Illustration by Ian Hurley
What Are LA’s Hottest Startups of 2022? See Who VCs Picked in dot.LA’s Annual Survey
In Los Angeles—like the startup environment at large—venture funding and valuations skyrocketed in 2021, even as the coronavirus pandemic continued to surge and supply chain issues rattled the economy. The result was a startup ecosystem that continued to build on its momentum, with no shortage of companies raising private capital at billion-dollar-plus unicorn valuations.
In order to gauge the local startup scene and who’s leading the proverbial pack, we asked more than 30 leading L.A.-based investors for their take on the hottest firms in the region. They responded with more than two dozen venture-backed companies; three startups, in particular, rose above the rest as repeat nominees, while we've organized the rest by their amount of capital raised as of January, according to data from PitchBook. (We also asked VCs not to pick any of their own portfolio companies, and vetted the list to ensure they stuck to that rule.)
Without further ado, here are the 26 L.A. startups that VCs have their eyes on in 2022.
1. Whatnot ($225.4 million raised)
Whatnot was the name most often on the minds of L.A. venture investors—understandably, given its prolific fundraising year. Whatnot raised some $220 million across three separate funding rounds in 2021, on the way to a $1.5 billion valuation.
The Marina del Rey-based livestream shopping platform was founded by former GOAT product manager Logan Head and ex-Googler Grant LaFontaine. The startup made its name by providing a live auction platform for buying and selling collectables like rare Pokémon cards, and has since expanded into sports memorabilia, sneakers and apparel.
2. Boulevard ($40.3 million raised)
Boulevard’s backers include Santa Monica-based early-stage VC firm Bonfire Ventures, which focuses on B2B software startups. The Downtown-based company fits nicely within that thesis; Boulevard builds booking and payment software for salons and spas. The firm has worked with prominent brands such as Toni & Guy and HeyDay.
3. GOAT ($492.7 million)
GOAT launched in 2015 as a marketplace to help sneakerheads authenticate used Air Jordans and other collectible shoes. It has since grown at a prolific rate, expanding into apparel and accessories and exceeding $2 billion in merchandise sales in 2020. The startup sealed a $195 million funding round last summer that more than doubled its valuation, to $3.7 billion.
The Best of the Rest
VideoAmp ($578.6 raised)
Nielsen competitor VideoAmp gathers data on who's watching what across streaming services, traditional TV and social apps like YouTube. The company positions itself as an alternative to so-called "legacy" systems like Nielsen, which it says are "fragmented, riddled with complexity and inaccurate." In addition to venture funding, its total funding figure includes more than $165 million in debt financing.
Mythical Games ($269.4 million raised)
Seizing on the NFT craze, Mythical Games is building a platform that powers the growing realm of “play-to-earn games.” Backed by NBA legend Michael Jordan and Andreessen Horowitz, the Sherman Oaks-based startup’s partners include game publishers Abstraction, Creative Mobile and CCG Lab.
FloQast ($202 million raised)
FloQast founder Michael Whitmire says he got a “no” from more than 100 investors in the process of raising a seed round. Today, the accounting software company is considered a unicorn.
Nacelle ($70.8 million raised)
Nacelle produces docuseries, books, comedy albums and podcasts. The media company’s efforts include the Netflix travel series “Down To Earth with Zac Efron.”
Wave ($66 million raised)
A platform for virtual concerts, Wave has hosted performances by artists including Justin Bieber, Tinashe and The Weeknd. The company says it has raised $66 million to date from the likes of Warner Music and Tencent.
Papaya ($65.2 million raised)
Sherman Oaks-based Papaya looks to make it easier to pay “any” bill—from hospital bills to parking tickets—via its mobile app.
LeaseLock ($63.2 million raised)
Based in Marina del Rey, LeaseLock says it’s on a mission to eliminate security deposits for apartment renters.
Emotive ($58.1 million raised)
Emotive sells text message-focused marketing tools to ecommerce firms like underwear brand Parade and men's grooming company Beardbrand.
Dray Alliance ($55 million raised)
Based in Long Beach, Dray says its mission is to “modernize the logistics and trucking industry.” Its partners include Danish shipping company Maersk and toy maker Mattel.
Coco ($43 million raised)
Coco makes small pink robots on wheels (you may have seen them around town) that deliver food via a remote pilot. Its investors include Y Combinator and Silicon Valley Bank.
HiveWatch ($25 million raised)
HiveWatch develops physical security software. Its investors include former Twitter executive Dick Costollo and NBA star Steph Curry’s Penny Jar Capital.
Popshop ($24.5 million raised)
Whatnot competitor Popshop is betting that live-shopping is the future of ecommerce. The West Hollywood-based firm focuses on collectables such as trading cards and anime merchandise.
First Resonance ($19.4 million raised)
Founded by former SpaceX engineer Karan Talati, First Resonance runs a software platform for makers of electric cars and aerospace technology. Its clients include Santa Cruz-based air taxi company Joby Aviation and Alameda-based rocket company Astra.
Open Raven ($19 million raised)
Founded by Crowdstrike and Microsoft alums, Open Raven aims to protect user data. The cybersecurity firm’s investors include Kleiner Perkins and Upfront Ventures.
Fourthwall ($17 million raised)
When an actor faces the camera and speaks directly to the audience, it’s known as “breaking the fourth wall.” Named after the trope, Venice-based Fourthwall offers a website builder that’s designed for content creators.
The Non Fungible Token Company ($15 million raised)
The Non Fungible Token Company creates NFTs for musicians under the name Unblocked. Its investors include Jay Z’s Marcy Venture Partners and Shawn Mendez.
Safe Health Systems ($15 million raised)
Backed by Mayo Clinic Ventures, Safe Health develops telehealth software and offers tools for enterprises to launch their own health care apps.
Intro ($11.6 million raised)
Intro’s app lets you book video calls with experts—from celebrity stylists, to astrologists, to investors.
DASH Systems ($8.5 million raised)
With the tagline “Land the package, not the plane,” DASH Systems is a Hawthorne-based shipping company that builds hardware and software for automated airdrops.
Ettitude ($3.5 million raised)
With a focus on sustainability, Ettitude is a direct-to-consumer brand that sells bedding, bathroom textiles and sleepwear.
Afterparty ($3 million raised)
Along similar lines as Unblocked, Afterparty creates NFTs for artists and content creators such as Clay Perry and Tropix.
Heart to Heart ($0.75 million raised)
Heart to Heart is an audio-focused dating app that “lets you listen to the story behind the pictures in a profile.” Precursor Ventures led the pre-seed funding round.
Frigg (undisclosed)
Frigg makes hair and beauty products that contain cannabinoids such as CBD. The Valley Village-based company raised an undisclosed seed round in August.
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Especially in the beginning, the core philosophy behind Bespoke Financial was simple: Like any consumer product industry, cannabis companies need to borrow money. They need to buy sugar for edibles. They need to buy plastic packaging materials from China — in bulk and in advance — to wrap their products. They need office supplies. For any of this, companies need short-term loans.
Photo by Richard T on Unsplash
Even before COVID, equity investors were retreating from cannabis: From 2018 to 2019 equity and debt capital raised declined from $14.2 billion to $11.7 billion. Venture startup money was starting to run dry. The pandemic only created more market volatility, which in turn made it even more difficult for cannabis companies to raise capital. At a time when everybody needed loans, lenders were scarce.
"People compare it to alcohol, tobacco, pharmaceuticals. If you look at any one of those industries, they rely on functioning debt capital markets," said Mancheril.
Paul Seaborn, an assistant professor of commerce at University of Virginia, agrees that debt capital markets are essential for mature consumer products industries, but he also thinks cannabis is going to stay weird for a long time yet.
"Every month, every year the industry is becoming more normal, but that doesn't mean that it's gone mainstream by any means," said Seaborn. "There's going to be a need for companies like this one who specialize in cannabis."
This isn't a novel concept, but servicing the cannabis comes with a unique set of challenges. For one, despite being "fully legal" in 11 states, weed is still illegal under federal law, meaning the Federal Deposit Insurance Corporation (FDIC) cannot insure the banks on loans to marijuana companies. Cannabis laws also vary wildly by state and are in constant flux.
"Dealing with an industry like cannabis, you run into every single issue—things that would be comical in any other industry," said Mancheril. "If this was easy, everyone would be doing it. It's the difficulties and the headaches that create the opportunity in front of us today."
Bespoke CEO George Mancheril
Lending to the nascent cannabis industry has been Bespoke's bread and butter since it launched in June of 2019, but the company also has much larger fintech aspirations. In April, Bespoke raised $8 million in Series A funding to expand a broader tech platform built on top of its underwriting model. A sort of Stripe-but-for-cannabis, the software aims to connect with banking systems, point of sales systems, compliance platforms and accounting packages like QuickBooks.
In combination with a suite of lending options, Bespoke allows cannabis companies more flexibility in how they order, invoice, borrow and pay — and because they don't actually handle marijuana, they're only considered a cannabis-adjacent company. This distinction lets them facilitate payments on their platform while avoiding sky-high transactional fees that banks and credit unions charge to cannabis companies to cover the higher compliance and disclosure requirements associated with the industry.
"A cannabis company looking to pay their vendor via ACH (an automated clearing house that coordinates money transfers) may have to pay 0.5% to 1% per ACH, which can add up quickly," said Mancheril. "Sending or receiving an ACH costs us 10 cents." The concept behind the platform is based on the ProducePay software model, which was created in 2014 by Mancheril's Bespoke co-founders, Ben Dusastre and Pablo Borquez, to provide a fintech platform for farmers. Now they've set their sights on a new crop.
The movement of money through the cannabis sector has historically been extremely opaque due to its forced reliance on cash, but as more and more companies are onboarded, Bespoke also gains a clearer understanding into the industry's cashflow. This allows them to refine their underwriting model even further and also identify new business needs in the industry that might be served with the platform.
But what happens if weed becomes federally legalized? Mancheril admits that the prospect could certainly introduce more competition into the lending landscape, but ultimately he believes legalization would be a net benefit to Bespoke. Mancheril said legalization would entice new investors into the space as well.
"You're going to have institutional capital looking to deploy 100, 200, 300 million dollars at a clip to the cannabis sector," he said. "They can either do the work themselves and try to underwrite these companies and try to understand the nuances of compliance, or you can work with someone like Bespoke."
Seaborn agrees that expertise in such a uniquely challenging landscape will likely take time to develop. "It would be very hard for someone who just does generic debt lending to pick up information from one of these cannabis companies and know if this is going to be a safe lending situation," he said.
Ultimately the success of Bespoke will likely mirror the success of the industry at large, but that's what drew Mancheril to the industry in the first place.
"I believe in the industry, and I believe there's a core consumer base that will keep this a thriving market," he said. "There are great fundamentals and great growth projections."
Even though he still sounds like a New York finance guy, he does keep a weed vape pen on hand at all times. If he can find a few moments to relax, he'll spark up a bowl and brew a cup of chai. California appears to suit him just fine.
Editor's note: This story has been updated to clarify George Mancheril's previous roles.
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