Investment in Southland Firms Surges in 1st Quarter

Investors, showing continuing faith in the active market for public offerings, risked $103 million on young, promising Southland companies during the first three months of 1996, more than double the amount in last year’s first quarter.

While high-technology companies gobbled up most of the money statewide and nationwide, more than half the money invested in Southern California in the first quarter went to the House of Blues, the restaurant-nightclub chain based in West Hollywood, according to a quarterly survey by the Price Waterhouse accounting firm.

The chain, started by Hard Rock Cafe co-founder Isaac Tigrett, raised $55 million from a consortium of venture capital firms. The money will help it expand internationally, boost its record label and three syndicated radio shows, and revive its recently canceled TV show, a spokeswoman said. Among its investors are Dan Aykroyd, Jim Belushi, Carly Simon, Isaac Hayes and John Goodman.

The House of Blues and five other Los Angeles County companies picked up a total of $83.1 million. Six Orange County companies raised a total of $15.9 million and two other companies, one in San Luis Obispo and one in Santa Barbara, received a total of $4.1 million.

In Orange County, the medical field was king. Medical Data International, an Irvine provider of online health-care services, picked up $4 million; Cornerstone Physicians Group, an Irvine manager of medical groups, received $3 million; and TherOx Inc., a Costa Mesa provider of oxygen delivery systems, obtained $3 million.

“There continues to be a lot of faith in the public market,” said Thomas E. Darcy, managing partner for Price Waterhouse’s West Coast high-tech group. Darcy said investors also are impressed with the increase in quality products and seasoned management at start-up companies.

Although venture capital funding in the first quarter far surpassed first-quarter funding last year, it fell short of the $123 million pumped into growing companies during the last three months of 1995, the Price Waterhouse survey found.

Venture funding is private money that is typically invested in new, young or growing companies. Investors usually take their gains when their companies go public or are sold.

In the Price Waterhouse survey, more money was given to fewer companies than in recent three-month periods. Last year, 21 Southland companies on average received funding each quarter. But only 14 caught investors’ eyes in the first quarter this year.

Statewide and nationwide, venture funding in the first three months fell off somewhat from the previous quarter but also increased dramatically over last year’s first quarter, the survey shows.

Investors put $680 million into 150 California companies in the first three months of this year, exceeding the $272.4 million they risked in last year’s first quarter. They invested $2.2 billion in 480 companies nationwide, a 47% increase over the $1.5 billion invested a year ago.

Silicon Valley led both California and the nation in venture funding, garnering $497.8 million mostly for software, communications and computer companies. Nationwide, software and communications companies accounted for 44% of all venture investments.