/women-in-tech-los-angeles-2645374356.html" target="_self">written on this issue</a>, <a href="https://hbr.org/2014/08/why-women-dont-apply-for-jobs-unless-theyre-100-qualified" rel="noopener noreferrer" target="_blank">year</a> after <a href="https://hbr.org/2017/06/male-and-female-entrepreneurs-get-asked-different-questions-by-vcs-and-it-affects-how-much-funding-they-get" rel="noopener noreferrer" target="_blank">year</a>, and in <a href="https://www.cloverpop.com/hacking-diversity-with-inclusive-decision-making-white-paper" rel="noopener noreferrer" target="_blank">study</a> <a href="https://www.credit-suisse.com/about-us-news/en/articles/media-releases/42035-201207.html" rel="noopener noreferrer" target="_blank">after</a> <a href="https://www.mckinsey.com/business-functions/organization/our-insights/why-diversity-matters" rel="noopener noreferrer" target="_blank">study</a>, including around the idea that women <a href="https://www.bloomberg.com/opinion/articles/2020-10-20/covid-19-explodes-the-myth-that-women-opt-out-of-the-workforce?sref=4Kf8RwDw" rel="noopener noreferrer" target="_blank">allegedly simply opt-out of the workplace</a>. But the pandemic has laid bare systemic inequities that have led women to be disproportionately impacted by the conflation of work and home life. New data from the Bureau of Labor Statistics monthly job report showed that women, especially Black and Latina women, were four times more likely than men to drop out of the labor force in September, according to <a href="https://nwlc.org/wp-content/uploads/2020/10/september-jobs-fs1.pdf" rel="noopener noreferrer" target="_blank">an analysis by the National Women's Law Center</a>. Of the 865,000 workers who left the labor force, 80% were women. </p><p>Among those inequities has been a large gender gap in VC funding. The data shows that the pandemic has made that far worse.</p><p>In the L.A. metropolitan region, VC investment dollars for all-female-founded companies dropped by 70% — from $83.2 million to $23.4 million — in a year-over-year comparison during the third quarter.</p><p class="shortcode-media shortcode-media-rebelmouse-image">
<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDU4NzgwOS9vcmlnaW4ucG5nIiwiZXhwaXJlc19hdCI6MTYyMzgwNzY1NH0.PDv4ja6xDLAAgLfv4ahG6lX3uwLK1drXkRMbTgm5vqA/img.png?width=980" id="ded32" class="rm-shortcode" data-rm-shortcode-id="63799da591d7093131d2755a9c9d3b60" data-rm-shortcode-name="rebelmouse-image" data-width="1106" data-height="768" />
<small class="image-media media-photo-credit" placeholder="Add Photo Credit...">Data from Pitchbook</small></p><p>Interestingly, VCs invested much less money in more deals — with deal count rising from nine to 12 deals.<br/></p><p>The story is very different for companies that have male co-founders, and at least one female. In Q3, investment actually rose year-over-year, from $183.8 million to $390.4 million, or 16 to 50 deals, respectively. In this case, VCs again spent less per deal in the third quarter, but overall investment dollars rose.</p><p>For all-male founders, the pandemic appears to have been a boon, at least in terms of raising funds. VC investment rose by 385%, from $742.8 million to $3.6 billion year-over-year in Q3. Those numbers equated to a rise in deal count, from 47 to 118, which showed that VCs in fact spent more money per deal on average than for any company with any female founder.</p><p class="shortcode-media shortcode-media-rebelmouse-image">
<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDU4NzgxMC9vcmlnaW4ucG5nIiwiZXhwaXJlc19hdCI6MTYyNjY5MzI5OH0.W4Eorv1YTX0x5U3aZy-jLREY98idi8g5YhOK01PpHD0/img.png?width=980" id="13fad" class="rm-shortcode" data-rm-shortcode-id="cbcd9cd20f4e54e4b478c5b1fe9bba15" data-rm-shortcode-name="rebelmouse-image" data-width="1026" data-height="790" />
<small class="image-media media-photo-credit" placeholder="Add Photo Credit...">Data from Pitchbook</small></p><p>In an unsparing <a href="https://medium.com/@jessecdraper/investing-in-women-isnt-a-fucking-charity-ceabe8918b9c" target="_blank">column entitled "Investing in Women isn't a Fucking Charity,"</a> Jesse Draper, founding partner of female-focused Halogen Ventures, wrote last month about some of the sad and painful realities of being a woman in a male-dominated field and how "boneheaded," financially, it is to not invest in women.<br/></p><p>"On a macro level, the lack of diversity in the industry is a problem because it means most of the money flows to types of founders VCs understand — businesses with white men of a certain socioeconomic background as their target customer," Draper wrote. "It means fewer great businesses have the opportunity to thrive. It means we put fewer products out into the world that improve the lives of women, BIPOC, and marginalized communities."</p><p>dot.LA found the trend in PitchBook data was similar for Q3 in the Bay Area and Seattle. In both those regions, all-male founders saw a significant increase in investment dollars and money spent per deal in the third quarter versus the same period a year earlier. They also received more money per deal than if they had a female co-founder.</p><p class="shortcode-media shortcode-media-rebelmouse-image">
<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDU4Nzg2OC9vcmlnaW4ucG5nIiwiZXhwaXJlc19hdCI6MTY2MDU3NDc0MH0.rOiJ9rCEVKoIMIFJSxAISTiT12arypX0auUgwflxsKk/img.png?width=980" id="e6a5e" class="rm-shortcode" data-rm-shortcode-id="3f880822a083661892a536d71dd3d662" data-rm-shortcode-name="rebelmouse-image" data-width="1078" data-height="846" />
<small class="image-media media-photo-credit" placeholder="Add Photo Credit...">Data from Pitchbook</small></p><p>In the Bay Area, that looked like a jump from $2.8 billion for 161 deals in Q3 2019 to $11.93 billion for 385 deals in this last quarter — for all male founders. For all female founders, the deal flow increase was a pale comparison, up from $98.6 million for 14 deals last Q3 to $141.6 million for 20 deals.<br/></p><p>Seattle VCs invested $1.5 billion for 79 deals with all-male founders, up significantly from $700,000 for 23 deals in Q3. All-female founders received a boost in Seattle because the single Q3 2019 deal involved an unknown amount of money, per PitchBook's data. In Q3 2020, all-women founders received $13.5 million spread over eight deals.</p><p>A PitchBook spokesperson said the company is working on a larger report examining such pandemic-related investment trends and their impact on women in an upcoming December report.</p><p>Of course, the drop in VC investment in women founders may be symptomatic of a broader societal shift.</p><p>The<a href="https://wiw-report.s3.amazonaws.com/Women_in_the_Workplace_2020.pdf" target="_blank"> annual "Women in the Workplace" study by McKinsey & Company and LeanIn.Org</a> noted that "Covid-19 has disrupted the workplace in ways we've never seen before" as women end up juggling more housework and caregiving burdens amid school closures. The report found that for the first time in the annual study's years researchers saw signs that women are leaving the workforce at rates higher than men.</p><p>"If these women feel forced to leave the workforce, we'll end up with far fewer women in leadership—and far fewer women on track to be future leaders," the report, released September 30, warned. "All the progress we've seen over the past five years would be erased."</p><p>__</p><p><em>Join dot.LA on Tuesday, Oct. 27, 2020 for an exclusive panel around these issues at our <a href="http://dotlasummit.com/" target="_blank">inaugural summit</a>.</em></p><p><em>Do you have a story that needs to be told? My DMs are open on </em><a href="https://twitter.com/latams" rel="noopener noreferrer" target="_blank"><em>Twitter @latams</em></a><em>. You can also email me at tami(at)dot.la, or ask for my contact on Signal, for more secure and private communications.</em><br/></p>
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