The Los Angeles Tech & Venture Scene 2019

U.S. venture activity has rebounded 3x since the lows of the post-dotcom boom days. This rebound in VC funding has brought with it a few notable changes. New technologies (e.g. AWS, Shopify, and the App Store) have lowered the costs of launching an internet business, and in part helped raise the bar for attracting capital (Jeff Jordan, Andreesen Horowitz). Data from Pitchbook shows how Series Seed has become the new Series A, and Series A is the new Series B round. Those same technologies have made it possible to launch multi-billion dollar technology companies outside of traditional tech hubs like Silicon Valley & Boston LA’s wealth of resources have turned it into a serious technology center. L.A. and Orange County (O.C.) startups raised $5 billion in 2016 (according to CB Insights). In fact, L.A. graduates more engineers than any other metro in the United States (Accreditation Board for Engineering & Technology). Universities such as University of Southern California (USC), UCLA, CalTech, Harvey Mudd, University of California, Irvine (UCI), and Loyola Marymount University (LMU) contribute to this trend. Los Angeles saw 376 companies funded in 2017, and 80 exits in 2016. Recent exits and IPOs include Snapchat ($24 billion IPO), Beats by Dre (acquired by Apple for $2 billion), Dollar Shave Club (acquired by Unilever for $1 billion), and Oculus (acquired by Facebook for $2 billion). Los Angeles also has the 3rd largest GDP in the world after Tokyo & New York (source: Brookings Institution). Historically, LA startups have had to look outside the city to raise capital. In fact, LA startups attract more outside capital than any other U.S. metro. That too is starting to change In just the last 24 months, 17 new funds set up shop in Los Angeles — doubling the number of local funds. Pre-Seed funds in LA include Amplify.LA, Halogen Ventures, Luma Launch, PLG Ventures, Wonder Ventures, and Act One Ventures. Seed funds include CrossCut Ventures, Bonfire Ventures, Embark Ventures, Wavemaker Partners, Fika Ventures, TenOneTen Ventures, Mucker Capital, Cross Culture VC, Macro Ventures, Riot VC, Sound Ventures, Moonshots Capital, Stage Venture Partners, Clocktower Technology Ventures, Brilliant Ventures, Troy Capital Partners, BAM Ventures, and Watertower Ventures. Series A funds include Greycroft Partners, Upfront Ventures, March Capital Partners, Alpha Edison, Anthos Capital, Pritzker Group Venture Capital, Anthem Venture Partners, Core Innovation Capital, and Fifth Wall. 2017 was a landmark year for Los Angeles tech. The largest LA VC deals in 2017 were: SpaceX, which raised $450M, Hyperloop One ($135M), Ring ($109M), The Honest Company ($75M), Rocket Lab ($75M), Divergent ($65M), Clutter Storage ($64M), Scopely ($60M), Soylent ($50M), Wag ($40M), and Within ($40M). The largest seed deals by category in 2017 were Consumer Products & Services (23%), Media & Entertainment (23%), Business Intelligence (16%), Health & Wellness (14%), Real Estate Tech (5%), Fintech (5%), Adtech (5%), and Other (7%). For Series Seed companies in LA, the median round size was $1.1M at an $8.8M post-money valuation, and average company age of 1.8 years (according to Pitchbook). For Series A companies in LA, the median round size was $6M at an $28M post-money valuation, and average company age of 4.2 years. Prior to 2000, LA saw the initial catalysis of a technology scene with companies such as eToys, Applied Semantics (later acquired by Google for its Adsense product, Idealab in Pasadena, Overture, GeoCities and eUniverse. After the end of the Dotcom bubble in 2000 and until 2011, only a few prominent companies were formed in LA such as Cornerstone OnDemand, TrueCar, SpaceX, eHarmony, and MySpace. From 2011 to the present, we’ve seen a resurgence in startup activity, with major LA players including ZipRecruiter, Clutter, Hyperloop One, The Honest Company, Ring, Dollar Shave Club, Oculus, Tinder, Snapchat, Wag and others. The MySpace Effect: the demise of myspace in particular led to a proliferation of tech activity in LA. MySpace was founded by several USC students who were working for eUniverse at the time. eUniverse incubated the company, and later raised additional funding for the project from Redpoint Ventures, and Vantage Point (both Bay Area funds). Eventually, former MySpace founders and employees went on to become founders and co-founders of some of LA’s largest companies and venture capital funds including Leaf Group (Demand Media), Scopely, DocStoc (acquired by Intuit), Troy Capital Partners, JamCity, WhipClip, CrossCut Ventures, Comparably, FloQast, unGlue, Countertop, Mobcrush, Gobbler, Science, Kitterly, Imbellus, Ellie, Gravity, Gobbler and Prevoty. The Snapchat Effect: over a decade later, Snapchat is having a similar effect on LA — attracting talent, investment & even affecting local real estate prices! Office rents in Venice neighborhood of Los Angeles have jumped over 100% since 2011, while other westside neighborhoods grew only 33%. Snap Inc. also now employs over 2,000 tech workers in Los Angeles, many of whom may one day establish their own technology companies. So, why LA? 1. Large market: LA offers quick access to early users/customers — There are 17.9 million residents in the five-county area, and nearly 10 million in Los Angeles County. 2. Large, well-trained workforce & a major center for higher education: Access to talent — 8.8 million person workforce and 121 campuses of higher education. 3. Excellent access to national and international markets: the ports of Los Angeles and Long Beach are numbers one and two in the nation in terms of container traffic handled. In 2011, two-way trade flows through the Los Angeles Customs District totaled $387 billion 4. Diversified economic base (beyond aerospace & Hollywood): most people think of LA as the “three-legged” economy – aerospace, movies, and tourism. In reality there are 14 significant industry clusters, including fashion, IT, manufacturing and design. 5. A leader in technology & engineering: Nearly 33,300 people work in computer systems design and software publishing activities. LA also boasts 9 engineering schools, including those at CalTech, Harvey Mudd, USC & UCLA. 6. LA is a major force in apparel design and manufacturing: LA is #1 in the nation in apparel manufacturing employment. Over 88,000 people work in apparel design, manufacturing and wholesaling. 7. A leading creative & design center: in addition to apparel design, Los Angeles is also a center for the design of autos, furniture, and toys. 8. A major force in the entertainment industry: the motion picture/TV production industry employs over 159,900 people, and generates receipts of $55.9 billion. An aerospace & transportation leader: LA is famous for its traffic so it’s no surprise that LA is a leader in “intelligent highways” technology and more. 10. The weather and geography: LA offers 329 days of sunshine! (Source: Los Angeles County Economic Development Corporation). Given LA’s resources, the city leads in several technology sectors. In particular, Gaming, e-commerce, and Online Media. Contributing factors for LA’s lead in gaming are the film industry, existing talent (storytellers and animators), studio style investors, and a large diverse market. Some leading LA gaming companies are Activision Blizzard, Scopely, JamCity, Industrial Toys, and Insomniac Games. In fact, E3 in Los Angeles is the world’s preeminent gaming expo. For e-commerce, some contributing factors are: manufacturing industry, access to influencers, fianncnial infrastructure and being a pacific port city. Local leaders are Dollar Shave Club, The Honest Company, The Bouqs Company, and Winc. Leading Online Media companies are Hulu, Snapchat, Fullscreen, and Maker Studios (acquired by Disney). Emerging sectors in LA yech are Virtual Reality (VR) and Augmented Reality (AR), E-Sports, and Transportation and Aerospace technology. Some leading AR & VR startups are Open, Within, Daqri, Wonder and Surveys. Leading E-sports companies are Cloud 9, Super League Gaming, Riot Games, and Immortals. Contributing factors for LA’s transportation and aerospace scene are Nasa’s JPL, Lockheed Martin, Boeing and engineering talent. Some emerging leaders are SpaceX, Hyperloop One, Rocket Lab, The Boring Company, and Relativity. Facebook purchased OC based Oculus for $2 billion. $276M has been invested in 4th mode transportation upstart Hyperloop One. The LA Staples Center (20k+ capacity) consistently hosts sold out League of Legends championships. What’s Amplify? Amplify invests in startups at the earliest stages. With over 150 mentors, and an incredible team, we actively provide support, capital and guidance throughout the lifetime of your business. In all we’ve invested in 75 companies, and have seen 9 exits including to Apple, Google & FanDuel. The Amplify team included Paul Bricault (Managing Partner), Oded Noy (Managing Partner), Richard Wolpert (Venture Partner), Eric Pakravan (Vice President), Amanda Schutzbank (Vice President) and Connor Sundberg (Analyst). The Amplify portfolio includes StackCommerce, Clutter, Winc, FLoQast, Gem, AlphaDraft, Bouqs, HelloTech and Bitium, among others.