Earlier this year, private equity firm Blackstone has placed a big bet on the future of artificial intelligence by investing $300 million in the Chatsworth company, which has been around for more than 20 years.
The company's DDN helps businesses store and manage large amounts of data that power their AI systems. This is the lifeblood needed for chatbots, self-driving cars, and more. Famous customers of DDN include chip maker Nvidia, AI startup Xai from Elon Musk, Google Cloud and Ford. DDN, short for DataDirect Network, has around 1,000 employees.
“We are pleased to announce that we are committed to providing a range of services and services to our customers,” said Jyothi Swaroop, DDN's Chief Marketing Officer.
The investment was the largest in the Greater Los Angeles region this year. This remains a hot spot for investments in both old and new tech companies ready for growth.
Venture capital investors and private equity firms poured $3.1 billion into 144 transactions in the LA region, which rose 15% in the first quarter of this year, according to research firm CB Insights. The area includes Los Angeles, Ventura, Orange, Riverside and San Bernardino counties.
Although investment levels may fluctuate, large capital in the LA region has been steadily increasing since 2023, when investments cooled after the collapse of Cryptocurrency Exchange FTX.
In addition to AI, investors also fund healthcare, e-commerce and defense technology startups and founding companies, highlighting how investments in the LA market are diversifying beyond advertising technology businesses and video apps.
“Today, it's getting caught up in a much more ambitious project,” says Mark Suster, general partner at Santa Monica-based Upfront Ventures. “It enters the discovery of satellites, alternative energy, national defense, drones, shipbuilding and pharmaceutical drugs. So it's more exciting than ever.”
The Los Angeles-area businesses that received the most money in the first quarter include Epirus, a $250 million Torrance-based defense company. According to CB Insights, 1,000 Oaks-based Latigo Biotherapeutics received $150 million. While Latigo Biotherapeutics develops non-opioid pain treatments, Epilus creates techniques that help protect against attacks from drone herds.
Economic consulting firm Economic Partners raised the most with $438 million, according to CB Insights, which relies on reports filed with the U.S. Securities and Exchange Commission. Econic challenged the total and raised nine figures in the first quarter, but the company refused to say how much.
Masha Bucher, founder and general partner of the first day venture, said he views El Segundo as the most promising hub for “deep tech” startups tackling complex issues such as water shortages.
Businesses in the LA region have access to a highly qualified workforce of aerospace and defense technology companies. The technology hub known as Silicon Beach is also approaching the airport, making it easy for entrepreneurs to fly to raise funds in San Francisco.
“There's the power of the community, and it's definitely something of a power spot on the map,” Butcher said. The company's investments include eye-opening crypto projects backed by a variety of AI startups and Sam Altman of Openai, who ensures people are human.
However, investors are not interested in AI alone. Culver City-based Whatnot raised $265 million this year, one of the biggest deals in the LA region. Live shopping apps allow people to buy and sell items such as clothing and collectibles. Potential customers can ask questions about the product in real time, find and bid on the product shown on live video.
It said it surpassed sales of more than $3 billion in 2024, but the company expects that figure to double this year. The startup, founded in 2019, says it's not yet profitable, but Tiktok's rivals show investors are growing rapidly.
“Live shopping and social shopping can absolutely be a huge market,” said Grant TraFontaine, CEO.
The company has approximately 750 employees in the US and Europe. The funding will help hire people to attract more users and improve the shopping experience, he said.
Like other businesses, they don't use AI to mitigate customer service or content on the platform.
“I tend to be a kind of purist, meaning that consumers don't care about AI. They care about the issues that are solved,” LaFontaine said.
Companies have been using AI long before chatbots like ChatGpt, which can generate text, images and code, became more popular.
But the insanity surrounding what is known as generative AI means that various industries face the way technology stumbles and disrupts how it works.
Naturally, investor interest in AI promoted much of the country's venture capital commitment in the first quarter. San Francisco-based Openai secured its biggest funding round in the largest funding round of $40 billion, bringing its valuation to $300 billion, according to CB Insights.
“We're looking forward to seeing you in the future,” said Jason Saltzman, Head of Insights at CB Insights. “Everyone recognizes the promise and…no one wants to miss it.”
Globally, $121 billion in venture capital was raised in the first quarter, earning 20% of transactions received by AI companies, according to CB Insights. Nationally, $90.5 billion in venture capital was raised in the last quarter, with a massive amount of money being fed towards Silicon Valley startups, according to the research company.
San Francisco is surged with AI startups expanding or opening offices, drawing them into the city's talent and Bay Area universities. AI leaders, including Openai and humanity, are also based there.
Openai said it will use the money raised in the first quarter to build that tool and invest in talent.
“People understand that this is a transformational technology,” said Chris Leharn, Vice President of Global Affairs at Openai in an interview. “It will permeate almost every aspect of life.”
Silicon Valley continues to be a distant leader in venture capital AI investment, but other cities such as New York are raising AI funds. There is also global competition from countries such as China. As lawmakers are considering whether to implement laws that can regulate AI, some high-tech beacon groups have raised concerns about how these bills will affect state innovation.
Starr said he doesn't think the venture capital dollar will leave California.
“The opportunity set here is really amazing,” Starr said. “Do you ever get backwards bills that try to over-adjust how the industry works in California? Of course, we'll find ways to get around them.”
