Lower VC Funding Not a Negative for OC

Lantgen: “The key aspect on this is that the large leases, large growth and positive absorption we have had with companies has really occurred with companies that got funding last year and even in 2014, so this may be a leading indicator going forward.”

IRVINE, CA—An apparent decrease in venture-capital funding for Orange County businesses over the past year is more indicative of global financial issues than problems with OC companies, JLL ‘s VP Jason Lantgen tells GlobeSt.com. The company recently reported that high-tech venture-capital investment volume declined in Orange County 40.7% in Q1 from 12 months prior, with several markets throughout the country experiencing a slowdown. We spoke exclusively with Lantgen about this trend and what it means for the Orange County commercial real estate market. GlobeSt.com: What does it mean that Orange County’s venture-capital funding has slowed in the past year? Lantgen: JLL puts together this report because we are continually tracking from where growth and expansion needs are going to be coming. At the end of the day, it’s a barometer of understanding the Orange County ecosystem. Seeing the numbers in comparison to last quarter and the last four quarters go done is not necessarily a sign of a lack of growth or opportunity here in Orange County—it’s more to do with the overall global capital markets and geopolitical matters that happened in the finance markets in the first quarter of this year. The money slowed primarily because of other factors out there than a lack of opportunity for investment in Orange County. What isn’t shown in the report is that the number of companies that would have been raising capital ended up raising debt with the thought process that financing and funding for their business would be more ideal at a later time. GlobeSt.com: Where do you see this trend heading? Lantgen: The key aspect on this is that the large leases, large growth and positive absorption we have had with companies has really occurred with companies that got funding last year and even in 2014, so this may be a leading indicator going forward. In 12 months, there may be some form of a slowdown because of this. Many companies in 2014 and 2015 that were receiving funding won’t notice the impact of this slowdown until 2017. And we can’t really call this a slowdown, just a difference in how money was placed in properties. I wouldn’t look at it any differently. For Orange County across the board, a number of large-scale organizations are looking to occupy space here. The labor and analytics in terms of skilled workforce is stronger than it is in San Diego and L.A. and is comparable to San Francisco. Emerging and existing businesses looking to scale higher are interested in Orange County because of this strong workforce, and our economy is much more diverse than it was in the past with one industry. GlobeSt.com: What else should our readers know about Orange County’s VC funding? Lantgen: For companies that were looking to get funding in the first quarter of this year, a number of them placed debt in order to allow them to achieve their valuations. A fair amount of that debt was ultimately converted to equity. This is not a negative for the business owner; there’s still a lot of capital out there for the Orange County market.