los angeles tech scene
It was once a contrarian perspective to think a venture capital firm could survive outside of Silicon Valley. But Dana Settle moved to Los Angeles and tried it anyway.
On this episode of Office Hours, co-founder of Zillow and dot.LA Spencer Rascoff talks to Settle about the booming L.A. tech scene and her investment firm Greycroft.
Settle moved to L.A. from Silicon Valley in 2005. The venture community in the area was small then, but she felt the inklings of something promising. Startups like Cornerstone OnDemand and Userplane were growing and so were the kind of industries arriving in L.A.
While her time up north saw a rise in tech companies, Settle saw L.A. disrupting every industry as data and artificial intelligence changed the game.
"This is the second largest city in the country. [It] has every single industry and huge opportunities here across biotech, real estate, mobility, space — every single area that you can imagine," said Settle.
As a founding partner at Greycroft and a member of its management committee, Settle is responsible for the firm's investment strategy and vision. When it comes to looking for startups to invest in, it's really about the founders for Settle.
She's looking for someone not just with a vision, but the ability to attack great talent.
"It doesn't mean you have to be like a total salesy extrovert or whatever. I mean, some of the best founders… are introverted. They have that crazy charisma that's just soft spoken, and everybody just wants to go with them," said Settle.
She also looks forward to seeing track records of success whether it was academic achievements or athletics. Any spark of success is valuable to Settle.
Within the last five years, Settle said that founders have gotten good at asking for higher demands. While they've met founders' needs, the real investment to Settle is seeing Greycroft be referred to other startups.
"Our sort of first principle is that venture capital is a long-term repeat business. And if you believe that, then you know, all of your interactions with founders and everything that you do every day, ultimately should build your brand. It's ultimately a referral business," said Settle.
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A decorated Marine who led troops through combat in Iraq and Afghanistan for four years and went on to build a successful nonprofit that deployed military veterans to disaster relief, CEO Jake Wood wants corporate America to give back.
Wood said he was inspired to become an entrepreneur because his time in the armed forces taught him to “embrace the suck.” After witnessing humanitarian disasters on a global scale firsthand, he became determined to lead companies that could lead social change.
His answer was El Segundo-based startup Groundswell, a Google-backed app that gives employees a way to offer charitable giving as part of their benefits package.
“All the data suggests that millennial and Gen Z talent, they want to work for companies that have alignment with their values,” Wood said. “What better way for a company to demonstrate that by saying, our values are your values meaning, what what you value we're willing to invest in -- versus saying, we're going to choose the issues that are important for us to address and solve, which is how corporate philanthropy traditionally has been done.”
Wood served in the Marine Corps as a decorated sniper before founding Team Rubicon, a nonprofit that deploys military veterans to help with disaster relief, in 2010. The company raised over $300 million in the 12 years Wood led it, and grew to over 150,000 volunteers worldwide.
Wood stepped down from his job as CEO of Team Rubicon in this year to launch Groundswell, a company he felt could do as much good as Rubicon.
“I didn’t want to be an entrepreneur again if it meant, like, shipping cat food faster,” he recently told the New York Times.
His new venture couldn’t be farther from that. Backed by GV (previously known as Google Ventures), Human Ventures, Marina del Rey-based Moonshots Capital, Felicis Ventures and Core Innovation Capital, the company raised a $15 million seed round. Groundswell will use its sizable seed round to hire new engineers and product staff as it get its app ready to debut in the first quarter of 2022.
Wood wouldn’t disclose what companies are signed up to already use the platform, but he said there is a range, from Fortune 500 firms down to hedge funds and venture- backed companies that are “red-hot” and about to go public.
He argued that beyond just doing good, companies also stand to gain from offering philanthropic benefits because they could help keep employees happy.
“Companies are scrambling to win in the talent war and that means that they're constantly trying to reinvent their benefits packages,” Wood said, noting that COVID-19 “exacerbated” the trend.
“Most people would be surprised to learn that more American households contribute to charity every year than they contribute to a 401K,” Wood said. “We think that charitable giving can just as easily become a non-negotiable element (of the compensation package) alongside it.”
Groundswell sells to employers, who use it to allocate tax-deductible funds for their employees to donate to a registered 501(c)(3) charity of their choice. Wood told dot.LA that one selling point for potential workers to use the program is they can donate pre-taxed income.
“By rolling out a platform like Groundswell, a company can first just give that money into the account for the employee to give away, which means that it's never counted as income for that employee, yet they still get the benefit of directing where that contribution goes,” Wood said. “The company takes a full tax write off for that contribution to the employee.”
Wood said the pandemic prompted an acceleration in companies rethinking their (as he called it) corporate social responsibility departments, and re-evaluating how they give back. Usually companies that offer charitable giving reserve the right to restrict employee donations to a specific set of nonprofits, but Groundswell would let workers send money wherever they choose.
Editor's Note: This story was updated to reflect GV's name.
In California, virtually the only state with hydrogen cars on the road, about 47 active fueling stations serve a trickle of early hydrogen adopters who mostly cruise around Los Angeles and the Bay Area today. These hydrogen-powered passenger vehicles aren’t anywhere near as popular as electric cars, but that isn’t stopping California from spending millions of dollars to support them.
In the next five years, the state plans to triple the number of hydrogen refueling stations available to everyday drivers. With support from California taxpayers and a handful of investors, FirstElement Fuel is poised to operate more than half of those locations.
The Irvine-based company, which already lays claim to running the “largest hydrogen fueling network in the world,” aims to more than double in size to 80 stations by 2024. To fund the expansion, it recently raised $105 million from Air Water, MUFG, Nikkiso, and JII. All four firms hail from Japan, which has also banked on hydrogen in pursuit of its climate goals.
Named after hydrogen’s position on the periodic table, FirstElement says its stations have prevented “more than 110 million pounds of CO2” from polluting the atmosphere to date. The company adds that it is “regularly breaking single day, and 7-day [fueling] records,” a signal that demand is rising.
But climate experts contacted by dot.LA did not share FirstElement’s enthusiasm for hydrogen passenger vehicles, nor do many automakers, due to the relative scarcity of clean hydrogen, its low energy efficiency, the risk of leakage, and the overwhelming momentum behind battery-powered vehicles in the market today. This comes despite the perks of hydrogen fuel cell-propelled cars, including faster refueling times and longer ranges than you can find in many EVs.
The Trouble With Hydrogen
“Regarding light-duty cars, hydrogen might have been viewed as competing with battery cars as of ten, 15 years ago, but the market has moved strongly towards battery-powered cars,” said Robert Howarth, Cornell University professor and co-author of a recent study on hydrogen’s climate impact.
For experts like Howarth, emissions from hydrogen production remain a colossal sticking point.
“Today, 96% of hydrogen in the U.S. is made from natural gas, and has a huge greenhouse gas footprint,” Howarth told dot.LA. “The natural gas industry is claiming they can do better and reduce emissions some, producing so called ‘blue hydrogen’” by employing carbon capture technology. However, Howarth says his research “clearly shows this marketing claim is not true.”
For its part, FirstElement says its hydrogen comes from “renewable biofuel sources” and is “‘green’ by any measure,” although it did not respond to further questions on its sustainability practices. In the past, the company has advertised its fuel as 33% renewable hydrogen, and the California Fuel Cell Partnership station map still lists the fuel dispensed at some FirstElement stations as such.
“Hydrogen made from renewable biofuel could in theory be zero carbon,” Deepak Rajagopal, professor at UCLA's Institute of the Environment and Sustainability, told dot.LA. But the fuel would likely require offsets to truly be considered zero carbon, he said.
Regardless, the company — along with firms like fossil fuel giant Shell — is working to make hydrogen more accessible. The expansion plans are crucial for the roughly 7,500 Californians who currently drive hydrogen cars such as Hyundai’s Nexo or Toyota’s Mirai. Some early adopters say they’ve faced fuel shortages, or “hydropocalypses” — building more stations could make getting around easier while potentially driving down costs.
Still, the slow progress made in overcoming these challenges, together with meager sales, explains why automakers like Honda and Volvo seem to have lost interest in hydrogen passenger cars.
Meanwhile the electric vehicle market is booming. California alone has roughly 73,000 EV chargers, serving the approximately 425,300 plug-in vehicles registered in the state today.
The Future of Hydrogen Fuel Cells
But hydrogen has noteworthy support in other avenues, including as an alternative to combustion engines in larger vehicles.
Companies like Daimler, Toyota and Volvo are eyeing hydrogen fuel cells to replace diesel engines in long-haul trucks. They support hydrogen because hydrogen fuel tanks fill up quickly and weigh far less than batteries.
FirstElement plans to serve commercial customers such as these, too. The firm says at least 12 of its 80 stations will support heavy-duty trucks in addition to light-duty cars.
Plus, there’s air travel. Hawthorne-based Universal Hydrogen has plans to test the first hydrogen-fueled airliner, because it could prove more practical for flying than heavy batteries, especially for long trips.
Beyond transportation, Hydrogen is used to make artificial fertilizer and refine petroleum. Down the road, it could also play a key role in decarbonizing steel.
So even if hydrogen-powered passenger cars are doomed to eat Tesla’s and Rivian’s dust, the need for clean, green hydrogen — and the infrastructure to distribute it — isn’t going anywhere.
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