2H 2022 Los Angeles Seed Deal Report

We’re excited to share the most recent update of our LA Seed Report, encompassing all seed funding to LA companies in the second half of 2022.

On a global scale, venture funding tumbled to $445 billion in 2022, a 35% decline YoY from the $681 billion deployed in 2021. Flaunting its relative immunity to broader venture pessimism, seed stage funding was the “least impacted funding stage” of 2022’s downturn. Despite the rosiness this might imply, when taken piece by piece, 2022 represented a steady, stepwise decline in quarter over quarter seed funding, with Q4 alone clocking in with 35% less funding than the same quarter the year prior.

And when we look at LA dealmaking, it doesn’t get much prettier. While the narrative, and numbers, for the first half of 2022 might have led one to believe that LA was uniquely protected from whatever evil was plaguing the rest of the world, the second half of 2022 was a sobering reminder that we are no exception.

Taken in its entirety, LA only saw a 6% decrease in funding in 2022 (YoY). Yet this comparison obfuscates what really is a significant slowdown. When comparing 1H with 2H of 2022, LA begins to mirror global trends. LA seed funding for the second half of 2022 clocked in at $505.89mm dollars raised across 120 rounds of financing. While only down 6% from the first half of 2022 ($539mm and 134 companies), 2H’22 funding was down a remarkable 35% from the same time in 2021 (when we recorded a record breaking $780mm deployed). While the Q3 of last year was up 20% over Q2, it was still down 20% from the same time in 2021. Fourth-quarter funding totaled $186.5 million, making it the lowest since the first quarter of 2021, when $139.3 million was invested. Not to mention, between Q3 and Q4, LA seed funding fell a humbling 43% (vs the drop between Q3 and Q4 of 2021 which was only 10%).

On a more granular level, the average deal size fell by 10% YoY when looking at 2H’22, to $4.17M (down from an average of $4.64M for 2H’21). But again, quarter to quarter, the drop was sharper. In Q4 of 2021, the average deal size was $4.8M, meaning that the average Q4 seed deal last year saw a nearly $700k decrease from the same time the year prior (with Q4 ’22 coming in at just $4.14M). That said, when you exclude all deals north of $6M, the average quickly falls to $2.97M, which might be fair given that 2H’2022 saw more deals above $6M than any half-year we’ve recorded to date.

But where did all this cash go? Well, 17% of 2H’22 capital went to blockchain companies (a 4% uptick over 1H’22). Blockchain deals came in 3rd by deal volume (14) and second overall for most funded category ($86.95). But boy did that faucet turn off quickly in Q4, with just 4 deals done and $21.6M deployed in the category. One can only imagine attention turned elsewhere amidst the broader crypto meltdown (hello, ai).

Once again SaaS funding remained strong, garnering an impressive 38% of all capital raised with $190.53M and 48 deals done (practically level with 1H’22). Conversely, none of the categories we track shrank as much as eCommerce did in 2H’22. While the amount of capital raised remained stable from 1H ($80.19M) to 2H ($73.5M), the number of deals done fell by 38% (from 26 to just 16). As LA SaaS ascends, we suspect fundraising for eCommerce, but CPG specifically, will only become more cut-throat.

Below are a few key trends from LA Seed deal activity in the second half of 2022:

• Blockchain deals had the highest average deal size at $6.21M (beating out the runner-up — biotech–by an impressive $1.74M per deal).
• We were prompted to begin tracking CleanTech for the first time as a category given that it surpassed even logistics and supply chain in number of deals done (7).
• The number of Social Media deals doubled from 4% in 1H’22 to 8% in 2H’22.

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Amplify is a first check fund backing LA’s earliest and strongest tech teams. You can get in touch with us here.

(Our report covers seed deals that have been publicly announced. Please reach out to olivia@amplify.la with any questions or comments.)