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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There is certainly a considerable amount that VCs and founders can do to improve diversity, but those in the industry say it is the limited partners who fund the whole ecosystem who could make the biggest difference.
"It's the LPs that have the power and can demand who they should or shouldn't be investing with," said Sue Toigo, co-founder of the Robert Toigo Foundation and chair of Fitzgibbon Toigo & Co.
At this moment of heightened public awareness, forcing big public pension funds to commit to putting more of their dollars in funds controlled by minorities could have a major impact. These public institutions, unlike their corporate kin, represent a wide and diverse swath of the country, making investment decisions for public servants like teachers, firefighters and municipal workers.
Two major funds, CALPERS and the Illinois Municipal Retirement Fund, illustrate the stark differences in the rules that govern pensions and the people who manage them.
"Our sources of capital are the LPs – like the city of L.A., CalPERS, foundations, and endowments," said Kate Mitchell, who co-chaired the National Venture Capital Association's first diversity and inclusion committee in 2014 and co-founder of Scale Venture Partners. "Their constituents are diverse, and they care greatly about this."
Just 2% of VC investment partners identify as African American or Latino and less than 10% of VC-funded companies are led by women or people of color, according to PledgeLA. LPs could greatly increase both numbers, according to Paul A. Gompers, a professor at Harvard Business School who studies the demographics of finance.
"Who you invest in looks a lot like who you are," Gompers said. "We know there are underserved pockets of entrepreneurs out there and those opportunities could perhaps create greater returns."
In response to the #MeToo movement, the Institutional Limited Partners Association, the industry voice for pension funds, foundations and sovereign wealth funds, expanded its due diligence questionnaire in 2018 to measure ethnic and gender diversity as well as hiring and promotion. Those changes, Mitchell said, have had a noticeable impact raising the bar with firms that must now answer to questions about hiring and diversity.
"It isn't done in a day," she said. "If you are going to make it happen, you have to make it a sustained effort."
Two Approaches: California and Illinois
The granddaddy of pension funds, California Public Employees' Retirement System, divested from apartheid South Africa in 1986 and got out of tobacco stocks in 2000. It also doesn't invest in thermal coal miners, manufacturers that make guns banned in California and businesses operating in Sudan and Iran. But prioritizing diverse funds has proven trickier because of the 1996 voter-backed Proposition 209, which CalPERS says bars it from giving preferential based on race, ethnicity or gender.
"LPs love to use Proposition 209 as the reason why they can't do anything," said Emanuel Pleitez, co-founder of East Los Capital who runs an annual conference aimed at educating officials that sit on institutional boards about how to invest in asset classes. "But you can still gather data and be transparent and be sure that the public knows what you are doing. There's a massive opening for LPs to do their jobs that's about picking the best managers and vendors that are diverse."
Pleitez argues that by not emphasizing diversity, public institutions have tipped the scale of wealth toward a class of white asset managers who have gained outsized profits.
In an effort to legally promote diversity, CalPERS, which manages about $400 billion in assets, started an "emerging manager" program in 1991. But last year it slashed the already small program from $3.5 billion to just $500 million in assets under management.
CalPERS declined to make anyone available for an interview. A spokeswoman explained the reduction occurred amid a broader effort to reduce fees and increase returns by shifting to managing 95% of private equity investments internally, up from 80% before. (CALPERS says during the last fiscal year it also "engaged" 700 companies to encourage greater diversity on their boards, half of which did so.)
An internal memo obtained by the website CIO warned that terminating the program "could receive media or legislative attention" but said the cuts were necessary because of long-term underperformance.
"A lot of the women and minority funds have actually closed," said Toigo. "All of the data indicates when you have diverse boards and diverse leadership you have better returns. I would argue you're actually violating your fiduciary responsibility by not paying attention to the data. Unless you're only selling to white people, if I was at a firm I would want every point of view represented in the investment process," said Toigo.
The Illinois Municipal Retirement Fund (IMRF), with $44.8 billion in assets under management, has taken the opposite approach of CalPERS', placing a high emphasis on diversity in its investment decisions.
"It's not about whether you can just do diversity or meet returns," said Dhvani Shah, IMRF's Chief Investment Officer. "We can do both."
As of the end of last year, minorities managed 33.8% of IMRF's actively managed assets, a 19.6% increase from 2018.
Shah says she is mandated to prioritize diversity under the Illinois Pension Code, which states that pension funds should "increase the racial, ethnic, and gender diversity of its fiduciaries, to the greatest extent feasible within the bounds of financial and fiduciary prudence."
IMRF's annual return for 2019 was 19.57%, beating the industry benchmark of 18.68%.
"I think Illinois can serve as a model," said Shah.
Rachel Uranga contributed reporting to this story.
Editor's note: This is the third in our series examining diversity in venture capital. Read the first story here, our second one here and sign up for our newsletter to get the latest updates.
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Bill Gurley, General Partner at Benchmark CapitalBut Gurley said the rush to sell is becoming less of a problem as L.A.'s tech scene matures after the successful IPOs of Snap, and more recently, GoodRx. He predicts those will have a trickle-down effect as investors and employees who have cashed out start the next generation of startups who want to take their companies the distance.
"Those things have real long-term impact about how they shed people with wealth that can go be founders or go be angel investors," Gurley said.
Gurley is a general partner at Benchmark, which he joined in 1999. He plans to step away when the firm invests its 10th fund. Gurley is most famous for making an early $10 million Series A bet in 2011 on Uber, which reaped a multibillion-dollar payday for his investors. Gurley is also known for getting in early on Stitch Fix, OpenTable, Grubhub, and Zillow.
Gurley said Benchmark has made 20 investments in L.A., including Riot Games, which he admitted "we sold that too early." More recently, Benchmark invested last month in Imagine Impact, the content accelerator and online marketplace startup founded by Academy Award-winning duo Brian Grazer and Ron Howard in 2018.
Gurley also talked about how startup founders are overly skeptical about Wall Street. He compared a private company going public to a football player moving from college football to the NFL.
"There's this myth in ventureland that Wall Street is not very smart, and it's just wrong," Gurley said. "It's an up-or-out game. I'm sorry it may sound harsh. You have to decide whether you have what it takes to go the distance."
For all his enthusiasm about going public, however, Gurley thinks the traditional IPO process is broken because it reaps huge gains for investment banks and their favored clients, which come out of the pockets of those who built the company.
"The system by which they allocate capital has gotten worse and worse," Gurley said. "It's a shock that the SEC allows it because it's such a game."
Instead, Gurley favors direct listings and SPACs, which have been growing in popularity.
Referring to calls in Washington to break up large tech companies, Gurley said he has long thought Apple's 30% cut of app store purchases was "aggressive." And he does not think it bodes well for Google that it also takes the exact same cut for Google Play.
"The fact that Google has the exact same number is a bad fact, not a good fact," Gurley said.
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