Chronicle of a Startup Town: Los Angeles
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About this ebook
Who is behind the most successful startups in LA? Why is the tech community in Santa Monica thriving? Entrepreneurs in Southern California have had a long history of success in film, television, fashion, aerospace, and medical tech. Now the LA startup scene is taking off, spinning up a revolutionary engine of commerce and innovation in Southern California business. Why now? And why LA?
To write this book, Lee Schneider conducted 30 interviews with startup founders, industry leaders, analysts, and venture capitalists to create a vivid picture of the vibrant and ever-changing Los Angeles startup scene. This is essential reading if you are considering moving your startup to LA, if you want to know why startups succeed and why they fail, and how you can find success with your business in new markets and verticals.
The book includes a handy resource section of workspaces and incubators.
Praise for Chronicle of a Startup Town: Los Angeles
I love how genuine Lee is about the LA Startup community. Lee has taken an extensive amount of time to carefully research and break down the LA Startup community. He explores how Los Angeles in a quick three to five years gained the growth it has today. --Espree Devora, WeAreLaTech
You're not going to get a better overview anywhere. A must read for anyone interested in the LA tech community. It's the most comprehensive coverage of the history, companies, and players in the LA tech community. --Andy Fortson, Faraday Future
Great study of LA's startup culture and the major organizations involved. Filled with great interviews with entrepreneurs, journalists and other players that make up the startup “tribes” that dot the LA landscape. After reading this book you have a good road-map to finding help and community for your startup. Recommended for anyone who interacts with the LA startup community and wants to learn how the startup economy works. --Joshua D. Kasteler, Founder of Safe Ducky
Lee Schneider
Lee Schneider is the owner and communications director of Red Cup Agency in Santa Monica, CA. Red Cup has reimagined communications for startup and enterprise businesses, building online networks, managing content, developing media, and creating PR campaigns. He has taught media and crowdfunding for the USC School of Architecture, where he is a member of the faculty, and has taught business marketing at General Assembly in Los Angeles. Married to a goddess, he is the father of three. Find him on Twitter at @docuguy. He is the author of Be More Popular: Culture-Building for Startups, Chronicle of a Startup Town: Los Angeles, Powerful Online Message Delivery - Free and Low-Cost Platforms for Creative Companies and Individuals, and The Angel Playbook, a guide for entrepreneurs and investors. Factoid: He was a writer for the iconic cartoon series ThunderCats.
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Chronicle of a Startup Town - Lee Schneider
CHRONICLE
OF A
STARTUP TOWN:
LOS ANGELES
LEE SCHNEIDER
Chronicle of a Startup Town: Los Angeles
Copyright © 2015 by Lee Schneider
Published by Red Cup Agency. Santa Monica, CA
All rights reserved. This book or any portion thereof may not be reproduced or used in any manner whatsoever without the express written permission of the publisher except for the use of brief quotations in a book review.
Cover design by Pixel Studio.
First Printing, 2015.
www.redcupagency.com
Contents
Booting Up: So You Call Yourself a Startup Town
Chapter 1: Origin Story
Chapter 2: Challenges to Credibility
Chapter 3: An Ecosystem Matures
Chapter 4: Incubators and Accelerators
Chapter 5: Celebrities and Other Startup Funders
Chapter 6: Crowdfunding for Startups
Chapter 7: Failure
Chapter 8: Should You Move Your Startup to LA?
Chapter 9: The Future Ecosystem
Chapter 10: Watching for Unicorns
Chapter 11: LA Resources
Chapter 12: Last Word - The Culture of Assholes
Acknowledgments
Booting Up: So You Call Yourself a Startup Town
Not the next Silicon Valley
It is pointedly unfair to say it, but I will say it anyway. Every startup town wants to be the next Silicon Valley, the region in south San Francisco Bay where the tech revolution was born.
In September of 1955, William Shockley left New Jersey, where he was working for Bell Labs, and moved to Mountain View, California. He rented an office building at 391 San Antonio Road and opened a business called Shockley Semiconductor.[1] Shockley’s decision was highly significant, as significant as D.W. Griffith’s decision to shoot his 1910 movie In Old California in Hollywood, as significant as Stanford, Huntington and Crocker’s decision the send the railroad not to San Pedro, but instead to Los Angeles. Like those other choices, Shockley’s was but one decision node that would trigger a cascading series of innovations, and spin out new industries.
Employees of Shockley’s company left to start Fairchild Semiconductor. Employees of Fairchild in turn started Intel. In 1980, John Doerr, an Intel salesman, left to become a venture capitalist, providing seed money for Netscape, Sun Microsystems and Google.
The Silicon Valley region became home to Bell Labs West, Hewlett-Packard, and Xerox PARC (Palo Alto Research Center), where Steve Jobs first saw the display system that he would appropriate for the Apple computer, and also the first mouse prototypes, the invention created by Doug Engelbart that made computers more human-friendly. Microprocessors and microcomputers were born and matured in the Valley. Cisco, Adobe, Apple, eBay, Electronic Arts, Facebook, Google, Intuit, Netflix, Oracle, Salesforce, Symantec and Yahoo were founded in the Valley. With a recipe like that, you can bake a heck of a cake. It makes sense that other startup ecosystems would model themselves on the Valley’s worldshaking success. Here’s what is really unfair, though. Other regions may try to become the next Silicon Valley, but they will fail. Their failure is inevitable, and they will fail hard.
What we have seen over the past few years is that’s not the way to success. That’s not the way to develop an ecosystem,
said Skander Garroum.[2] He runs Compass, a benchmarking application that tracks startup and business ecosystems worldwide.
Each and every ecosystem is different, and every ecosystem needs to find its niche, and every ecosystem needs to find their own solution and their own growth engine.
He believes that LA is finding its direction in design, media, gaming, and consumer-focused startups, and we will see in the succeeding chapters whether he is right or not.
The money flows
In 2014, investors poured $48.3 billion into new US companies.[3] Los Angeles startups received a $3.04 billion share of that bounty.[4] The flow opened up with Snapchat’s $486 million funding round and Maker Studio’s $500 million sale to Disney. As Garrett Reim wrote in Built in Los Angeles:[5]
In fact, 2014 investment totals [in Los Angeles] were 188 percent higher than 2013 levels and acquisition totals were 430 percent higher than 2013 levels. In 2014, over 250 digital tech companies received funding and over 80 companies were sold.
There was talk of a new Gold Rush as investors plunked down their bets. Get Rich Quick has been a meme in the California storyline since the aerospace industry sent the economy soaring in the 50s, since the movie industry first lit it up in the 30s and again in the 40s, since the railroads brought wealth and work at the turn of the century, and during the actual Gold Rush in 1848.
In 1939, novelist Nathanael West wrote about how the pursuit of Southern California fame and fortune eventually destroys its pursuer. In the 1960s and 70s, Joan Didion focused a cold, hard light on the Black Box of LA’s mystique. Today, even the most optimistic startup founders know the risks are high and the job dangerous when they start businesses here, but they come anyway, plunk down their money or invest their time.
Why?
If you ask me why the startup community, and especially in LA, has become so prevalent today, it’s because venture guys and tech guys have become almost equal to actors, studio heads, and directors, in terms of their fame,
said Andrew Heckler,[6] founder of Hone, a platform for quizzes, surveys and polls headquartered in LA. As a partner at Workhouse Capital, founder of Brightfield Energy, angel investor and startup advisor, he’s been part of the Los Angeles startup ecosystem since 2006.
How many people in the country know Mark Zuckerberg? And how many people in the country know Tom Freston? Well, a lot more people know Mark Zuckerberg, and Tom Freston started MTV,
Heckler pointed out.
Startup founders are the rock stars of our times. The most significant companies in the tech movement, like MySpace, Google, Facebook, Snapchat, Dropbox, and Tesla Motors, are less than a decade old and are worth billions. The thought processes of the founders—their code, their design sense, their personal tastes—are coding and designing us. The infiltration is deep and lasting. Many of these mindshare-gobbling companies started in Silicon Valley, but more are starting in LA, an ecosystem that is rapidly gaining credibility, cash, talent and respect.
New startups are launching on the Westside, in Santa Monica and Venice, and also in Pasadena and downtown. Why, I ask in this book, and why now? Who are the major players? What will they do next? In this series of interviews with startup founders and investors, players on the scene and observers, I chronicle a movement reshaping a city, changing the nature of information and data, leveraging the power of that supercomputer in our pocket or bag, and disrupting what it means to go to work every day.
It’s big stuff, but why is it happening in Los Angeles?
A series of events conspired to nourish the Los Angeles startup ecosystem. Coworking spaces like Coloft provided places for the tech community to meet. The Meetup online community of informal group events provided a network. Both successes and failures helped prime the Petri dish that nourished the scene. Passionate early advocates, like Jason Nazar, CEO of Docstoc who founded Startups Uncensored, and early investors like Paige Craig, added to the mix.
Early successes drew big players to the region, like Yahoo, Google, Facebook and Apple, and failures helped as well. When failed ventures exploded like celestial stars, valuable engineering talent was released into the ecosystem, and those people started their own new companies. The LA ecosystem, like all ecosystems, is a living thing. I’ve had to redraw my startup map as I worked on this book. I don’t believe I will nail it down; it’s changing too fast for me or anyone else. But I will tell you what I know.
The Los Angeles difference
The Los Angeles startup ecosystem is dramatically different from the San Francisco Bay Area’s, from New York’s or Boston’s. LA’s diversity—in the region’s talent pool, in the cultures it supports, in the types of startups being formed and funded—is its great strength and differentiator. Diversity is what makes the region different, diversity is what makes it work, and as I will show in my final chapter, diversity is what will save the ecosystem from destroying itself.
Adriana Herrera, founder of GrandIntent, a marketing analytics platform, told me:[7] Going into any industry when you’re new and you have a different background, there’s a lot of proving of yourself that you have to do to the people who have been in that industry. At least that’s what my experience was. I think I’ve seen this regardless of male or female for people.
As she explained, at the end of the day it is a startup founder’s track record, what they achieve, that attracts financial support, partners, and creative talent. As I came in, I started to establish that track record and started to have success. No one could argue with it.
Brad Brooks is CEO of TigerText, an encrypted messaging system that has found traction in the healthcare industry because nurses and doctors can send secure messages, like care directives and prescription information, that are HIPAA and HITECH compliant. (HIPAA is the federal Health Insurance Portability and Accountability Act, intended to protect the security of health care information. HITECH is the