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Venture Deals in LA Are Slowing Down, And Other Takeaways From Our Quarterly VC Survey
Keerthi Vedantam
Keerthi Vedantam is a bioscience reporter at dot.LA. She cut her teeth covering everything from cloud computing to 5G in San Francisco and Seattle. Before she covered tech, Keerthi reported on tribal lands and congressional policy in Washington, D.C. Connect with her on Twitter, Clubhouse (@keerthivedantam) or Signal at 408-470-0776.
It looks like venture deals are stagnating in Los Angeles.
That’s according to dot.LA’s most recent quarterly VC sentiment survey, in which we asked L.A.-based venture capitalists for their take on the current state of the market. This time, roughly 83% of respondents reported that the number of deals they made in L.A. either stayed the same or declined in the first quarter of 2022 (58% said they stayed the same compared to the fourth quarter of 2021, while 25% said they decreased).
That’s not hugely surprising given the sluggish dynamics gripping the venture capital world at large these days, due to macroeconomic factors including the ongoing stock market correction, inflation and Russia’s invasion of Ukraine. While startups and VC investors haven’t been hit as hard as public companies, it looks like the ripple effects are beginning to bleed into the private capital markets.
Image courtesy of Hagan Blount
In addition to slowing deal volumes, most investors said they’re seeing startup valuations lose momentum, as well: Roughly 81% said valuations either stayed the same or decreased from the previous quarter, with nearly 39% noting a decline.
Should that sentiment continue moving forward, it could spell bad news for startups as far as raising the money they need for growth, investors said.
“If I was a startup right now, I would be making sure I have plenty of runway,” said Krisztina ‘Z’ Holly, a venture partner at Good Growth Capital. “When it looks like there's some potential challenges ahead in the market, it’s good to fill your war chest.”
Among VC respondents, about 86% said they believed that valuations in the first quarter were too high—one potential reason why deals slowed down in the first quarter, according to TenOneTen Ventures partner Minnie Ingersoll. She noted that L.A.’s growing startup scene features more early-stage ventures, whose valuations haven’t come down the way later-stage startup valuations have.
“I would say we are just more cautious about taking meetings where the valuations are at pre-correction levels,” Ingersoll said. “We didn’t take meetings because their valuations weren’t in line with where we thought the market was.”
While most respondents said the Russia-Ukraine war didn’t have much impact on their investment strategies, some 22% said it did have an effect—with one VC noting they had to pass on a deal in Russia that they liked.
Is There a Flight Out of Los Angeles?
Los Angeles was heralded as the third-largest startup ecosystem in the U.S. at the beginning of the year, behind only San Francisco and New York. Yet nearly one-third (31%) of VC respondents said that at least one of their portfolio companies had left L.A. within the past year. It won’t come as a huge surprise that the city of Austin, Texas has been one of the prime beneficiaries of this shift—with roughly half of those who reported that a portfolio company had left L.A. identifying Austin as the destination.
The tech industry’s much-hyped “exodus” from California has been widely reported on, especially as more companies have embraced the work-from-home lifestyle and also opted to move their operations to lower-cost cities and states. Most notably, Elon Musk has recently moved two of his companies, electric automaker Tesla and tunnel infrastructure startup The Boring Company, from California to Texas (with both of those firms moving in and around Austin).
“In today's competitive market with lots of capital to invest, we think the next generation of successful VCs are going to be diverse in markets (not just Silicon Valley)... [and] have access to undiscovered founders from everywhere,” said one survey respondent.
NFTs Aren’t Popular With VCs—But Web 3 Is
“It’s the future,” according to one respondent. “Buckle up and get on board.”
Are NFTs...
More than 71% of VC survey respondents said they were bullish on Web3—the new blockchain-enabled iteration of the internet, which promises decentralization and a whole range of applications involving cryptocurrencies, NFTs, DeFi and more. It’s the same sentiment informing Santa Monica-based VC firm M13’s new $400 million fund, which considers Web3 a core piece of its investment thesis.
In Q2 2022, do you expect your portfolio companies to:
L.A. is home to an ever-growing cadre of Web3-focused startups operating across the realms of finance, entertainment and other industries. But while local investors are willing to pour money into blockchain-related ventures, one segment of the space continues to evoke skepticism: Only 18% of respondents would describe NFTs as “a good investment,” while 33% thought they were “bad” investments and 39% said they were unsure.
As in our last survey several months ago, it appears that NFTs continue to divide opinion, with respondents expressing differing perspectives on their value and utility. One referred to them as “get rich quick schemes,” but added that the art pieces and social communities that emerge from them may be valuable. Another said that “NFTs as a digital medium are a legitimate thing”—but noted the vast majority are “awful investments with no intrinsic value.”
Graphics courtesy of Hagan Blount.
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Keerthi Vedantam
Keerthi Vedantam is a bioscience reporter at dot.LA. She cut her teeth covering everything from cloud computing to 5G in San Francisco and Seattle. Before she covered tech, Keerthi reported on tribal lands and congressional policy in Washington, D.C. Connect with her on Twitter, Clubhouse (@keerthivedantam) or Signal at 408-470-0776.
https://twitter.com/KeerthiVedantam
keerthi@dot.la
'No Swiping, No Profiles, No DMs': 222 Wants to Serve Gen Z Experiences Based on Serendipity
05:00 AM | October 17, 2022
image by 222
Midway through dinner at a West Hollywood restaurant, Arman Roshannai, the 21-year old CTO of 222 brings up 19th century French polymath Pierre-Simon Laplace’s demon. Or, rather, the Frenchman’s theory of destiny. As Roshannai explains, LaPlace thought that if someone (the demon) knows the precise location and momentum of every atom in the universe, their past and future values for any given time can be calculated from the laws of mechanics. Freewill, Laplace would say, is an illusion.
How did we get to Laplace? Roshannai made a joke about 222 being his demon after I suggested he’s Dr. Frankenstein.
“Don’t mention that in the article,” Roshannai says. He’s mostly joking.
But how could I not? 222 is a demon caste from human brain mimicry. But unlike the other demons — consumer predictability, metaverse, surveillance — 222 is offering salvation.
The idea for 222 began with a simple theory: “Meeting people through chance encounters, being at a bar, seeing someone wearing a shirt of a band you like and striking up a conversation just felt much better than getting a follow request on Instagram,” says Danial Hashemi, the 21-year-old COO.
To test it, Roshannai and Hashemi began to host events at Keyan Kazemian’s house—the 23-year-old CEO of 222.
“We would beg our friends who didn't know each other to come to Keyan's backyard where he lives in Orange County,” says Hashemi. “We cooked pasta and served wine.” They also had their friends fill out a personality survey that they then used to determine who should sit at which table at subsequent dinners.
People kept coming back. Some people became best friends. Others started dating. And what began as a college research project bloomed into an AI company. “No swiping, no profiles, no dms, just say yes and find the people and places that best match your personality,” says Hashemi.
Sound cool? The table next to ours thinks so. They’re one of a smattering of four-to-eight person cliques at the West Hollywood restaurant who have been synthesized to have a good time. And by the looks on their faces, bright-eyed and full of expression, 222 is working.
To sign up, you have to be between 18 and 27. For now, 222, is targeting Gen Z. The app, I’m told, is coming soon but until then you enter your phone number on 222’s website before being directed to 30-some odd questions that include:
“Would you rather watch an arthouse or mainstream blockbuster?”
“Would you rather go clubbing or have a daytime picnic?”
“Would you rather listen to Tchaikovsky or Megan Thee Stallion?”
Potential members also have to rate how strongly they agree or disagree with statements like:
“I would go to space if there’s a chance I wouldn’t come back.”
“Humans should make an active effort to curb the emission of greenhouse gasses.”
“Humans are born with an innate purpose.”
The survey also includes a self-assessment of your drug habits and at one point you have to rate your own attractiveness on a scale between one and 10. The goal is to provide the AI with enough data points for it to determine which of the 16 categories your personality falls into.
“Once you get your personality type, you wait until we have an experience,” Hashemi says.
For now, 222 experiences are held every other week. Members who are selected by the AI engine to attend the dinner portion of the evening pay $2.22. Those who aren't selected for the dinner portion of the experience can still, if they choose, attend the post-dinner venue.
The way the AI determines compatibility is a bit of a mystery.
“The AI picks up on these social trends itself,” says Roshannai. “It may notice that similarity is a great indicator of compatibility, or find other underlying patterns that we didn’t even know existed.”
Based on feedback from real-life interactions, he continues, “we certainly can and will do some tinkering with what we feed the model.” But ultimately, the model itself will start learning what prompts have weight and which questions are best used to predict meaningful connections.
According to Kazemian, “Do you think comedy is becoming too politically correct?” Has been particularly successful in determining compatibility. Political leanings less so.
Back at the restaurant, Kazemian pulls out his laptop, scans the room like a spy, taps a few keys on the keyboard and runs a script. The program sends participating 222 members a text message with info for the post-dining venue.
Tonight, the venue is a rooftop lounge within walking distance of the restaurant and with a 180-degree view overlooking the city. Hashemi confirms there’s a section designated for 222 members. While we’re standing around the tables, Kazemian’s girlfriend dares Roshannai to go talk to a girl. He does. Pays her a compliment on her dress “and it worked,” Roshannai exclaims. The look on his face is a familiar one, it’s the look of excitement spawning from serendipity. It may seem like typical human behavior but increasingly, it’s not.
Every trend report suggests young people just don’t care about being in the physical world anymore. Tech companies are obsessed with trying to create increasingly immersive online spaces to hang out in. The average young person spends half their waking life staring into a screen. The office is dead. Third spaces are increasingly scarce. The loneliest generation in the history of the world keeps getting lonelier.
“Have you read Robert Putnam’s book “Bowling Alone?” Hashemi asks me. “One of the slides on our pitch deck literally says we're anti-Metaverse.”
Not long after our arrival, the trio begins to notice familiar faces from the restaurant pour in. Hashemi says that as their member base has grown steadily at a rate of 30% per month since 222’s inception, it’s increasingly difficult to differentiate who’s been sent by 222 and who hasn’t. Based on the RSVPs, of the nearly 40 people who attended the dinner portion of the evening, only four or five replied that they wouldn’t attend the post-dinner venue. Which is to say, 222’s success rate, at least for this evening is roughly 90%.
The use cases for this technology, Kazemian says, are myriad: choosing seats on airplanes, selecting roommates, providing venues with information about their patrons' likes/dislikes to best curate an unforgettable evening. But the goal, the same one that inspired those backyard dinners, remains the same: Veer people back towards the physical world. Incite meaningful connections IRL. Use the demon to fight the demons.
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Andrew Fiouzi
Andrew Fiouzi is an editor at dot.LA. He was previously a features writer at MEL Magazine where he covered masculinity, tech and true crime. His work has been featured in the Los Angeles Times, Long Reads and Vice, among other publications.
The Future of Hologram Tech Comes Down to Its Price Tag
05:00 AM | March 16, 2023
Photo: Proto
In 1971, Dennis Gabor was awarded the Nobel Prize in Physics for his invention of the holographic method, which was based on bending light waves to reproduce images. Since then, the hologram’s been adapted for a variety of uses, from reanimating dead musicians to 3-D movies and passport stamps.
During the pandemic as artists worldwide sought out alternative ways to reach their audiences, there was again, a moment in which holograms appeared to be a part of the future – of classrooms, work communication and entertainment.
But the technology is far from mainstream, and the dream that we’d all interact with holograms on a daily basis hasn’t come to fruition yet.
Entertainment
Back in 2012, Tupac Shakur was reanimated for a brief set as a hologram at the Coachella Valley music festival.
The creation was a joint effort between several firms, including Arizona-based AV Concepts and Digital Domain, based in Playa Vista. Digital Domain’s chief technology officer Hanno Basse told dot.LA the company worked with the also King estate and Time Magazine to create a hologram of Dr. Martin Luther King, Jr. for a VR museum exhibit.
Besides holographic people, Digital Domain creates realistic CGI for films in its digital humans lab, and has been used in blockbusters including Marvel’s “She-Hulk,” “Black Widow” and “Avengers: Endgame” as well as a 2018 “Call of Duty” ad for Activision.
Basse said that while Digital Domain’s VFX work with digital humans on films like “Titanic” and “The Curious Case of Benjamin Button” has earned it Oscars, the company’s eager to use its tech in other ventures. Additionally, one area Digital Domain is trying to work more on is video games, which rely entirely on virtual humans. Gaming in particular is a space ripe for virtual human tech, especially since realistically animating characters, especially in multiplayer games, is still challenging even for huge studios.
Hologram Tupac debuted at the Coachella Valley Arts & Music Festival in 2012.Photo: AV Concepts
Communication
But while hologram Tupac was a big deal, in 2020, Nussbaum realized that communication – not concerts – was where hologram tech was needed.
So Nussbaum started Proto and developed what’s now the company’s flagship device, the Proto Epic. It’s a nearly 90-inch-tall metal box capable of fitting a human over six feet tall inside. The box is also equipped with front-facing 4K video cameras and speakers, so the box can transmit audience feedback and let the user respond in real-time (watch Ellen DeGeneres do so here).
Becoming a hologram is simple – iPhones 13 and above have 4k cameras, so all it requires is the Proto Beam app, which uses the phone to live capture 3D video and beam it to the Proto E (or the smaller, tabletop model, the Proto M) from anywhere.
You might recall that during the pandemic, news station KTLA used Proto to do remote red-carpet reporting for the 2020 Emmy Awards.
Howie Mandel, a backer of Proto, told dot.LA after a demo he became an investor and advocate for the technology (Proto’s Van Nuys office is housed in the same building as Mandel’s production and podcast studio).
“It was like the first time I saw an iPhone,” Mandel said. “It puts Zoom and every other video broadcaster and hologram company to shame. I can be someplace without going anywhere, which is my dream come true as a germaphobe.”
Proto founder David Nussbaum, left, does a fist-bump with investor Howie Mandel, right, via the Proto E device. Photo: Proto
Advertising
Mandel said he sees potential for Proto in merchandising. To that end, the company has already inked deals with auction house Christie’s, also an investor, to use Proto devices to show items. Other clients include Verizon, Virgin Media O2 and CAA. Retailer H&M also uses Proto E devices to replace window mannequins.
“I think it’s going to be the Kleenex of communication, retail, education and advertising,” Mandel told dot.LA about his predictions for Proto’s future.
Scott Likens, head of accounting firm PwC’s innovation hub, said he learned of Proto from a participant in its Next Tech Studio and began working with them last spring. PwC mainly uses Proto to communicate globally without boundaries.
“Hologram is a unique space that requires dynamic hardware and software, so we are continuously testing what works in both small and large collaborative sessions,” Likens noted.
H&M used a Proto E (right) to replace window mannequins at one of its stores with videos of hologram models. Photo: Proto
Healthcare
Bari Hoffman, associate dean for clinical affairs and internal medicine professor at the University of Central Florida, said she’s been using the Proto Epic device since 2021.
Hoffman said UCF has used Proto to beam in volunteers for virtual exams, including people with advanced Huntington’s disease who couldn’t otherwise travel. She also said Mandel used one to talk to a class about his OCD diagnosis and had a “seamless” live conversation.
“It’s really imperative and impactful for our students to be able to see in high definition the life-size, head to toe experience of that patient,” Hoffman said. She added that while most medical schools also rely on trained actors to simulate symptoms for education, hologram tech could allow people actually living with chronic diseases to volunteer from afar.
But holograms are not ready for large-scale healthcare use, Hoffman said. “Nobody is actually delivering health care with the technology yet, because there's some other things that need to be in place to make it compliant [with regulators].” Adding that, UCF has recruited a “large number of faculty and clinical experts, physicians and surgeons in the community to study and evaluate [it].”
Digital Domain's virtual human technology used hologram-like tech to de-age football star Joe Montana for NBCUniversal's "Quantum Leap." Photo: Digital Domain
Upcoming innovations
That said, it’s going to take some time before consumer-focused devices like Proto make their way into the home of everyone in America considering the smaller Proto M retails for nearly $7,000. Though Nussbaum wouldn’t disclose sales figures, he said he’s sold “hundreds” of them.
Which explains why other companies have jumped into the hologram business. In 2016, Microsoft began working on HoloLens, a mixed-reality headset that retails for $3,500. And in 2020, Meta filed a patent application for “3D conversations” conducted virtually using hologram-like tech.
For his part, Basse said he expects an arms race for holograms or digital human technology to accelerate. “Visual presentations in one form or another are a major piece of modern life, and people, creators and organizations that are looking to stand out need to find ways to rise above the competition,” he said.
Mandel was also optimistic about holograms becoming mainstream. “This is probably the most excited I have seen people around a piece of technology,” he said of Proto. “It needs to be everywhere.”
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Samson Amore
Samson Amore is a reporter for dot.LA. He holds a degree in journalism from Emerson College. Send tips or pitches to samsonamore@dot.la and find him on Twitter @Samsonamore.
https://twitter.com/samsonamore
samsonamore@dot.la
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