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Venture capitalists set sights on Hollywood

LOS ANGELES (Reuters) - Silicon Valley financiers got the Hollywood treatment in “Social Network,” the new film about Facebook, but the courtship between the technology and entertainment hubs has heated up with venture capital deal values in Los Angeles nearly doubling this year.

The Hollywood sign is seen on a hazy afternoon in Los Angeles, California, November 4, 2007. REUTERS/Danny Moloshok

Digital and social media, video games and clean technology were the biggest attractions for venture capital activity, said Emily Mendell, vice president of strategic affairs, National Venture Capital Association (NVCA).

“There are a number of hot industry sectors right now and it seems that L.A. has the opportunity to capitalize on them,” Mendell said.

In the first three quarters of 2010, there were 155 venture capital deals worth $1.3 billion in the Los Angeles/Orange County region, up from 124 deals worth $673 million a year before, according to the Moneytree report released last week by PricewaterhouseCoopers and NVCA, based on ThomsonReuters data.

Dealmaking activity decreased during the third quarter across the United States, which experts attributed to seasonal factors and tough comparisons to large rounds of clean technology investments a year earlier.

But funding remains on course to pass investment levels in 2009 overall, according to Tracy Lefteroff, global managing partner of the venture capital practice at Pricewaterhouse.

Nationwide, venture capitalists have invested $16.7 billion through the third quarter, versus $12.9 billion a year before.

The Los Angeles region ranks fourth in investments this year and appears to be narrowing its gap with leaders like New York, New England and Silicon Valley.

JUST A PLANE RIDE AWAY

Long viewed as the U.S. capital of entertainment, L.A.’s surge in digital startups has stoked the interest of nearby Silicon Valley, home to the most fertile venture capital market in the world.

“It’s an easy commute down (from Silicon Valley) and there’s also an ecosystem in LA that is fostering more and more start-ups,” Mendell said.

Having more seasoned start-up executives now based in Los Angeles is another factor.

“Back when the Internet emerged there wasn’t a strong start-up community in LA. But now there are several second and third-time entrepreneurs, and venture capitalists are increasingly taking notice,” said Mark Suster, a partner with venture capital firm GRP Partners.

Digital media companies such as MySpace, Hulu, Demand Media and Overture have helped lure venture capital dollars into Los Angeles.

People involved with those high-profile ventures are branching out.

“We just raised $5 million in a Series A round ... We had to turn some (investors) away,” said Arnie Gullov-Singh, chief executive officer of Ad.ly, of the first round of venture capital financing for the start-up that provides advertising on Twitter via celebrity endorsements.

Gullov-Singh, a former News Corp executive, previously worked at another startup, Overture, which was acquired by Yahoo! Inc.

“There’s money that’s been pent-up in the LA market that must be invested to be put to work,” he said.

Reporting by Susan Zeidler, editing by Gerald E. McCormick

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