Every year, Anna Barber, managing director of Techstars LA, has to sift through around 1,000 applications and meet with hundreds of founding teams in order to select ten to go through the prestigious three month accelerator program that can serve as a crucial launching pad for very young startups.
So what does she look for above all else? Curiosity and a desire to ask hard questions.
"What I really mean by that is the willingness to look at things that you assume to be true and question them," Barber said. "Because the key to building a great business is constantly making tiny adjustments based on new information and sometimes big adjustments. If you lack the courage to question your own assumptions, you're never going to get there."
In addition to running Techstars LA since 2017, Anna Barber is a partner at The Fund, an early stage venture capital fund made up of local founders and operators that expanded to L.A this year. She has also served as a coach and strategic consultant to founders since 2013.
Barber says she wants founders to have a strong point of view, but they have to be willing to quickly shift and adapt as they learn new information.
To find out whether founders are willing to question their own assumptions, Barber asks how they know certain things they have asserted about their pitch are true.
"I get a lot of information from the answer," she said.
Another question Barber likes to ask is if a founder is wildly successful, what will the world look like in the future?
"What's so interesting is whether the founder answers that from the perspective of what they individually will be doing or what will happen with their customers," Barber explained. "The ones that focus on how the world will be different for their customers tell me that they're really deeply thinking about what their customer wants."
In addition to running Techstars LA since 2017, Barber is a partner at The Fund, an early stage fund made up of local founders and operators that expanded to L.A this year. She has also served as a coach and strategic consultant to founders since 2013.
Barber started her career as a corporate lawyer and was a strategy consultant at McKinsey & Company. She shifted to tech during the end of the dot-com bubble in 1999 as an executive at two e-commerce startups that were ahead of their time, Petstore.com and then Rentanything.com.
The fourth TechStars LA class started this week and will present at a Demo Day in October. Standouts from the previous three classes include Slingshot Aerospace, Blue Fever, Stackin, Fernish, Liquid,Dash Systems and Finli.- techstars-la - dot.LA ›
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Similar programs are common in the startup world and in the creator economy. For example, social media companies can use accelerator programs not only to support rising stars but to lure those creators—and their audiences—to the company’s platforms. Genies believes avatars will be a crucial part of the internet’s future and is similarly using its program to encourage creators to launch brands using Genies’ platform.
“I think us being able to work hands on with this next era—this next generation of designers and entrepreneurs—not only gets us a chance to understand how people want to use our platform and tools, but also allows us to nurture those types of creators that are going to exist and continue to build within our ecosystem,” said Allison Sturges, Genies’ head of strategic partnerships.
DIY Collective’s initial cohort will include roughly 15 people, Sturges said. They will spend three weeks at the Genies headquarters, participating in workshops and hearing from CEOs, fashion designers, tattoo artists and speakers from other industries, she added. Genies will provide creatives with funding to build brands and audiences, though Sturges declined to share how much. By the end of the program, participants will be able to sell digital goods through the company’s NFT marketplace, The Warehouse. There, people can buy, sell and trade avatar creations, such as wearable items.
Genies will accept applications for the debut program until Aug. 1. It will kick off on Aug. 8, and previous experience in digital fashion and 3D art development is not required.
Sturges said that the program will teach people “about the tools and capabilities that they will have” through Genies’ platform, as well as “how to think about building their own avatar ecosystem brands and even their own audience.”
Image courtesy of Genies
Founded in 2017, Genies established itself by making avatars for celebrities from Rihanna to Russell Westbrook, who have used the online lookalikes for social media and sponsorship opportunities. The 150-person company, which has raised at least $250 million to date, has secured partnerships with Universal Music Group and Warner Music Group to make avatars for each music label’s entire roster of artists. Former Disney boss Bob Iger joined the company’s board in March.
The company wants to extend avatars to everyone else. Avatars—digital figures that represent an individual—may be the way people interact with each other in the 3D virtual worlds of the metaverse, the much-hyped iteration of the internet where users may one day work, shop and socialize. A company spokesperson previously told dot.LA that Genies has been beta testing avatar creator tools with invite-only users and gives creators “full ownership and commercialization rights” over their creations collecting a 5% transaction fee each time an avatar NFT is sold.
“It's an opportunity for people to build their most expressive and authentic self within this digital era,” Sturges said of avatars.
The company’s call for creators could be a sign that Genies is close to rolling out the Warehouse and its tools publicly. Asked what these avatar tools might look like, the startup went somewhat quiet again.
Allison Sturges said, “I think that's probably something that I'll hold off on sharing. We will be rolling some of this out soon.”
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The second quarter was still a strong one for L.A. by pre-pandemic standards, but it marks a significant slowdown after a record-smashing 2021. The cooling deal activity could continue during the current third quarter and beyond amid an uncertain economic environment and an overdue correction in startup valuations, VC executives told dot.LA.
“You’re starting to see deal flow slow down and you're starting to see a lot of venture investors take a wait and see approach,” said Brian Lee, co-founder and managing director of L.A.-based BAM Ventures.
PitchBook and the National Venture Capital Association recently released their second quarter Venture Monitor report on the investment landscape. According to PitchBook, VCs invested nearly $4.8 billion in the L.A. metropolitan area during the second quarter this year, a nearly 38% decline from the nearly $7.7 billion invested during the same period a year earlier. The number of deals dropped year-over-year from 353 to 278 from April through June.
Deal activity in the Los Angeles MSA since 2019. Source: PitchBook Data
Deal activity during the three-month period is also down from the first quarter of this year, when startups collectively received $7 billion from VCs across 337 deals. Still, L.A.’s second quarter deal count and investment volume were at or above quarterly figures in 2019 and 2020, according to PitchBook.
“The second quarter still maintained a lot of momentum from 2021 and the first quarter, especially if you're looking at the actual capital going to startups remaining historically high,” PitchBook Venture Analyst Cameron Stanfill told dot.LA. “There's still a lot of money that's going into startups right now.”
And L.A. has been one the strongest markets so far this year, trailing only the Bay Area and New York regions in deal count and deal value, according to the Venture Monitor report. As of June 30, there were 669 deals here collectively worth $12.6 billion.
Still, experts say investors are being more rigorous and selective. Taj Ahmad Eldridge, a co-founder and general partner at Include Ventures, said he’s seen funds “taking their time” to do more due diligence before making an investment.
“They're looking for more traction on the customer side,” he said of what funds are seeking lately. Startups do “not necessarily have to have some revenue piece of that, but at least just a pathway to where they could figure this out”
Indeed, startup founders are having a harder time raising funds just from intangibles like vision, a beta product or celebrity involvement, said Joey Boukadakis, founder of L.A.-based General Specific, which advises early and growth stage startups.
“The main variable it feels like investors are focusing on is this signal that someone is willing to pay you for something,” Boukadakis said. “Companies with some kind of revenue around what they're doing in today's world most likely have a better chance of having conversations and bringing on additional capital.”
That could be bad news in the short term for startups in emerging tech spaces like Web3, a decentralized vision for the internet based on blockchain technology. Crypto and NFTs may very well change the digital world as we know it, but not anytime soon.
Investing activity in Web3 hasn’t stalled, but valuations in that space have “come down quite a bit,” said Anna Barber, partner at L.A. VC firm M13. (Disclosure: M13 is an investor in dot.LA)
“We're talking about an emerging market where six months to a year ago, there might have been more appetite for risk,” she said. “We’re very interested in the sector. We're continuing to invest. I think it's more about measuring risk and potential differently in terms of how and when and how much to invest.”
The amount of capital flowing back to investors dried up during the second quarter. Pitchbook recorded 24 venture-backed company exits collectively worth $95.75 million in the L.A. region during the second quarter. This is a sharp drop from the whopping $5.7 billion that returned to investors across 27 deals during the same period last year. This decline comes amid a fall in initial public offerings, public listings and special purpose acquisition company (SPAC) mergers, PitchBook noted.
Early-stage investments, which are generally the most distant from the public market, appear to be largely insulated from current economic troubles. Nationwide, there’s been little slowdown in angel and seed round investment activity, per PitchBook Data.
That tracks with what Minnie Ingersoll has seen as a partner at early stage investor TenOneTen Ventures. She noted the L.A.-based VC just closed an investment last week and another in June, keeping pace with the firm’s usual deal flow.
“I would say there has been less change than I have expected,” Ingersoll said.
One change she has noticed is an increase in extension or “bridge rounds.” These smaller raises are aimed at giving startups more breathing room to weather an economic storm that could last months if not years.
“That's giving them extra runway,” Ingersoll said. “And that means they don't have to go hit the market right now.”
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