OC Tech Funding Tops $100M in 3Q

Orange County tech funding is growing. According to research from JLL, there was $106 million in total tech funding in the third quarter. It was the second consecutive quarter when tech funding surpassed $100 million and the fourth consecutive year when tech funding has surpassed $500 million. Venture capital and private equity has made up a bulk of the tech funding in the market, and a majority of the capital has gone to IT and software companies.

“When you look at the companies being funded within the region, I believe it speaks less to a core focus and more of a broader representation of the skilled workforce across so many different business types,” Jason Lantgen, VP at JLL, tells GlobeSt.com. “New businesses are being formed across various industries, not just one.  In order for these entrepreneurs to thrive they need an idea, a proof of concept and of course an ability to scale.  All of these components take time and I believe this has a lot to do with broader connectivity in the region, better access to resources, and better access to capital.”

Tech funding has increased steadily since 2014, and it will likely continue upward. The increase in tech funding also shows a transition in the local economy. “The local economy has changed from a financial services-semiconductor-real estate-based industry to one that is much more focused on innovation,” says Lantgen. “The underlying history of the region has always been defense, life sciences/device, and semiconductor.  While some companies have left or been acquired it has spawned other companies.  Higher education for the region has been educating the workforce for these industries for decades and it is one reason more engineers come out of Southern California than anywhere else.  We are seeing the investment and growth here because our clients want to be as close to that labor pool as possible. On a national perspective, there’s still value in Real Estate prices here compared to other regions seeing the investment we are seeing.”

This creates a big opportunity for landlords to capture this growing business. In general, these companies have gravitated toward creative-style office buildings near like firms. “There is a broader drive and demand to be near similar based companies within a campus or community,” Lantgen explains. “We had seen “creative space” be placed in high-rise properties on a spec basis as a way to attract tenants during the rebound.  While the interest was there, today, those same customers no longer want to be across the way from professional firms, but in creative campuses that have scale and amenities.  I think landlords and investors should look at their product and really try to understand what type of Tenant they are looking to attract, and focus on that consumer. All properties are not for all businesses.”

This trend is not exclusive to Orange County. Tech funding is growing throughout Southern California, and Los Angeles and San Diego have well-established tech hubs—both serving a very different market segment. “I think it’s important to look at Orange County as the epicenter of Southern California and the entire region as one economy,” adds Lantgen. “What’s good for San Diego, is good for Orange County and vice versa.  Our data shows the workforce for each county pulls from the others and that is something to consider.  I am very long on all of Southern California as well as Orange County. While I don’t know how 2019 will look compared to 2018, the general sense is the tide has risen across the board on the market and local economy.  A few IPOs or acquisitions may occur as opposed to additional funding which would be reasons why the numbers can always fluctuate.  Overall, there’s more diversity across the market as opposed to 10 years ago and that is a good thing.”