When Snap, the Los Angeles-based parent company of SnapChat, initially announced its plans to go public at a $25 billion valuation last year, some more casual observers may have seen the news and felt that it was a sign that Los Angeles had truly arrived as a home for startups building disruptive new companies. Of course, those would be very casual observers indeed, as the more involved members of the venture capital and private equity world are already well aware that Los Angeles arrived years ago and is currently a thriving ecosystem for entrepreneurs, counting among its ranks some of the biggest success stories in the American economy in recent years.
That reality that was clearly on display at the Vator SplashX LA event held at the stylish Techstyle Fashion Group headquarters in El Segundo, CA on January 19, where some of the most prominent entrepreneurs and venture capitalists rubbed shoulders with some of the most promising young players on the scene.
“LA is one of the hottest startup communities in the world right now,” said MC Shawn Gold, CMO of Techstyle Fashion Group during his opening remarks. “We have Dollar Shave Club, True Car, Oculus, Maker Studio, Tinder …, SnapChat, SpaceX, Techstyle, which has become one of the fastest-scaling companies in the history of the category. So really, anything can be done in the LA startup community at this point.”
The event was an intimate one, allowing a select group of people to hear speakers and panelists dig into just what it took for a young company to succeed in Los Angeles, and why this moment, in this city, presents such an incredible opportunity for entrepreneurs looking to make their mark.
Entrepreneurship as Endurance Sport
The evening’s first speaker was Mitch Thrower, founder and chairman of Events.com, who dug into what every company should understand about maneuvering through the inevitable series of difficulties and setbacks that come with founding a company in “The Ten Second Secret: And 9 Lessons from a Serial Entrepreneur.” While he was careful to outline just how difficult the going would be, he also highlighted how the right approach and a willingness to stick through difficulty would bring ultimate success, using his experience running 22 Ironman Triathlons as an apt analogy.
“Entrepreneurship is an endurance sport,” Thrower said. “You have to have the long view.”
Upon Thrower finishing his discussion, the evening’s panel discussion, “The Funding Landscape,” sat down and begin to dig in to how the landscape for raising capital looked in Los Angeles and beyond for 2017, featuring five prominent venture capitalists active in the LA scene. Moderated by Carmen Palafox, partner with Make in LA, the panel featured Brian Garrett, co-founder and operating partner with Crosscut Ventures; Laurent Grill, program director and investor of Luma Launch; Rich Jun, managing partner of BAM Ventures; Colleen Poynton, vice president of Core Innovation Capital; and Kevin Zhang, parter with Upfront Ventures.
The discussion followed a number of subjects, including an exploration of which spaces appeared the most promising moving forward, and where LA’s funding landscape stands in 2017 after 2016 saw private investment pullback from the lofty heights of 2015. However, one theme that appeared to run through every response is the fact that Los Angeles currently features an astonishing level of opportunity.
“I think that you can always say that it’s much more competitive, and use that as an advantage to maybe drive down valuations with entrepreneurs, but I think it’s less that there’s less money out there,” said Jun. “What you’re coming up against is not necessarily the shortness of capital but more a glut of opportunity. What we’ve noticed, which is a continuation of what we saw in 2015, 2016, and moreso 2017, there’s just a lot of great companies out there, and a lot of great entrepreneurs, and everyone’s looking for your money. So it’s less about ‘are people willing to fund my deal?’ versus ‘are people willing to fund my deal because they have opportunity costs in maybe missing out on the next deal?’ So it’s less about the company and more about it being incredibly competitive with a glut of great companies out there.”
Finally, the evening wrapped up its slate of speakers with a fascinating talk by Chris Vaughn, founder and CEO of Saucey, an alcohol delivery service that connects local liquor stores and other retailers with delivery drivers and users interesting in getting their booze delivered to their home. Vaughn outlined how he and his co-founders had tapped into a massive market with tremendous opportunity, including a period when they were working days growing the company while performing all the deliveries for a service that was available until 2am, seven days a week.
While it took time to convince investors to buy into his business, Vaughn highlighted a particular point with regard to getting a company off the ground: rejection builds grit.
“You’ve seen a lot of companies, whether it’s Airbnb, whether it’s FanDuel, whether it’s many others, that have been rejected seemingly into oblivion,” said Vaughn. “And I think that that can, in many ways, be a good thing for you. Having to go through those tribulations, having to go through people saying ‘eh, this sucks,’ having to go through people saying ‘I like it but it’s not for me,’ or whatever that may be. I mean, for us it was on day one. We thought this was an incredible idea that was going to give liquor stores tons of additional revenue. We started going to liquor stores, and they’re like ‘that’s not going to work.’ So on day one we started getting rejected. The first liquor store that said yes to us more than tripled its business. So I think being rejected in many ways, of course, you have to be right about your assumptions, but it can drive, I think, a level of perseverance that a lot of people don’t have. And that’s what it’s going to take to get you beyond where you are today.”
Silicon Beach Primed to Steal Silicon Valley’s Thunder
Vator’s first SplashXLA presented an interesting and engaging view of the thriving ecosystem of entrepreneurs and investment funds currently exploding in the city of Los Angeles. With so much of America’s attention paid to Silicon Valley and its multitude of tech unicorns, Los Angeles’ “Silicon Beach” remains a region on the rise, potentially presenting some of the biggest opportunities currently existing in private markets.
Images used by permission. Copyright Scott Shui 2017.