@andrewchen

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The next generation of the SF and LA tech ecosystem

Hi readers,

I’ve been MIA! But ready to be back and writing more now that I’m finished with my book (more on that in a second).

Two things today:

First, I recently posted a tweetstorm about my adventures in the LA tech ecosystem, and how it compares to SF, and the upcoming changes. I have it below, with some updates and edits

And second, I’m happy to announce that I just turned in a final version of my upcoming book, THE COLD START PROBLEM, which has its final book cover and is ready for pre-order.

Pre-order here! 聽(Not in the US? CanadaUK 路聽AustraliaFranceGermanyJapan 路聽India)

I’ll talk a bit more about the book and the process there shortly, but wanted to drop those links in too.

Thanks,
Andrew

 

The clash between SF and LA, and how it’s thawing
Something big is happening at the intersection of tech and entertainment – of SF and LA. From LA, you see celebs angel investing, and promoting tech. And SF startups are actively courting creators, both mainstream and digital native, as the anchors in their new social products

This was not always the case. For a long time, the SF world found the LA ecosystem to be byzantine, full of gatekeepers and copyright owners. The most common interaction was music labels and movie studios suing early startups – Napster, YouTube, BitTorrent – not collaboration.

From the LA POV, the user generated platforms – Web 2.0 – were building products built on the backs of content creators and owners, but without giving much back. Whereas the entertainment ecosystem is driven by cash and % profits, the startup ecosystem is built on equity

And it went on for years.

How the thawing happened
But in the recent past, some big things have happened:

  • First, you had Dr Dre making $700M+ on selling a company like Beats to Apple. Tech can be big when you engage
  • The social apps also got so big that gaining followers became obviously valuable
  • For creators who weren’t yet successful in the traditional mold — with an agent, TV show deal, or otherwise — the openness of the social media ecosystem became a huge plus. This created a new type of talent
  • Also, Netflix/Amazon/others became simply too big to ignore or reject
  • The social media platforms became a major force for brand and advertising dollars. And a way to launch new consumer brands. If talent embraced this, it could be a new way to build an empire

The view of startups started to change also — and not just bc of the “creator economy.” Startups began to realize – in a crowded growth ecosystem with tapped out paid mkting, etc – that influencers could be a new effective channel. It helps with PR – and for recruiting – when celebs (both mainstream and B2B influencers) invest in your company. Every edge counts.

Creator go-to-market
The “creator economy” thesis leverages celebs/influencers/creators both as an end customer but also as a distribution method. When creators use your product – like a Substack or Shopify – they naturally promote it as part of its use. Yet there are limits to how well this SF x LA intersection will work

It’s not yet clear that celebs can “make” a product happen. Yes, sometimes they join early, as they did with Twitter/Clubhouse, and can accelerate growth

There’s still a culture clash between the two worlds. Celebs/creators/influencers often expect to get advisory shares, or to get the last round’s valuation, simply for being involved. The gatekeepers also often ask for their own — it’s annoying! Tech is not building beverage cos here!

The folks in movies/TV/music are still somewhat curmudgeonly. Yes, they are engaging with tech – not just suing them – but it’s still early. New young startups can’t afford licensing, upfront fees, and so on

What’s the solution?

The next wave
The opportunity might be to simply to engage with new sectors. Rather than working with the classic A-list stars, instead, the opportunity is to engage TikTokers and Twitch streamers. Or bloggers and Substackers, rather than published authors. These digitally native content creators got big by adopting technology early, and might be willing to work with startups earlier. They don’t work with the traditional gatekeepers in entertainment, and thus might be easier to connect with — startup founder to digital creator — to quickly work out deals.

The truth is, well-established talent in the entertainment world often face a kind of innovator’s dilemma in adopting new products. If they jump in too soon, they might expend energy on an app or technology that doesn’t go anywhere. They might also end up creating a lot of value that is hard to create. By not charging to participate, they might undermine their other mainstream revenue streams, where they charge for commercials, appearances, and otherwise. Digital creators often don’t have any of this to worry about.

The other thought, even more radically, to invest in game studios and new interactive experiences – not film/movies. As we’ve articulated in the past, we think games will be the next social network, and the next huge entertainment medium. I have a Venturebeat interview here that spells out the thesis. Importantly, games are software. They launch like apps, buy Facebook ads, engage social networks, and have many of the motions that look like the software companies we’re used to in SF. Rather than focusing on film/TV/music, it might be that games becomes the focal point that brings the two groups together.

This is a long way of saying, while LA x SF is trending up – more cross-pollination, more people spending time in both, more collaboration – it’s still early. But more is happening and it will unlock new approaches to engage consumers that could never of happened before

My next moves
I’ve committed to spending more time in LA over the next year – something like 60/30/10 in SF/LA/other will be the split. In recent visits, I’ve found a fascinating ecosystem of people. I would summarize these constituents like:

  • 鈥渘ew to LA鈥 founders 鈥 this is the new gen of startups
  • fancy SF CEOs who are now in LA — lots of folks have moved down, on the down low!
  • SF/LA investors — especially seed funds, and SF folks who have relocated
  • digitally native creators — tiktokers, streamers, etc
  • big co tech platforms — YouTube and Netflix folks who have a big presence in LA
  • incumbent entertainment folks — this is a big umbrella, but includes agencies, studios, talent, and much more
  • DTC startups — lots of these!
  • OG LA tech — the folks who started it all

There’s many other groups of course, and it’s quite diverse, but fascinating to see a much more complex ecosystem — in many ways — than SF which constitute maybe a third of this. SF is more clustered into various “mafias” than LA, since it’s more tech than not.

Anyway, I plan to be between LA and SF in the coming quarters. If you’d like to meet up, send me a DM!

 

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