3 Things: Snap’s Ecosystem
Snap is going public at a valuation between $20–25 billion. Journalists and investors are debating whether post-IPO Snap will be like Facebook, Twitter, or something else entirely.
Ben Thompson has a good breakdown here:
The New York Times ran an article about how Snap’s IPO will change the LA tech scene. The money quote:
“What we have not had is our Google moment,” Mr. Lourd said, referring to Google’s initial public offering in 2004, which produced a horde of new millionaires in Silicon Valley.
Now such a moment may soon be upon Los Angeles. Next month, Snap, the parent company of the disappearing-message app Snapchat, which is based in the Venice neighborhood, is set to go public — and in the process mint a wave of tech millionaires and billionaires in a city better known for its well-paid Hollywood stars.
tk Our team spends a lot of time thinking about the health of ecosystems. While there is a lot that stakeholders can do to make a stronger startup community, nothing is more powerful than breakout successes — Google in the Bay and Snap in LA.
In particular, the Snap IPO will energize three important stakeholders in the LA ecosystem: employees, investors, and the government.
The long tail of Snap’s success will be its early employees. These employees, flush with some cash, has seen what good looks like. They have cut their teeth against the best. They love startups. They are talented and, now, experienced.
Over time, they will leave Snap to start their own companies. Their tight networks — based in LA — will provide early validation, employees, and cash. Like Google in the Bay, having Snap on your resume, especially pre-IPO, will be a significant competitive advantage.
Snap’s investors will be handsomely rewarded. And the investor community in LA will be rewarded by association.
Once an ecosystem is validated — an unglamorous process that takes a long time — money starts flowing. You can expect to see established investors in LA raise larger funds and new investors set up shop. This will create a feeding frenzy — much of it noise, but some of it signal.
LA Mayor Eric Garcetti has been courting the tech community for years. Snap’s IPO will validate his approach.
Government policy is particularly important in the tech community for two reasons:
- The community is generally liberal (with some interesting Ayn Rand-like libertarians), so social policy is important. It’s hard to find a booming tech scene in a socially conservative location.
- Because these companies are trying to do something new, they often run into issues with outdated regulation. Like Uber and Airbnb, city regulations can stifle innovation. We will see how LA — an established city that thrived before Snap — positions itself relative to its competitors.
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