Scaling up SoCal

By Faraz Fatemi

Some cities are synonymous with certain industries. When you think of finance, you think of New York. When it comes to fashion, it’s Milan. For haute cuisine, Paris. And as the center of TV, film, and music, Los Angeles is where popular culture is created.

In today’s world, consumer tech is increasingly intertwined with pop culture. Brands, games, social apps, and streaming services impact our daily lives as much if not more than traditional media. As pop culture and tech converge, Southern California has become a center for investment and innovation. And consumer is just one piece of the innovation happening in SoCal, with game-changing frontier tech, fintech, biotech, gaming and enterprise companies all being formed here as well in recent years.

The numbers we’ve all seen tell a story worthy of Hollywood. LA is now the third largest hub for venture activity in the US, behind San Francisco and New York. In 2021, VC deal flow in Southern California increased more than 50 percent from the previous year, landing at just under $14 billion; exit flow more than doubled to $25.4 billion. Investments in SoCal-based blockchain startups soared 188 percent year over year in 2021; mobile and consumer company funding grew 93 percent.

More than beauty and the beach

At Lightspeed, we’ve seen this trend coming for a long time, because we’ve been here a long time. We’ve had the privilege of investing and building alongside the vibrant and inclusive ecosystem of local funds, founders, and operators that have called SoCal home for decades. In recent months we’ve doubled down on our commitment to the local ecosystem, and we’re excited to share that we now have key partners representing growth, consumer, fintech, and the entire Lightspeed Faction blockchain investing team on the ground right here in Los Angeles.

Our first major investment in Southern California came over 15 years ago in early 2007. In 2011, we had the privilege of backing Jessica Alba’s The Honest Company ($HNST). Early that next year, we invested $500k in an ephemeral picture app that formed the foundation of Snap ($SNAP). Both of these companies went on to IPO and generate meaningful returns for investors and employees alike, but more importantly left their mark on the LA tech scene, paving the way for years of innovation to follow.

Over the last decade & a half, we’re proud to have invested around half a billion dollars into local businesses. In fact, more than a quarter of the consumer startups we’ve funded historically at Lightspeed are based in Southern California. Among these, we’ve grown to recognize the importance of celebrity-led platforms which include, in addition to $HNST, Autograph with Tom Brady, Goop alongside Gwyneth Paltrow, HAUS Labs alongside Lady Gaga, and House of LR&C with Ciara & Russell Wilson, and multiple others soon to-be-announced. In recent years, my partners Nicole, Alex, Mercedes, and Jeremy on the Lightspeed consumer team have also invested in and helped to grow category-defining local businesses like Archive, Cameo, Fan Controlled Football, Verishop, United Dwelling, TradingTV, Fourth Wall, Flickplay, and AWA Studios, just to name a few.

We love SoCal…so what’s next?

There are many reasons why Lightspeed has been and will continue to be unequivocally #LongLA and long on the broader Southern California ecosystem.

Southern California has always had an unmatched concentration of creative and entertainment talent. More recently, we’ve seen this creative DNA and the technology world converge in applications across social, commerce marketplaces, gaming, blockchain, the creator economy, and more — all of which are vital areas of interest for Lightspeed.

From 2015 to 2020, Southern California saw the greatest influx of tech talent in North America, according to CBRE’s 2021 Scoring Tech Talent report. Amazon, Apple, Google, and Netflix have all expanded their office footprint in LA. And of course, it is home to some of the world’s leading universities, including five University of California campuses, as well as CalTech, USC, Loyola Marymount, and the Claremont Colleges.

The startup ecosystem is absolutely thriving. In recent years, we’ve seen the emergence of local technology unicorns including Goat (~$500M raised), Whatnot (~$485M), Mythical Games (~$260M), and the aforementioned Autograph (~$205M). And of course, the most highly valued private tech company in the US, SpaceX, is headquartered right in our backyard in Hawthorne.

From Santa Barbara down to San Diego, the SoCal tech community is spirited, collaborative, and incredibly talented. We look forward to building on the momentum from our recent local community activations around blockchain and consumer technology, and hope to continue bringing together these exceptional groups of founders, operators, and investors. We at Lightspeed are excited to double down on the vibrant, rapidly-growing Southern California startup community with our investing partners on the ground here permanently.

Coming up this fall, we’ll have a number of investment announcements, curated local sector events, and much more exciting news to share. If you ever find yourself here in LA — please drop me a line at faraz@lsvp.com or over on Twitter or LinkedIn. I would absolutely love to get together for coffee and share even more about what gets us so excited about the startups & sunshine here in SoCal!

Faction Ventures, LLC (“Faction”) and Lightspeed Management Company, L.L.C. (“Lightspeed”) are separate businesses that operate independently of each other. Faction is a registered investment adviser under the United States Investment Advisers Act of 1940, as amended. Faction advises its own fund(s) and does not advise any Lightspeed clients, and Lightspeed does not advise Faction or any of its clients. Lightspeed and Faction are parties to an agreement pursuant to which Lightspeed holds certain interests in Faction and the fund(s) Faction manages.