Don’t tell CrossCut Ventures about the supposed glut of seed capital in Los Angeles.
The Venice venture capital firm has just raised a $75 million fund to invest in early stage L.A. startups.
“The lack of institutional capital in SoCal, dollars per opportunity, it’s one of the more undercapitalized ecosystems in the U.S.,” said Managing Director Brian Garrett. “We believe the greatest amount of value creation happens between the seed and Series A round.”
The CrossCut 3 fund, as it is called, aims to make 25 to 30 early stage investments over the next two to three years, 80 percent of which will go to L.A. companies, he said. The company has made 45 early stage investments since its founding in 2008. This third fund is substantially larger than its previous two, which had a combined total of $25 million.
Conventional wisdom says that CrossCut is swimming against the tide by continuing to focus on early stage investing. Many people believe that not enough venture capital firms in Los Angeles focus on Series A investing, a later moment in a company’s lifespan where financing is needed to drive revenue growth through sales and marketing spending.