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X‘I Was Surprised’: Despite a Drop, LA Seed Funding Shows Resilience in Face of Pandemic
Ben Bergman is the newsroom's senior finance reporter. Previously he was a senior business reporter and host at KPCC, a senior producer at Gimlet Media, a producer at NPR's Morning Edition, and produced two investigative documentaries for KCET. He has been a frequent on-air contributor to business coverage on NPR and Marketplace and has written for The New York Times and Columbia Journalism Review. Ben was a 2017-2018 Knight-Bagehot Fellow in Economic and Business Journalism at Columbia Business School. In his free time, he enjoys skiing, playing poker, and cheering on The Seattle Seahawks.

- L.A. companies raised a total of $71 million in seed funding, a 26% decline from the first quarter of the year.
- Ecommerce and Software-as-a-Service (SaaS) companies fared best during the pandemic
- Analysts were surprised investment hadn't dropped further.
Mirroring national trends, seed stage investment in Los Angeles slowed during the second quarter of 2020 as venture capitalists focused on shoring up their existing portfolio companies to weather the pandemic. L.A. companies raised a total of $71 million in seed funding, a 26% decline from the first quarter of the year, according to a report released Tuesday from the pre-seed fund Amplify.LA.
But considering the severity of the pandemic, the drop off could have been much worse. More seed deals were completed in the most recent quarter than the same period last year. And there was no decrease in valuations, with seed round sizes holding steady at an average of around $2.5 million.
"I was surprised, like many others, that the funding environment has been as resilient as it has been," Connor Sundberg, a senior associate at Amplify.LA who compiled the report, said by email. "I think in situations like the current pandemic, there's a tendency to jump to the first-order consequences – closures, consumer fears, uncertainty – and sometimes miss the second and third order effects. We've had companies that have seen favorable legislation changes like telehealth or make years worth of progress in adoption because they provide services that have helped keep small and mid-size businesses in operation."
Software as a service (SaaS) startups once again raised the most money of any category, with Nacelle, which makes a web app platform for online retailers, leading the way. It raised $4.70 million in a deal led by Index Ventures and Accomplice VC in June.
Ecommerce startups got a boost as consumers stayed at home during the pandemic and wanted to upgrade their bedrooms and backyards. For instance, Ettitude, maker of bedding and bath products made from organic bamboo, raised $1.6 million in a deal led by Drumbeat Ventures in April. Outer, which sells outdoor sectional sofas, raised $4.3 million in a round led by Mucker Capital in June.
"We saw huge upticks in things related to home improvement, at-home leisure, and learning that benefited from people suddenly spending much more time at home," said Sundberg. "Companies w/ supply power and almost exclusively brick-and-mortar alternatives saw a lift."
However, it was not all good news for ecommerce startups, who faced increasing competition from competitors who had previously been more focused on their brick-and-mortar operations. There was also more competition for certain ad keywords, which drove up prices. And startups that sold travel or outdoor products struggled.
"It really has been a massive mix of outcomes and less of a rising-tide-lifts-all-boats phenomenon," said Sundberg. "The companies we've consistently seen do best, though, are those in ecommerce infrastructure. They benefit from competition from new companies starting to sell online and existing companies increasing sales or spending more to stay competitive. They're perfectly positioned as their bet is one on ecommerce as a whole, not on a specific product or category."
Seed deals were somewhat of a bright spot in the second quarter. Across all rounds, just 140 deals were completed in the second quarter in greater L.A, the fewest since Pitchbook and the National Venture Capital Association began tracking the data in 2014.
Venture funding around the globe was up 15% in the last quarter, accelerating from -5% in the first quarter, according to Goldman Sachs. Meanwhile, deal count fell 14% in each of the last two quarters, reflecting a trend of fewer deals but larger rounds.
As always, it is best not to read too much into quarterly fluctuations, which have a limited data set. But considering the ongoing severity of the pandemic and resulting recession, those trying to raise money in most categories can breathe a sigh of relief.
"I think the longer-term insight we've had is that despite quarterly swings one way or the other, the ecosystem as a whole is moving in a good direction," said Sundberg. "In the past few years, we've seen new funds open their doors, existing funds raise significantly more, and a number of exits that have thrown more talent and mentorship into the ecosystem."
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Ben Bergman is the newsroom's senior finance reporter. Previously he was a senior business reporter and host at KPCC, a senior producer at Gimlet Media, a producer at NPR's Morning Edition, and produced two investigative documentaries for KCET. He has been a frequent on-air contributor to business coverage on NPR and Marketplace and has written for The New York Times and Columbia Journalism Review. Ben was a 2017-2018 Knight-Bagehot Fellow in Economic and Business Journalism at Columbia Business School. In his free time, he enjoys skiing, playing poker, and cheering on The Seattle Seahawks.
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This Week in ‘Raises’: Improvado Hauls $22M, Clearlake Launches $14B Fund
Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
This week in “Raises”: A pair of Web3 platforms for gamers landed funding, as did a Manhattan Beach medical startup looking to bolster primary care via nurse practitioners. Meanwhile, a Santa Monica-based investment firm launched its seventh fund with more than $14 billion in dry powder.
Venture Capital
Improvado, a marketing data aggregation platform, raised $22 million in a Series A funding round led by Updata Partners.
Web3 gaming platform FreshCut raised $15 million in funding led by Galaxy Interactive, Animoca Brands and Republic Crypto.
Medical startup Greater Good Health raised $10 million in a funding round led by LRVHealth.
Joystick, a Web3 platform for gamers and creators, raised $8 million in seed funding.
Open source data protection company CipherMode Labs raised $6.7 million in seed funding led by Innovation Endeavors .
Mobile phone charging network ChargeFUZE raised $5 million in seed funding led by Beverly Pacific, TR Ventures, VA2, Jason Goldberg and Al Weiss.
Polygon, a startup aiming to better diagnose children with learning disabilities, raised $4.2 million in seed and pre-seed funding led by Spark Capital and Pear VC.
Pique, a virtual women's sexual health clinic, raised $4 million in a seed funding round led by Maveron.
Psudo, a sneaker startup that utilizes recycled water bottles and 3D sublimation printing to create its shoes, raised $3 million in a seed funding round led by SternAegis Ventures.
Funds
Santa Monica-based investment firm Clearlake Capital Group raised $14.1 billion for its seventh flagship fund.
Raises is dot.LA’s weekly feature highlighting venture capital funding news across Southern California’s tech and startup ecosystem. Please send fundraising news to Kristin Snyder (kristinsnyder@dot.la).Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
LA Tech ‘Moves’: New Head of Originals at Snap, New President at FaZe Clan
Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
“Moves”, our roundup of job changes in L.A. tech, is presented by Interchange.LA, dot.LA's recruiting and career platform connecting Southern California's most exciting companies with top tech talent. Create a free Interchange.LA profile here—and if you're looking for ways to supercharge your recruiting efforts, find out more about Interchange.LA's white-glove recruiting service by emailing Sharmineh O’Farrill Lewis (sharmineh@dot.la). Please send job changes and personnel moves to moves@dot.la.
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FaZe Clan brought on Zach Katz as the gaming and media company’s new president and chief operating officer. Katz was previously the chief executive officer of the music tech investment fund Raised in Space Enterprises.
TikTok brand factory LINK Agency promoted Dustin Poteet to chief creative officer. Poteet was previously creative director at the firm.
Livestream shopping platform Talkshoplive hired Tradesy co-founder John Hall as its chief technology officer. Universal Music Group Nashville's former vice president of digital marketing, Tony Grotticelli, also joins the company as vice president of marketing.
Anjuli Millan will take over as head of original content at Snap after three years of overseeing production for the division.
Tech and media company Blavity hired Nikki Crump as general manager of agency. Crump joins the company from Burrell Communications Group.
O'Neil Digital Solutions, which provides customer communications and experience management for the health care industry, hired Eric Ramsey as national account sales executive. Ramsey joins from T/O Printing.
Investment firm Cresset Partners named Tammy Funasaki as managing director of business development. Funasaki previously served as head of investor relations for Breakwater Management.
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Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
Snapchat’s New Controls Could Let Parents See Their Kids’ Friend Lists
Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.
Snapchat is preparing to roll out enhanced parental controls that would allow parents to see who their teenagers are chatting with on the social media app, according to screenshots of the upcoming feature.
Snap’s parental controls.
Courtesy of Watchful.
Snapchat is planning to introduce Family Center, which would allow parents to see who their children are friends with on the app and who they’ve messaged within the last seven days, according to screenshots provided by Watchful, a product intelligence company. Parents would also be able help their kids report abuse or harassment.
The parental controls are still subject to change before finally launching publicly, as the Family Center screenshots—which were first reported by TechCrunch—reflect features that are still under development.
Santa Monica-based Snap and other social media giants have faced mounting criticism for not doing more to protect their younger users—some of whom have been bullied, sold deadly drugs and sexually exploited on their platforms. State attorneys general have urged Snap and Culver City-based TikTok to strengthen their parental controls, with both companies’ apps especially popular among teens.
A Snap spokesperson declined to comment on Friday. Previously, Snap representatives have told dot.LA that the company is developing tools that will provide parents with more insight into how their children are engaging on Snapchat and allow them to report troubling content.
Yet Snap’s approach to parental controls could still give teens some privacy, as parents wouldn’t be able to read the actual content of their kids’ conversations, according to TechCrunch. (The Family Center screenshots seen by dot.LA do not detail whether parents can see those conversations).
In addition, teenage users would first have to accept an invitation from their parents to join the in-app Family Center before those parents can begin monitoring their social media activity, TechCrunch reported.
Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.