Venture capitalists plowed more than $203 million into Orange County businesses in the second quarter of this year, with early-stage software and medical device companies topping the list of recipients, according to the latest quarterly MoneyTree Report on venture capital investment.
The amount invested – $203,085,900 to be precise – was more than triple the $66.533 million that local companies got in the second quarter of last year.
And the 29 deals concluded, the highest second-quarter number since 2000, were more than double the 13 transactions reported last year.
So far this year, Orange County has seen a steady increase in venture capital investment. This follows three years of declining investment from 2012 to 2014, which came on the heels of a two-year recovery in 2010-11 after venture capital placements had plummeted in 2009.
Venture capital investment in Orange County hit a high in 2000, when companies got $1.7 billion in such financing – though it dropped precipitously the following year.
In the first half of 2015, investors have put nearly $382 million into local companies, compared with $593 million for all of last year.
An increasing number of these investments are happening at early-stage companies and across a diversified swath of industries – not just in the hot tech sector.
Five years ago, fewer than half of venture capital investors wrote checks for early-stage companies.
So far this year, two-thirds of investments have been in companies that are pre-revenue or otherwise early-stage – a proportion that is far above the national average, said John Taylor, head of research at the National Venture Capital Association.
“That’s huge,” Taylor said. “These are companies just getting going, with high expectations. This is a very positive sign.”
One such company is Axonics Modulation Technologies, which was among the Orange County businesses with the largest investments.
Axonics received about $17.3 million in the second quarter, the fifth-largest amount, even though the Irvine-based medical device company still has not brought its product to market. It is working on an implantable device to treat overactive bladders and plans to start clinical trials in January.
This isn’t the first large investment Axonics has received. In March last year, the company got $32.6 million in Series A financing.
Axonics CEO Raymond Cohen attributed the venture capital investments to the quality of his team, which was reconstituted from another company, Vessix Vascular.
That business was sold in 2012 to Boston Scientific in a deal worth hundreds of millions that Cohen characterized as a successful exit.
“I think the investors are betting that we can, in fact, have a similar successful exit” at Axonics, he said.
Orange County is perhaps the leading region in the country for cutting-edge medical devices, Cohen said, so it’s natural that a large portion of venture capital is funneled into medical device companies.
So far this year, software companies have received $181 million – nearly half of all the venture capital invested in Orange County.
But significant investment also has flowed into medical devices, with companies in that sector receiving $72.6 million, the report found.
“That’s much larger than nationwide,” Taylor said. “That’s a very strong position in medical devices.”
The fact that investments are increasingly directed toward early-stage companies is a testament to investors’ confidence in the success of those businesses, Taylor said.
“This says not only is investing healthy but it’s future-looking,” he said.
The MoneyTree Report is produced for the National Venture Capital Association by PricewaterhouseCoopers, which uses data from Thomson Reuters.
Contact the writer: 714-796-2286 or lwilliams@ocregister.com
