Here Are the dot.LA/PitchBook 50 Hottest Los Angeles Startups for Q2
Despite a Black Swan event enveloping the world and the worst economic downturn since the Great Depression, plenty of Los Angeles startups continue to survive and even thrive during the pandemic. Not surprisingly, many of the winners are beneficiaries of the stay-at-home economy, offering consumers entertainment, education, workouts and shopping from the safety of their living rooms.
By now, you are probably familiar with Quibi, which tops our list of the dot.LA/ Pitchbook hottest L.A. startups despite a rocky debut with bad buzz and reports of anemic subscriber numbers. Hollywood veteran Jeffrey Katzenberg and former HP and eBay CEO Meg Whitman raised close to $2 billion in funding to launch a mobile version of Netflix, capital they will surely need now as they regroup and hang on for a day when people are again commuting to work.
Number two on our list is the much lower profile streaming company Generation Genius, which has benefited from students not being able to return to the classroom. The Sherman Oaks startup aims to make learning about science fun by making short and entertaining lessons and quizzes for kindergarteners through fifth graders.
For adults missing the gym, FitOn was number three. Backed by Crosscut Ventures, the two-year-old app provides free on-demand group fitness classes and allows users to socialize with friends during a workout and compete via a live leaderboard.
"FitOn has become the #1 free fitness app and grown rapidly with COVID as people can no longer make it to the gym," wrote Lindsay Cook, co-founder and CEO of FitOn in an e-mail. "Since the start of the pandemic, we've experienced massive increases all around. We have seen over 200% growth in workouts, signups, and friends are working out together."
Verishop Inc., an e-commerce site led by former Snap Inc. executive Imran Khan, is at number four. Already with a hefty pre-money valuation of $87.5 million, the company aims to make online shopping fun through "social commerce." Last month, it launched a social media-like feed of photos and videos on its iPhone app that recommends products based on which content users like.
The smallest of our top five is TopHap. It's still in beta and has raised $675,000 in angel funding. TopHap bills itself as the first AI-powered analytics platform to optimize realtor performance.
Here are the rest of the top 50. (Read about our methodology and how we determine the top startups below)
What gets a company on the list?
First, the company had to be founded between 2015-2020. Then PitchBook data scientists assigned a growth rate and size multiple equally. The growth rate represents the average weekly percentage change in a company's signals. It is calculated by averaging the weekly growth rate over a trailing eight-week period. For example, let's say a company's Web Growth Rate (SimilarWeb Unique Visitors and Majestic Referring Domains) was 10% each week for 4 weeks, and followed by an increase of 30% for the next 4 weeks. During that eight-week period, the combined weekly average growth rate was 20%.
The size multiple is the sum of a company's signals divided by the median company signal size. For example, if a company had 1,000 SimilarWeb Unique Visitors and the universal median for all companies in the platform was 500 SimilarWeb Unique Visitors, then the company's SimilarWeb Size Multiple would be 2x. A company's overall Size Multiple is calculated by averaging the Size Multiples from the following Signals: Social, Web, Employee, and Mobile Size.
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Online marketer Social Native is upping their AI game.
The Beverly Hills-based advertising tech firm Social Native has acquired Olapic, a New York-based competitor. Terms of the deal weren't released but the move will triple Social Native's employee and customer count, co-founder David Shadpour told dot.LA. It will also help boost the company's artificial intelligence so that it can give brands more insights into what kind of ads resonate.
Social Native connects marketers and advertisers with designers, videographers and other talent to create ads. Olapic serves a similar purpose but uses a different method: It mines the internet for unique content on social media and elsewhere, then strikes a deal with copyright holders to license it for commercial use. The combined organization's customers include Adidas, L'Oréal, Unilever, Sony and Nestlé Group.
"We solve the same problem in different ways," Shadpour said. "The acquisition was strategic in that it added a source of content, but its primary role was to fuel our machine learning and AI engine."
Combining forces, that is, will enhance the data that Social Native has at its disposal to provide customers useful insights for how to design and deploy their advertising strategy.
The company's database of ads and the data surrounding their use will grow tremendously. Social Native has over 100,000 ads and related images its creator network has created since it was founded in 2017, while Olapic has millions of assets that it has unearthed since its 2010 launch.
The acquisition also makes Social Native's data more diverse. Since Social Native has until now centered on social media ads, it has been focused on outcomes like increasing click-through rates and decreasing customer acquisition costs for its clients. Olapic, meanwhile, has specialized in creating custom widgets — think images that appear in a carousel on a brand's website — which allow it to track different kinds of outcomes, such as how long digital shoppers stay on a website.
The goal now, Shadpour said, is to use this bigger and broader dataset to not only understand what features in an ad perform best – such as number of people, ad length, emotional sentiment, color palette and where or whether a logo appears – but also to be able to offer customers reliable predictions for how their advertising content will perform.
"(We want) to say that with x percent certainty, this creative will produce this result," said Shadpour.
Social Native has raised an $8 million seed round in 2017. Its investors include L.A.-based venture firms ActOne Ventures, TenOneTen Ventures and Tiller Partners; Carter Reum, co-founder of Beverly Hills-based venture firm M13; Richard Wolpert, venture partner at startup accelerator Amplify.LA; and Vivek Ranadivé, owner of the NBA's Sacramento Kings. The company has 69 employees according to LinkedIn.
Olapic is much larger, with over 200 employees. It raised $21.1 million, most recently with a $15 million Series B in 2015. Its multinational operations will expand Social Native's footprint outside the U.S.
Social Native had been in talks with Olapic for a little over a year, Shadpour said. The pandemic accelerated the decision to pull the trigger.
"COVID served as, 'Hey, there's an opportunity for us today, when companies are in doubt, through M&A,'" Shadpour said. "Our mindset wasn't, 'It's COVID, what am I gonna do?' in a negative way; but, 'It's COVID, what opportunities exist? As other companies may be struggling, does it create an opportunity for you?' For us, that was Olapic."
Shadpour said Social Native will likely do more acquisitions to further strengthen the company's data.
Palantir Technologies' stock rose more than 30% after the enigmatic, big data analytics company officially went public with a direct listing on the New York Stock Exchange Wednesday.
The stock under the ticker symbol PLTR ended the day at $9.50 per share or $2.25 above its $7.25 reference price.
Palantir's Unconventional Voting Structure<img lazy-loadable="true" src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDQ1MTQyOC9vcmlnaW4ucG5nIiwiZXhwaXJlc19hdCI6MTYzNjQxODYzMX0.Hyi0HYB_4Uq1Knn1ZPZ7YRlUvy-jXxtNtEPirbw8WCI/img.png?width=980" id="29110" class="rm-shortcode" data-rm-shortcode-id="50a1e07f92e7f750629d4e2456763bb1" data-rm-shortcode-name="rebelmouse-image" />'Transparency is a Great Thing': Secretive Big Data Firm Palantir Goes Public<p>The company's voting and governance structure has given many industry analysts pause. Michael Weisbach, the Ralph W. Kurtz finance chair at Ohio State University's Fisher College of Business, said it creates an extra class of stock that gives founders effective control of the company no matter how much stock they actually own.</p>
University of California, Los Angeles economists say the glass is half full for the U.S. economy — at least for now.
The quarterly UCLA Anderson Forecast released Wednesday wanly touted a "better-than-expected outcome" for the U.S. economy in the near term, a major upgrade from the last report's forecast of a "depression-like" crisis for the economy. But the new, relatively optimistic assessment is highly reliant on how the pandemic progresses, the authors cautioned.
California's economy is broadly expected to mimic the nation's so long as pandemic-related shutdowns dissipate in 2021. Still, the optimistic outlook doesn't expect a full recovery for California until after the end of 2022, when economists forecast state unemployment will remain close to 6%, compared to just under 5% for the U.S. overall.
Part of the reason for this improved forecast is that the economy opened up earlier than anticipated and there were no new shutdowns, despite multiple states experiencing a surge in cases over the summer. Moreover, consumers and businesses adapted quickly to new technologies and remote working, while the Federal Reserve committed to near 0% interest rates until labor market conditions recover. In fact, borrowing rates are at historic lows, below even the levels reached during the Great Recession.
The economic bounce-back was always expected to be big, as temporarily laid-off workers returned to work. Because the economy reopened earlier than USC analysts predicted, recovery numbers, which had been expected in 2021, came instead in the third quarter, leading to "stronger 2020 growth and weaker 2021 growth," the report said.
GDP is expected to grow 0.3% in the fourth quarter with real GDP declining overall to 4.2% for all of 2020, the authors wrote in an essay entitled "The recovery is losing momentum." For context, that's 50% steeper than the decline of 2.8% from the Great Recession in 2008. But those numbers are far better than the annual 8.6% decline forecast in mid-June. The forecast for 2021 is 3.5% growth and 4% growth for 2022.
"That there's more economic activity than we expected that's good news, but it's not something that you'd say we're out of the woods, because we're not," Jerry Nickelsburg, the director of the forecast, told dot.LA. "The economic outlook depends critically on the trajectory of the pandemic and the public health response to it."
Nickelsberg forecasts that it will take the U.S. until the first quarter of 2022 to achieve the same level of economic activity that it saw in the fourth quarter of 2019.
He expects 2020 fourth quarter growth to be relatively weak, with more bankruptcies and layoffs. And winter will put a damper on economic activity in many parts of the country where it has been moved outdoors, Nickelsberg said.
Unemployment isn't expected to reach pre-pandemic rates until late 2024 at the earliest.
And that's with some rather optimistic assumptions, including that there is widespread availability and usage of an effective vaccine in early 2021 or that the pandemic has a relatively mild impact on economic activity in 2021 and 2022. The report also assumes another, more limited federal fiscal stimulus round before the end of 2020.
"None of these assumptions are assured, and if they do not come to pass, our forecast, presented here, is too optimistic," the authors wrote.
Though employment recovery has been fast as workers returned from temporary layoffs, sectors that rely on more human contact have seen a rise in permanent layoffs. In those sectors, employment "won't fully recover until consumers and businesses return to old habits, which won't be for some time, if ever," the forecast said.
But it's on theme that the forecast is a little more uncertain, as Nickelsberg said, "there's a higher probability that we are too optimistic than that we are too pessimistic."
California's leisure and hospitality industry have been hurt by the drop off in international tourism. But home sales have bounced back after a precipitous first-quarter drop.
"There is heightened uncertainty now, uncertainty about the pandemic, uncertainty about fiscal policy, another stimulus package or not out of Washington, uncertainty about the election, there's lots of uncertainty in the economy right now," said Nickelseberg.
A Dive into L.A.'s Tech and Gig Economy
The forecast noted that the gig economy in California has been hit harder by the pandemic in terms of overall unemployment.
L.A. County has more than one million gig workers as of 2018 — roughly one gig job for every four traditional jobs — and the numbers are growing faster in this segment than the U.S. overall.
That helps explain why L.A. has seen steeper drops in overall employment during the "pandemic-induced recession," the report states, especially since a greater share of its gig workers are in transportation, arts, entertainment and recreation, which have been hit especially hard.
Many have been buoyed by the unemployment benefits provided by the coronavirus stimulus bill.
That's especially relevant because gig workers tend to make less than their conventional counterparts. Gig workers in the professional, scientific and technical sector in L.A. earn an average of $52,000 annually, compared to their counterparts who earn $142,000.
The forecast examined tech industry jobs, with five large clusters led by the Bay Area and followed by Southern California, then Boston, Seattle, and Manhattan. The report noted that tech jobs increased dramatically in most of those areas from 2005 to 2020, while in Los Angeles there was only a moderate increase of 36,000 tech jobs.
Although L.A. County ranked second out of 20 counties for having the most tech jobs in the U.S., it was 11th on that same list for average pay. Tech workers in L.A. earned an average salary of $142,000, slightly above the national average of $135,000 for the industry. In Santa Clara, tech workers received an average salary of $287,000, while in Manhattan that number is $205,000 and in Seattle $200,000.
Though the tech industry has done well amid the pandemic, the forecast noted that it could be harder to see a near-future increase in tech workers in the Bay Area and New York, with high costs of living, as companies experiment with remote working.
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