Venture capitalists set sights on Hollywood

* LA VC deal values nearly doubled year-to-date

* 155 deals worth $1.3 bln vs 124 deals, $673 mln

* Digital and social media and clean-tech drawing funds

By Sue Zeidler

LOS ANGELES, Oct 18 (BestGrowthStock) – Silicon Valley financiers
got the Hollywood treatment in “Social Network,” the new film
about Facebook, but the courtship between the technology and
entertainment hubs has heated up with venture capital deal
values in Los Angeles nearly doubling this year.

Digital and social media, video games and clean technology
were the biggest attractions for venture capital activity, said
Emily Mendell, vice president of strategic affairs, National
Venture Capital Association (NVCA).

“There are a number of hot industry sectors right now and
it seems that LA has the opportunity to capitalize on them,”
Mendell said.

In the first three quarters of 2010, there were 155 venture
capital deals worth $1.3 billion in the Los Angeles/Orange
County region, up from 124 deals worth $673 million a year
before, according to the Moneytree report released last week by
PricewaterhouseCoopers and NVCA, based on ThomsonReuters data.

Dealmaking activity decreased during the third quarter
across the United States, which experts attributed to seasonal
factors and tough comparisons to large rounds of clean
technology investments a year earlier.

But funding remains on course to pass investment levels in
2009 overall, according to Tracy Lefteroff, global managing
partner of the venture capital practice at Pricewaterhouse.

Nationwide, venture capitalists have invested $16.7 billion
through the third quarter, versus $12.9 billion a year before.

The Los Angeles region ranks fourth in investments this
year and appears to be narrowing its gap with leaders like New
York, New England and Silicon Valley.

JUST A PLANE RIDE AWAY

Long viewed as the U.S. capital of entertainment, LA’s
surge in digital start-ups has stoked the interest of nearby
Silicon Valley, home to the most fertile venture capital market
in the world.

“It’s an easy commute down (from Silicon Valley) and
there’s also an ecosystem in LA that is fostering more and more
start-ups,” Mendell said.

Having more seasoned start-up executives now based in Los
Angeles is another factor.

“Back when the Internet emerged there wasn’t a strong
start-up community in LA. But now there are several second and
third-time entrepreneurs, and venture capitalists are
increasingly taking notice,” said Mark Suster, a partner with
venture capital firm GRP Partners.

Digital media companies such as MySpace, Hulu, Demand Media
and Overture have helped lure venture capital dollars into Los
Angeles.

People involved with those high-profile ventures are
branching out.

“We just raised $5 million in a Series A round … We had
to turn some (investors) away,” said Arnie Gullov-Singh, chief
executive officer of Ad.ly, of the first round of venture
capital financing for the start-up that provides advertising on
Twitter via celebrity endorsements.

Gullov-Singh, a former News Corp (NWSA.O: ) executive,
previously worked at another start-up, Overture, which was
acquired by Yahoo! Inc (YHOO.O: ).

“There’s money that’s been pent-up in the LA market that
must be invested to be put to work,” he said.
(Reporting by Susan Zeidler, editing by Gerald E. McCormick)

Venture capitalists set sights on Hollywood