Way More Parties in LA: Why I’m Bullish on LA Tech and What I’m Doing About It
I am far from the first outsider to say that the tech ecosystem in Los Angeles is worth paying attention to, but I hesitated a little to write this post because part of me felt like I was letting people in on a bit of a secret. However, like a founder who is afraid to share her idea out of fear that someone may steal it, it all comes down to execution and putting in the work. And so, sharing why I’m #LongLA (h/t Greg Bettinelli) more publicly is well worth it for our fund and for the LA ecosystem as a whole—a rising tide lifts all boats.
My infatuation with the LA tech community began in the summer 2012 when I was working with Gumroad. We traveled a number of times to LA and worked with digital teams at ICM, UTA, CAA, WME, and several labels and management companies in an effort to get artists to sell direct-to-fans using our service. At the time, most of these groups were biz dev partners and only a couple were dabbling in making tech investments opportunistically. This, of course, has changed as agencies have ramped up their investment activity alongside groups like UMG, Chernin, SB Projects, Sound Ventures, and Troy Carter’s team. When I joined Wanelo a year later, a significant amount of brand and retail partners were based in LA. That fact, coupled with the number of influencers who could be valuable to the platform, allowed me to spend more time in LA, thereby building new and fostering existing relationships.
And so, when I joined Deep Fork just under two years ago, I was drawn to the fact that there were already a few LA investments from Fund I (RadPad, Bkstg fka Fahlo, and Amplify), and Tim was in the midst of investing in Wevr fka Wemo Lab out of Fund II. In my first year or so on the job, I made a few trips to LA, but it wasn’t exactly a proper routine. And as someone who wants to meet with founders building the latest in consumer tech, I felt like I was potentially leaving opportunities on the table. So, beginning in November 2015, I resolved to go to LA every month (in addition to my monthly SF trips). This month will mark 6-straight months with at least a full day Uber’ing around LA seeing portfolio companies, investors (both traditional VCs and strategics), and potential new investments.
LA’s startup ecosystem feels like NYC’s in 2009. It is nascent and fresh and hopeful with the same sort of momentum I felt from NYC about a half decade ago. The companies that are being built are predominantly consumer-facing (my personal sweet spot). And while one might argue they seemingly aren’t taking on the big, hairy, audacious problems (though some are) that you find companies in Silicon Valley tackling, they have very favorable macro tech trend tailwinds, which allow them to have significantly higher upside than many of the comparable businesses built in NYC five-plus years ago. I also think a younger tech ecosystem results in having younger founders, and when you’re building consumer-facing businesses (as most in LA seem to be), particularly ones targeting a younger demo, it’s valuable that you yourself are a likely user or customer. It’s a core piece of my hypothesis around founder-product fit, and LA seems to have this in spades.
Given the relative nascency of the ecosystem, for a young investor, there is an ability to grow with it in a way that can’t be done in NYC, let alone the Valley. You can build a reputation over time by being active in the community and doing right by entrepreneurs. The network effects that come with investing (both money and time) in a geography are real. While Snapchat can serve as a magnet for talent and the nexus of LA’s tech ecosystem (it’s the Palantir of Venice) and Science Inc. is doing tremendous work, I believe the startup scene is largely underfunded, particularly when it comes to funds who can stake their claim as a true lead investor. Lowercase, with which we’ve co-invested in a LA startup, is the preeminent seed fund in the area, and Upfront and Greycroft are the dominant traditional VCs, but there is plenty of room for others to come in, whether they’re on the ground (as Arena, Karlin, and TenOneTen have shown) or they’re parachuting in with regularity. I believe that making monthly trips to LA allows us to be a de facto LA seed fund. I’m fairly confident that no east coast investor is going to LA that frequently and spending that much time there (short of Fred Wilson who literally lives there two-plus months of the year).
LA’s similarities to NYC don’t end with how far along the former ecosystem is. In fact, LA’s diversity of industries (media and entertainment, fashion, finance, and tech), cultures, and general “personalities” within its massive population lends itself to being much more similar to NYC’s mix than SF’s homogeneity. I think being exposed to such diversity makes me a better, more adaptable and empathetic investor. I also believe that launching products, particularly in consumer mobile, in LA or NYC leads to lower odds of false positives than launching in the early adopter monoculture of SF. Furthermore, just as many companies should or need to be in NYC given the industries that the city harbors, there are numerous startups that need to be in LA for similar reasons. As I outlined in a previous post comparing my time in SF to my time in NYC, maintaining a solid “tech-life balance” and cultivating personal happiness fosters professional success. I believe this quality of life leads to more sustainable company-building and a lower likelihood of burnout, especially among so many young founders. The below Tweet came from a meeting during my last trip to LA:
This 21 year-old founder wisely recognized that being close to his college friends and having as normal of a life outside of running a hypergrowth startup would lead to a higher likelihood of success for his company, and maintaining an identity that wasn’t solely bound to his startup would be healthiest.
I’m not the first, and I certainly won’t be the last, investor to say that what’s percolating in the LA tech scene right now is compelling and attractive, but I do hope that bringing additional awareness to it, particularly as an outsider from across the country, helps elevate the conversation. If you’re a founder building a (consumer) startup in LA or a VC who is spending time there, please connect with me on Twitter. Quite simply, if you invest in consumer tech and you’re not paying close attention to what’s going on in LA, you’re missing out on one of the next important startup waves.