Los Angeles is the second-biggest city in the United States, with a huge creative class and a lot of wealthy investors.But the city’s tech startups get a lot less attention than companies based a few hundred miles to the north in Silicon Valley and San Francisco.
When we were in L.A. this week, we swung by Mark Suster’s office to catch up on which companies are flying under the radar from out there. Mark Suster has been living in the city and investing in L.A. startups for the last four years.
He named three main areas where Los Angeles excels — online video, advertising, and vertical e-commerce — and turned us on to 14 of the hottest startups everybody should be following.
Online video is an obvious fit for L.A. given that the city is the hub of the entertainment industry.
Machinima makes videos that appeal to gamers, including trailers and original editorial content. You've probably never heard of it unless you're into gaming, but it's absolutely huge: in May, the company showed more than 660 million videos to 73 million unique users and was the number one entertainment channel on YouTube.
Maker Studios* is like an old-fashioned Hollywood studio, only focused exclusively on YouTube videos. It seeks and hires talent, produces videos, then finds advertisers to back them. It now has more than 125 dedicated YouTube channels with 21 million subscribers and 300 million views a month.
By way of comparison, all videos on all Disney properties combined get less than 100 million views a month, according to Suster.
Another way of looking at it: Daniel Tosh has a hot Comedy Central show, Tosh.0, where he makes snarky comments about online videos. Each episode gets about 3 million viewers. Maker artist Ray William Johnson (shown here) does the same thing twice a week on YouTube. Each of his videos draws about 6 million views. But if you're over 30, you've probably never heard of him.
*Suster's firm GRP has a stake in Maker.
MovieClips has the exclusive rights to clips from a bunch of famous movies -- not just trailers, but full clips. Users can search the site to find bits like the Spinal Tap scene in which Nigel Tufnel explains that his amps are louder because they go to 11. There's also an easy way to apply for a licence to reuse certain clips.
Break Media isn't exactly a new startup, but still gets little attention outside the world of online video. The company was was founded in 2004 with a 42% investment by movie studio Lionsgate, and started out by soliciting funny home videos for online distribution. It now has 180 employees, its own production branch, a network of video sites, and a massive video advertising network. It serves more than 57 million videos per DAY to more than 100 million unique monthly viewers.
Advertising technology is big in Los Angeles -- it's only second to New York. In particular, L.A. spawned GoTo.com (later Overture), which invented the paid search advertising model that Google modified to become fabulously wealthy, as well as Applied Semantics, which Google bought to help build AdSense, its ad network.
Ad network Burstly* is an example -- the startup helps mobile developers place ads from ad networks within their apps, while letting them retain control over exactly which ads appear.
*Suster's firm GRP is an investor.
GumGum* helps ads monetise images -- not by selling banner ads, which don't work, but by placing ads over the images they're already using. It's the biggest in-image ad network in the world, serving ads to more than 100 million unique viewers a month.
*GRP is an investor in GumGum and Suster is on the board.
Based in Beverly Hills, Ad.ly* has been operating under the radar for some time now, but gained notoriety for powering Charlie Sheen's crazed love affair with Twitter earlier this year. Now, TechCrunch is reporting that Ad.ly is being courted by multiple big tech companies -- Twitter and Google being among the most likely buyers.
*GRP is an investor.
E-commerce sites focused on women are hot in L.A., and this Kim Kardashian-backed company that sells shoes via subscription is probably the biggest name among them. ShoeDazzle recently received a $30 million investment from hot Silicon Valley VC firm Andreessen Horowitz.
This 'next-generation e-commerce company' was founded by MySpace cofounder Josh Berman and former Slingshot Labs founder Diego Berdakin. Its first service was JewelMint, which sends users designer jewelry each month for a subscription of $30.
Pose* launched in January 2011 with a simple idea: download the app, take photos of your favourite fashion finds, add info like how much they cost, and share them with the world. It's like Instagram for people who like to shop.
*GRP is an investor in Pose.
There are also a few hot L.A. startups in other categories.
Altly is working a better alternative to Facebook. The company hasn't launched its first product yet, but founder Dmitry Shapiro wrote a manifesto about the need to have more control over which information you share with which friends. It sounds a lot like what Google+ is doing.
Shapiro has fought Google before -- his last company was online video sharing site Veoh, which raised $70 million and boasted former Disney CEO Michael Eisner as a boardmember. It basically lost out to YouTube and declared bankruptcy last year.
Factual* was created in 2007 by Gil Elbaz (shown here), the cofounder of Applied Semantics, which Google bought to form the basis of its AdSense ad network. It builds technology to let developers insert data more easily into Web pages. The company raised $25 million last December from a who's who list of investors, and Suster is convinced it will become one of L.A.'s hottest companies.
*GRP is an investor.
TrueCar* is not really a hidden gem -- everybody who's familiar with the L.A. tech scene mentions it, but outside L.A. it doesn't get much press. TrueCar compiles data from car sales to tell shoppers what other people are actually paying. The company has been around since 2008 and is now the number one source of referrals to car dealers, says Suster.
*Suster's firm GRP is an investor.