Tech Merger Frenzy in L.A. Highlights New Set of Startups


By Rob Golum and James Nash

Two takeovers in two days are putting a spotlight on Southern California’s role as a hotbed for technology startups.

Facebook Inc. said March 25 that it agreed to buy the virtual reality company Oculus VR Inc., based in the Orange County city of Irvine, for at least $2 billion in cash and stock. A day earlier, Walt Disney Co. plunked down a minimum of $500 million for Maker Studios, a supplier of shows for YouTube that has its headquarters in Culver City, next to Los Angeles.

Southern California has developed enough talent and financing for a self-sustaining community of tech startups to take root and grow, from the seed capital stage on up. Local universities are pushing entrepreneurship programs, the flow of venture capital money is on the rise and earlier startups have helped attract talent that’s remained instead of moving north to Silicon Valley.

“There’s been a proliferation of both angel and seed capital over the last couple years, and that’s allowed companies to stay here, build and grow,” said Paul Bricault, a venture partner with Greycroft Partners, a backer of Maker Studios.

Facebook’s interest in the region came to light last year, when Chief Executive Officer Mark Zuckerberg unsuccessfully tried to buy SnapChat Inc., a mobile photo-sharing service in Venice, a beach community on the west side of Los Angeles.

The company, founded by two Stanford University graduates, turned down his offer of about $3 billion, people with knowledge of the matter said at the time.

Bricault,who’s also managing partner of Amplify.LA, which assists startups, said the climate for new businesses has changed over the past two decades.

Staying Put

In the past, entrepreneurs in Southern California would leave as their funding needs grew and not return, he said. Now “companies are not only electing to stay here, but they are drawing capital from outside L.A. to fill the gap.”

Southern California ranks No. 3 worldwide for technology startups, behind Silicon Valley and Tel Aviv, according to a 2013 report by Be Great Partners, a technology incubator based in Los Angeles.

A concentration of immigrants and universities are driving the growth in technology businesses, said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto.

Some companies are big enough to be considering initial public offerings. The Rubicon Project Inc., anonline advertising company based in Los Angeles, expects to raise as much as $132.4 million in an offering of up to 7.79 million shares at $15 to $17 each, according to a regulatory filing.

Car Culture

TrueCar Inc., an online auto shopping service, attracted a $30 million investment from Microsoft Corp. co-founder Paul Allen’s Vulcan Capital in December. The Santa Monica-based company is working with Goldman Sachs Group Inc. and JPMorgan Chase & Co. on a possible IPO, people familiar with the matter said in November.

Venture capital financing in Los Angeles and Orange counties has amounted to more than $17 billion over the past decade, according to data from PricewaterhouseCoopers LLP. The two counties cover almost 5,000 square miles, about the size of Connecticut, according to Census Data.

The number of deals in the region rose to 267 in 2012, the highest since 2004, according to Esmael Adibi, head of Chapman University’s Center for Economic Research in the City of Orange, citing PricewaterhouseCoopers statistics.

Small Business

The role of digital business in the region is still small relative to the wider local economy, which is led by shipping, the entertainment industry and construction, as well as aerospace and fashion. Los Angeles is the largest manufacturing center in the U.S., according to Mayor Eric Garcetti’s Office of Economic and Workforce Development.

Small and midsize businesses play a particularly large role in Los Angeles, according to Helena Yli-Renko, director of the Lloyd Greif Center for Entrepreneurial Studies at the University of Southern California.

The back-to-back sales of Oculus and Maker Studios underscore how vibrant the startup climate has become, said Bricault, whose company oversees investments of $400 million.

“If you look today, the number of companies that have raised money in excess of $500 million and their private market valuations, it’s probably higher than it ever has been before,” he said.

In Los Angeles, employment in e-commerce and digital entertainment has climbed 24 percent in the past five years to 14,920 jobs, according to the Milken Institute in Santa Monica.

Homegrown Companies

“Los Angeles and Silicon Beach are profiting from the shift to digital entertainment leveraging the large number of entertainment workers already living in the area,” said Kristen Keough, a Milken research analyst.

Locals shouldn’t view the sales of homegrown companies as a setback for the regional economy, Yli-Renko said. Oculus plans to continue running independently, while Maker Studios will remain in Culver City.

“Both of these companies look to be at the point where they can really benefit from additional resources to grow and expand, so I don’t think there’s a negative to it,” she said. Oculus and Maker Studios have demonstrated “strong proof of concept and strong proof of market adoption.”

Angel group investments, valuations climbed in 2013

2013 Halo Report By Region

By: Cromwell Schubarth, Senior Technology Reporter-Silicon Valley Business Journal

Investments by angel groups last year grew with increases seen in investments in startups in the Internet, health and mobile sectors, according to a new report.

The findings came in the Halo Report, which measures only the activities of angel groups and doesn't include the seed investment activities of venture firms, accelerators or angels who act independently. The report is issued quarterly and annually by the Angel Resource Institute, Silicon Valley Bank and CB Insights.

The three most active angel groups in the country last year were the Golden Seeds, Tech Coast Angels in Southern California, the Houston Angel Network and Silicon Valley-based Sand Hill Angels, according to the Halo Report.

California had the largest share of deals involving angel groups (19%) and the greatest amount of investment (20%). The report also showed that about three-quarters of angel group investments are done in their home state.

Five regions of the country accounted for about two-thirds of the deals and dollars invested: They are California, New England, Great Lakes, Mid-Atlantic and the Southeast. 

Median angel group round sizes have remained steady over the past three years at $600,000.  But when angel groups co-invested with other types of investors, the median round size reached a three-year high of $1.7 million.

The amount invested in healthcare startups by angel groups rose from $1.1 billion in 2012 to $1.5 billion last year. In the Internet sector it rose from $935 million to $1 billion. In mobile/telecom it went to $1.1 billion from $1 billion.

Growthinker Melissa Welch Speaking and Giving Back at the Youth Business Alliance Program

Melissa went above and beyond and gave back to the community with 60 minute presentation at  the Alliance College Ready Academy in South Los Angeles o 30 high school students accepted into the Youth Business Alliance Program based on having the highest GPAs in the school  and having an interest in and passion for business and entrepreneurship. 

Great and inspirational work, Melissa!!

CELEBRATE! on March 26! Surprise Launch Jump-Started by Maverick Angels

Register for the event here. Growthink is a proud sponsor of Maverick Angels.


At this event, Maverick Angels will be unveiling the Launch of our New Company -- and We Want You to Join in the Celebration. This is the night when we will reveal exciting details of our New Venture -- it's a Wild Idea dedicated to the Greatest Pioneers of our Time...Entrepreneurs! 

  
So...if you're the type who crosses at a red light, has your hair on fire exploding with ideas and challenges the Status Quo, then you will feel right at home during our Big Bash on March 26th. Please join us at this historic event and meet up with Angels, Other Investors, Accelerators, Incubators, Crowdfunders, Sponsors & Affiliates and LA's Influencers.

  

We have mastered mixing business with fun, so bring plenty of business cards as we Collaborate, Educate and Get Down to Learning about YOUR Ventures. 

Here's the Deal: 

Who It's About: Entrepreneurs at All Stages
Date: Wednesday, March 26, 2014 - 6PM to 9PM PDT

Location: 

Loyola Marymount University

Roski Dining Hall located in University Hall

1 Loyola Marymount University Drive
Los Angeles, CA 90045
 

Parking:  

On-Campus parking will cost $10 for the evening.

As you enter LMU from Lincoln Ave and pass security, University Hall is the first building you see on the right. Simply enter the adjacent parking lot and park anywhere. The parking fee is payable at machine kiosks located near each elevator bank. You may pay with either cash or by credit card. 

  

Price: $10 + $1.54 (Eventbrite Fee) for Non-Sponsors

NON-REFUNDABLE

 

What's Up at the Launch?

Fire Up for Our Famous Elevator Pitch Contest 
We've Got Swag--Get Your Goodie Bags Ready
Guest D.J. (Name to be Announced) in the Lounge
More Fun Surprises to Tell You about Coming Soon!

 

Don't Miss Our "Ask the Experts" Panel! This evening is all about you--so work it. Make it happen by interacting with our group of Top Mentors who are there to share their knowledge by answering your questions related to the success of your start-ups.

First Los Angeles Company to go Public since 2011

Rubicon Prices IPO, Values Company at $450 Million

By JUSTIN YANGThursday, March 20, 2014

Tech advertising platform Rubicon Project Inc. priced its initial public offering Thursday at $17 a share, valuing the company at more than $450 million.

The Playa Vista company intends to offer 6.7 million shares to the public, setting aside an overallotment of another 1 million shares. Rubicon, considered one of the earlier automated ad exchange players, claims it reaches 97 percent of U.S. Internet users, and 600 million users worldwide. Competitors include AOL, Google and Microsoft.

Despite its wide reach, the company has had trouble reaching profitability according to its S-1 form. The company reported a net loss of $9.2 million in 2013. Revenue rose 47 percent to $84 million compared to the year earlier. Rubicon has raised $51 million in venture capital funding.

Frank Addante, Rubicon’s chief executive, is the largest individual shareholder of the company with 10 percent. Clearstone Ventures owns 21 percent, News Corp. owns 19.3 percent and Mayfield Fund owns 14.2 percent.

Rubicon is the first Los Angeles tech company to go public since Demand Media’s IPO in 2011. The stock will be listed on the New York Stock Exchange under ticker symbol RUBI.

Source: http://www.labusinessjournal.com/news/2014/mar/20/rubicon-prices-ipo-values-company-450-million/