Nine Los Angeles CEOs, founders and executives generously gave us their thoughts on the future of LA tech. Overall they were quite optimistic about 2015 and beyond, seeing the industry overcoming even its biggest challenges in 2015. Their thoughts range from venture capital flow to networking to virtual reality, and everything in between.
Predictions below from:
Gil Elbaz, CEO and founder of Factual
Scott Lahman, CEO and founder of textPlus
John Tabis, CEO and founder of The Bouqs
Richard Davis, director of publishing of Scopely
Scott Grimes, CEO and co-founder of Woven Digital
Farbod Shoraka, CEO and co-founder of BloomNation
Michael Bolger, CEO and co-founder of Hovelstay
Greg Cohn, CEO and co-founder of Burner
Gil Elbaz, CEO and founder of Factual
Will we see the type of growth we saw in 2014, in 2015? Yes. The overall economy is growing nicely and I don’t think we are at a market top yet. VC investment will likely continue lockstep with the macroeconomy. The correlation could cease if we see some well-funded startups implode (think about Webvan in 2000), but I don’t think that’s going to happen anytime soon.
Is there one particular sector you think is set to boom?
It is not so much a sector, but one incredibly exciting theme that is set to boom. Nearly every sector from logistics to finance to entertainment is being reimagined and revolutionized through new digital networks that form hubs of valuable, actionable data. The companies that will thrive are those that sit near the centers of these hubs, that are able to aggregate the most data and put it to use.
Uber and Lyft, for example are collecting data at an unbelievable scale. They not only know where we all are, but where we are going. They can use the data to send cars there in advance and make the service better. We see opportunities like this across almost every category – and LA is a great place to work on many of these new companies.
I’m of course biased as the founder & CEO, but certainly Factual is focused on being a hub for all data and contextual information related to location. We’ve already made a significant impact as a platform that enables location-based services and targeted mobile advertising.
Are there any tech startups in LA our readers should keep an eye out for?
Second Spectrum is an example of a startup with great potential, and fits the theme of a company aggregating unique data and making it actionable. (Full disclosure, TenOneTen is an investor.) They take second-by-second data from NBA games, which analyze every single player and ball movement, and build intelligence to help managers make key decisions. But the real revolution is in the sports fan experience – they create amazing statistical visualizations, which consumers seem to love. (As a Clippers season ticket holder, I get to enjoy these at home games regularly since they are shown up on the Jumbotron.)
Another up-and-comer is ConnectHQ (TenOneTen is also an investor) which helps Internet of Things companies make sense of the vast user data they collect. It’s a very challenging and important data aggregation and analysis problem.
Any big problems that LA tech needs to tackle?
I think the key to our market is really liquidity in talent, particularly in engineering. I think LA is 'tipping.' Only a couple of years ago, the best and brightest would find their way to LA because of some extra-professional reason (significant other, sunshine, family...) Now, I think it is common for people to see LA as a legitimate destination for their talents and ambitions, and LA as the ideal platform to build the career or tech startup. As the density of engineering talent increases, and people are here long enough to have a couple of jobs, we'll see even more ambitious tech.
LA may be uniquely suited to tackle many of these opportunities in the emerging category, VR (virtual reality) tech. For example, building a new VR solution for the healthcare industry would require the aggregation of talent not just in graphics and user experience but also scaled data tech and embedded sensors. LA just may end up as the nexus of VR tech. Many are aware that Oculus Rift is in Irvine (disclosure, my brother and TenOneTen venture partner Eytan Elbaz was an investor) but there are other local upstarts like Wemo that are doing very interesting things in this space.
How do you think the LA startup community will be different in 2015?
I mentioned the need for a liquidity of talent. We also need a density of talent. Something magical happens when you bring a lot of super talented and creative and ambitious people within a small radius. First of all, amazing things are built. Perhaps more interestingly, this density attracts more talent and you get a virtuous cycle. Where will the high-density areas be over the next decade? Of course the Santa Monica/Venice beach area is hot, but real estate is also limited, so it is very hard and extremely expensive to find physical space to build a startup.
One thing to watch for is the Expo line. The new line will connect downtown with the Santa Monica coast, and I think will end up being a dense corridor of innovation. It travels from downtown, through USC, through Culver City, across Santa Monica, and finally ends up at the promenade. I’m bullish on all of these areas and they should all see significantly more activity (and density) of startups, talent, and success.
LA VC firms like Greycroft and Pritzker Group have been thriving. Upfront just raised another $280m round and great micro-VCs like MM Partners and Rincon Ventures are raising new funds. But, that still isn’t close to enough capital to fund all the opportunity. There is also plenty of Sand Hill VC investing going on in SoCal, but that will continue to grow and I think 2015 could be the year that we see Sand Hill firms locate partners here in LA.
Any other thoughts, observations, or reflections?
In sum, for talent it’s a case of the more the merrier for LA. It's a virtuous cycle. In 2014, we raised outside capital for TenOneTen Ventures to grow its early stage investing, and we feel like we are in just the right place at the right time.
Scott Lahman, CEO and founder of textPlus
Will we see the type of growth we saw in 2014, in 2015? Of course the market is pretty frothy and that always raises questions of sustainability and the ‘b” word (rhymes with trouble). That being said, I serve on Mayor Garcetti’s Council Of Technology and Innovation, and I believe in the Mayor’s commitment to our sector and his plan to stimulate growth. The future is very bright for Los Angeles, which continues to be one of the most important cities on earth for technology and startups.
Is there one particular sector you think is set to boom?
I spent a lot of my early career in the videogame business - at Activison, JAMDAT and EA. So I certainly took notice of the number of my old friends and colleagues, all tremendous talents, who were jumping into the Oculus opportunity. That talent flood hasn’t stopped with John Carmack and, more recently, Jason Rubin joining the fray. Something exciting is happening around Oculus and, having used the device, I’m a believer. Obviously games are not the only sector for Oculus, however, they are possibly one of the most exciting. VR has the opportunity to return a facet of the games industry that has been missing for a long time - the constant “arms race” for better and better hardware and more and more processing power. This type of benevolent arms race really can create a huge market opportunity and generate boom-like returns for a lot of participants.
Are there any tech startups in LA our readers should keep an eye out for?
As already mentioned, Oculus is not LA-based but is local and has reach into LA. I believe in Meredith Perry and have high hopes for uBeam. We’ve had a few entrepreneurs spin out of textPlus to start their own companies (Saucey & Rumr), and I’ll be watching them like a proud papa.
Any big problems that LA tech needs to tackle?
LA is a leader in the mobile social messaging space, with Snapchat, textPlus, Whisper, Tinder, Burner, Rumr and others. However, we’ve just scratched the surface of what’s possible in such a massive space (global human communication!). textPlus’ special sauce is providing the cloud phone - a downloadable telco in an app if you will. For us, this is the natural next step in the “software eating the world” progression. Music, movies, photographs and games are all discovered and fulfilled online, we believe your communication stack will soon be as well.
How do you think the LA startup community will be different in 2015?
The growth of LA’s startup scene has been well documented over the past two years. But now the anchor tenants are showing up. Upfront Ventures just raised a $280 million fund. Google just purchased a campus in El Segundo. Snapchat will grow ferociously especially as they begin to focus on monetization. These companies are helping turn Los Angeles into a net importer of talent. They also represent and stimulate more buyers in the local ecosystem. 2015 will be the year that we see sophistication and depth at every single level of the startup ecosystem, from early stage to late, garage to goliath.
Any other thoughts, observations, or reflections?
I spoke at Ivan Nikkhoo’s class at USC’s Marshall School Of Business on raising growth capital recently. First of all, the fact that there’s now a class on raising growth capital is amazing. When I started as an entrepreneur, blogs hadn’t even been invented yet, so fat chance getting good advice. But more than that, the insight that these students possessed and the quality of their questions was really inspiring. Based on this one experience, I feel really good about the future generations of entrepreneurial leaders in Los Angeles.
John Tabis, CEO and founder of The Bouqs
Will we see the type of growth we saw in 2014, in 2015? I think in the first half of the year we'll continue to see the same growth and activity that we've seen. Things will likely slow in the second half of the year, and we may even see a bit of a retrenchment more broadly in the market. But the macro-trend for LA will continue to be strong over the next decade. Things are just getting started in the LA market, from the recent exits, to A, B and C Rounds, to Greycroft and now Upfront raising big local funds. LA is on the move and that will roll through any market corrections that may hit later next year, or any time really.
Is there one particular sector you think is set to boom?
Home Improvement / Goods / Design is an area where I've been seeing more and more interest, and more traction. Companies like Laurel & Wolf and Interior Define are tackling a huge, old, and largely broken market, and with home prices consistently rising along with new construction. I think we'll see more dollars and attention in that sector in '15.
Are there any tech startups in LA our readers should keep an eye out for?
Just mentioned, but Laurel & Wolf is a company I love. They're solving a huge problem that goes beyond the consumer experience to supply chain and infrastructure. Interior Decorating has largely been reserved for the super wealthy or connected, and while price point was an issue, discovery and access was also a big challenge for the regular Joes and Janes of the world. How does one even FIND an interior decorator? I can tell you that I personally had no idea, until now. Long on L&W, big time.
Any big problems that LA tech needs to tackle?
I think the biggest challenge is a founder base and an employee base that fundamentally understands what startup means. There is amazing, amazing talent in LA. But there is not a wealth of startup-experienced talent. We have some great leaders, and we have some folks that definitely have some experience over the years. But as the hiring boom has continued, it's become harder to find experienced folks that live and breath and inherently 'get' what a startup is and what working at a startup is all about.
Up north that's all there is, so everyone lives it and breathes it, and the education about what it's like and how it's going to be when working in such a company isn't really needed. Even if someone hasn't worked in a startup up north, their 10 best friends have, so there's a shared knowledge base. Here in LA that's being built alongside the tech infrastructure around funding, services, etc. It's just going to take some time. With collective success in LA will come a bigger and broader shared knowledge base, and as understanding increases amongst potential founders and employees, this challenge for the community disappears.
How do you think the LA startup community will be different in 2015?
More at the later stage, less at the early is my best guess. We've seen a wild surge in super early stage companies in LA over the last few years. And as that cohort has matured, we've had some great successes. Companies like Honest, Dollar Shave Club, Telesign and DogVacay are now big, well-funded companies setting the bar for the rest of us. I think we'll see more and more reaching those post B round heights in 2015, but I expect a slowdown on the really early stage bets as funds have pulled back a bit from the Seed Stage boom. As VC's refocus and hone their strategies, fewer early stage companies will get out of the garage, but the best of the best will have a clearer path as a result.
Any other thoughts, observations, or reflections?
Great time to be in LA tech!
Brad Brooks, CEO and founder of TigerText & Whisper
Will we see the type of growth we saw in 2014, in 2015?
Yes, absolutely.
Is there one particular sector you think is set to boom?
I think the financial services industry is poised for strong growth. This is one of the markets that we serve here at TigerText, and we see a lot of opportunity for technology to not only improve communications in this field, but increase business performance as a whole. The challenge historically has been that it’s difficult to find technologies that adhere to the strict regulation and compliance standards that the financial services industry has to deal with. I think this will soon change as more companies are seeing the opportunity to drive innovation in the industry. There is also an opportunity for increased security measures coming off of the “Year of the Hack.”
Are there any tech startups in LA our readers should keep an eye out for?
Cargomatic is a really interesting startup to watch. It’s a tech company based out of Venice Beach that is much like Uber, but for trucking. The app connects available truck drivers with people who need to move large amounts of freight in a quick time frame. Already, it’s shown a lot of traction and raised a $2.6M seed round in June. I think it has a lot of potential for growth, and that it’s a company that you should be keeping your eye on.
How do you think the LA startup community will be different in 2015?
The LA startup community is going to coalesce as more companies break out. The tech scene here is growing and as the network continues to build, LA-based startups are becoming better positioned for success, which will ultimately create a ripple effect for sustained growth. Silicon Valley is so powerful because of its network and all of the resources that its tech community has developed over a long period of time. Thanks to those who have paved the way for a more robust LA tech scene, the startup community here is really maturing and I have no doubt we’ll see the impact of that over the next year.
Richard Davis, director of publishing of Scopely
Will we see the type of growth we saw in 2014, in 2015? We should see consolidation in mobile gaming, along with the success of IP branded games. We should also growth in Virtual Reality, Wearables, Internet of Things (ioT), Connected Cars, and Technology disruption in mature industries (The Uber of ________).
Is there one particular sector you think is set to boom?
Wearable Apps
Are there any tech startups in LA our readers should keep an eye out for?
Any big problems that LA tech needs to tackle?
LA continues to compete with San Francisco for top talent, particularly engineering talent.
How do you think the LA startup community will be different in 2015?
Traditional entertainment and media companies will increasingly partner with technology companies to create, develop, and support exciting start-ups
Any other thoughts, observations, or reflections?
Fortune favors the bold.
Scott Grimes, CEO and co-founder of Woven Digital
Will we see the type of growth we saw in 2014, in 2015? Yes, I fully expect we will see similar growth in 2015 in regards to funding and even more activity on the M&A front. Certain sectors will see significant consolidation.
Is there one particular sector you think is set to boom?
I think scalable content creators in the digital media space will continue to see rapid expansion in 2015. The companies with the most scale and cultural relevance will see the majority of the growth.
Are there any tech startups in LA our readers should keep an eye out for?
Any big problems that LA tech needs to tackle?
If someone could fix the traffic situation I would greatly appreciate it.
How do you think the LA startup community will be different in 2015?
I think you will see more entrepreneurs starting companies in LA based off the success in the area over the last few years. I think you will also see a continued influx of top talent relocating to our city because of the hot job market and overall quality of life.
Farbod Shoraka, CEO and co-founder of BloomNation
Will we see the type of growth we saw in 2014, in 2015? Yes, I think we are still going to see money flow into venture capital, allowing these firms to raise large funds and giving start-ups the ability to raise large rounds of funding and ultimately demanding high acquisition valuations. While there are potential signals that there is a bubble in the future, I don’t think 2015 will be the year for a slowdown or bust.
Is there one particular sector you think is set to boom?
On-demand services, like Postmates and Instacart, are a hot sector that is getting a lot of attention from not only entrepreneurs but from VCs as well. The idea of bringing the digital and physical world together is going to be the future of technology.
Are there any tech startups in LA our readers should keep an eye out for?
Nasty Gal, Washio and ZipRecruiter are some companies I would keep my eyes on for this upcoming year.
Any big problems that LA tech needs to tackle?
I think the biggest issue is getting engineering talent to LA, so any solution that would give LA tech access to more engineers would be helpful to the startup scene down here.
How do you think the LA startup community will be different in 2015?
I think we will start seeing more and more VCs in the Valley coming down to LA with their checkbooks. We are making a name for ourselves and we are getting noticed. I expect to see more interest in investing in LA from outside investors.
Michael Bolger, CEO and co-founder of Hovelstay
Will we see the type of growth we saw in 2014, in 2015? I think we’ll see even more growth with sites that serve a purpose, merging real and virtual worlds, especially risk-based security and on-line self-protection services. As far as the vacation and short stay connection sites, we will begin to see some merging, with smaller operations fading away. Too many people rushed into the vacation rental business off certain valuations that were set this year by Wall Street, and the market is unproductively crowed, especially in LA. Last, I see a lot of money coming into Los Angeles. A lot. With the Chinese dollar buying up LA commercial real estate in downtown, you’re going to see that same stream move into Los Angeles tech sectors.
Is there one particular sector you think is set to boom?
Two actually. Health based sites and service apps.
Are there any tech startups in LA our readers should keep an eye out for?
Thisbarsaveslives.com is one. They do phenomenal work and the CEO is a bright guy. Also Chownow.com. I like their setup.
Any big problems that LA tech needs to tackle?
Yes. Cohesion. There aren’t enough tech leaders talking to each other. But that’s reflective of Los Angeles, it’s an individualist mentality. I can say that as I’m a fourth generation Angelino. But we really do need to start sharing more ideas with one another, to create a complete, highly productive community, in service to the city as well as our own growth.
How do you think the LA startup community will be different in 2015?
I think we’re going to see more and more companies moving Los Angeles. LA is right on the brink of defining its own place at the table, and there’s an abundance of really good talent here at the moment.
Any other thoughts, observations, or reflections?
Yes. Hovelstay is going to have a stellar year. We’ve got some incredible partnerships in the works and our growth overseas is gaining substantially. We feel very fortunate.
Greg Cohn, CEO and co-founder of Burner
People have been predicting a drying-up of early-stage capital and the "Series A crunch" for a while now. Veterans recognize that as simply a point in the cycle, but it feels like that's starting to play out a bit now and we'll see more of that in 2015, where it's not so easy to walk up to an accelerator with a couple of friends and walk out of the program with seed investment. The thresholds for raising are higher, the angels are harder to close, the serial entrepreneurs and the senior talent are committed, the competition for the few berths at the good accelerators is strong. (In my view, it's always kind of hard, but the hype cycle makes it look easy.) It's hard to hire good, seasoned talent.
One of the ways I think this cycle ultimately expresses itself is a flight to quality. Money chases the better deals. Eventually the non-performing companies run out of money and get folded into the better companies -- and some of the good talent cycles back into the market one way or another.
Hopefully a bunch of solid companies make it through the middle stages and are able to build up stronger senior and mid-level teams. Hopefully some of our strongest startups achieve escape velocity and really break out -- or continue to grow in breakout ways. Hopefully some of the incumbents in town wake up to the opportunities under their noses and will start doing some M&A. All of these are good things for those of us who are building serious technology companies, but there are no free rides!
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