Watch: Investing in Uncertain Times: Why a Reset in Valuations Could be Liberating for Founders

Ben Bergman

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.

Watch: Investing in Uncertain Times: Why a Reset in Valuations Could be Liberating for Founders

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A decade-long run-up in startup valuations that came to a screeching halt after the novel coronavirus froze much of the worldwide economy last month could have a silver lining for company founders.

"They can build great businesses but don't have to be chasing a growth rate," said Carter Reum, co-founder of M13. "It can be liberating. We've lived in a world the past few years where an artificially high valuation was nothing more than a vanity mark."

Reum spoke in a dot.LA webinar on the state of investing along with Kara Nortman, a partner at L.A.'s largest venture firm, Upfront Ventures.

dot.LA Strategy Session: Investing in Uncertain Timeswww.youtube.com

Both invest heavily in consumer companies and pointed out that a softening of direct-to-consumer companies began last year after well-documented stumbles at WeWork, Caspar, and other brands.

"There was a lot of shame around the resets in valuations and now I think that's gone," Nortman said. "I've seen that be liberating for founders."

Reum said he is excited to be able to invest in businesses he sees long-term potential in, but could not justify the lofty valuations they demanded from investors. He says now VCs and founders alike can focus more on creating sustainable companies.

"Whereas growth-at-all-costs was really cool that last few years, the coolest thing going forward is controlled growth-with-profitability," he said.

Upfront and M13 are still deploying capital but knowing their next fund could be harder to raise they are being more conservative. Nortman says Upfront is preferring to write checks in the $3 to $4 million range rather than the $10 million sums it would deploy before the crisis out of its sixth series-A fund. The firm normally invests in one new company a month, a pace that has continued.

"Things are still moving at Upfront," she said, but also added: "There's still a big question about how to price things and how to invest in people you've never met."

Nortman said even after the virus subsides there will be less travel and perhaps fewer gatherings. Asked whether her firm was still planning to host the Upfront Summit, a splashy annual conference that brings over a thousand investors and founders to L.A. each winter, Nortman said to stay tuned.

"We view the Upfront Summit as a permanent endeavor and an important element to the community," she said.

"Everyone just breathed a sigh of relief," laughed Reum.

Speakers Include:

Kara Nortman, partner at Upfront Ventures
Carter Reum, partner and co-founder of M13
Ben Bergman, senior reporter at dot.LA

Kara Nortman is a partner at Upfront Ventures

Kara Nortman, Partner at Upfront Ventures

Kara is a Partner at Upfront Ventures, the largest venture capital firm based in Los Angeles. Some of her notable investments include Parachute Home, The Wing, Fleetsmith, Stem, Territory, Strive, and Qordoba. Before Upfront, Kara co-founded the children's e-commerce company Moonfrye and also spent seven years at IAC where she co-headed the M&A group and acted as the Senior Vice President and General Manager of Urbanspoon and Citysearch. During her tenure at IAC she oversaw the initial investment in Tinder. Earlier in her career, she also spent time at Morgan Stanley, Microsoft, and Battery Ventures. She received her AB in Politics from Princeton University and her MBA from Stanford University. Kara is also a founding member of All Raise, a VC-led group dedicated to increased diversity in funders and founders and serves as an advisor to the Women's National Soccer Team Players Association. Kara resides in Los Angeles with her husband and three daughters. @upfrontvc

Carter Reum is a partner and cofounder of M13.

Carter Reum is an Investor, Entrepreneur and Author

Carter and his brother Courtney are Partners and Co-Founders of M13, a full-service venture engine with offices in Los Angeles, New York and San Francisco. M13 executes a "founders first" focus to build and scale leading consumer technology companies. M13's holdco model consists of a $200M consumer tech fund, active support of its founding teams and a launchpad brand studio that incubates ideas into sustainable companies with partners such as P&G Ventures. With more than 80 direct investments and 16 exits, M13's prior investments total over $137B in enterprise value and includes Lyft, Pinterest, Ring, Daily Harvest, FabFitFun, Rothy's and more. The brothers began their careers at Goldman Sachs before launching their first company, VEEV Spirits, one of the fastest-growing independent brands and an early leader in sustainability and wellness. Carter is active in culture and arts as a member of the LACMA Board of Trustees, the digital advisory of The Metropolitan Museum of Art and an Executive in Residence for the City of Los Angeles. @M13Company

Ben Bergman is dot.LA's senior reporter, covering venture capital.

Ben Bergman, Senior Reporter at dot.LA

Ben Bergman is dot.LA's senior reporter, covering venture capital. Previously he was a senior reporter/host at KPCC, a producer at Gimlet Media and NPR and produced two investigative documentaries for KCET. He has been a frequent on-air contributor to NPR and Marketplace and has written for The New York Times. Bergman was a 2017-2018 Knight-Bagehot Fellow in Economic and Business Journalism at Columbia Business School. He enjoys skiing, playing poker, and cheering on The Seattle Seahawks. @thebenbergman

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Here’s Why Streaming Looks More and More Like Cable

Lon Harris

Lon Harris is a contributor to dot.LA. His work has also appeared on ScreenJunkies, RottenTomatoes and Inside Streaming.

Here’s Why Streaming Looks More and More Like Cable

Evan Xie

The original dream of streaming was all of the content you love, easily accessible on your TV or computer at any time, at a reasonable price. Sadly, Hollywood and Silicon Valley have come together over the last decade or so to recognize that this isn’t really economically viable. Instead, the streaming marketplace is slowly transforming into something approximating Cable Television But Online.

It’s very expensive to make the kinds of shows that generate the kind of enthusiasm and excitement from global audiences that drives the growth of streaming platforms. For every international hit like “Squid Game” or “Money Heist,” Netflix produced dozens of other shows whose titles you have definitely forgotten about.

The marketplace for new TV has become so massively competitive, and the streaming landscape so oversaturated, even relatively popular shows with passionate fanbases that generate real enthusiasm and acclaim from critics often struggle to survive. Disney+ canceled Luscasfilm’s “Willow” after just one season this week, despite being based on a hit Ron Howard film and receiving an 83% critics score on Rotten Tomatoes. Amazon dropped the mystery drama “Three Pines” after one season as well this week, which starred Alfred Molina, also received positive reviews, and is based on a popular series of detective novels.

Even the new season of “The Mandalorian” is off to a sluggish start compared to its previous two Disney+ seasons, and Pedro Pascal is basically the most popular person in America right now.

Now that major players like Netflix, Disney+, and WB Discovery’s HBO Max have entered most of the big international markets, and bombarded consumers there with marketing and promotional efforts, onboarding of new subscribers inevitably has slowed. Combine that with inflation and other economic concerns, and you have a recipe for austerity and belt-tightening among the big streamers that’s virtually guaranteed to turn the smorgasbord of Peak TV into a more conservative a la carte offering. Lots of stuff you like, sure, but in smaller portions.

While Netflix once made its famed billion-dollar mega-deals with top-name creators, now it balks when writer/director Nancy Meyers (“It’s Complicated,” “The Holiday”) asks for $150 million to pay her cast of A-list actors. Her latest romantic comedy will likely move over to Warner Bros., which can open the film in theaters and hopefully recoup Scarlett Johansson and Michael Fassbender’s salaries rather than just spending the money and hoping it lingers longer in the public consciousness than “The Gray Man.”

CNET did the math last month and determined that it’s still cheaper to choose a few subscription streaming services like Netflix and Amazon Prime over a conventional cable TV package by an average of about $30 per month (provided you don’t include the cost of internet service itself). But that means picking and choosing your favorite platforms, as once you start adding all the major offerings out there, the prices add up quickly. (And those are just the biggest services from major Hollywood studios and media companies, let alone smaller, more specialized offerings.) Any kind of cable replacement or live TV streaming platform makes the cost essentially comparable to an old-school cable TV package, around $100 a month or more.

So called FAST, or Free Ad-supported Streaming TV services, have become a popular alternative to paid streaming platforms, with Fox’s Tubi making its first-ever appearance on Nielsen’s monthly platform rankings just last month. (It’s now more popular than the first FAST service to appear on the chart, Paramount Global’s Pluto TV.) According to Nielsen, Tubi now accounts for around 1% of all TV viewing in the US, and its model of 24/7 themed channels supported by semi-frequent ad breaks couldn’t resemble cable television anymore if it tried.

Services like Tubi and Pluto stand to benefit significantly from the new streaming paradigm, and not just from fatigued consumers tired of paying for more content. Cast-off shows and films from bigger streamers like HBO Max often find their way to ad-supported platforms, where they can start bringing in revenue for their original studios and producers. The infamous HBO Max shows like “The Nevers” and “Westworld” that WBD controversially pulled from the HBO Max service can now be found on Tubi or The Roku Channel.

HBO Max’s recently-canceled reality dating series “FBoy Island” has also found a new home, but it’s not on any streaming platform. Season 3 will air on TV’s The CW, along with a new spinoff series called (wait for it) “FGirl Island.” So in at least some ways, “30 Rock” was right: technology really IS cyclical. - Lon Harris

Here’s What Happened in LA’s Entertainment Tech World This Week 🍿

FaZe Clan is finally embracing women’s esports over a decade after its founding.

The future of hologram tech comes down to its price tag.

Social Media📱

TikTok users are finally talking about the ban.

Here’s how LA’s tech scene feels about the SVB collapse.

Small businesses are taking over TikTok live.

As TikTok faces a ban, competitors prepare to woo its user base.

Are influencers the key to fighting climate change?

Artificial Intelligence 🤖

The AI arms race hits college campuses.

AI is so cool. Why is the conversation around it so dumb?

We asked our readers how they’re using AI in a professional setting. Here's what they said.

Venture Capital & Finance 💰

The SoCal companies affected by the collapse of Silicon Valley Bank.

Who’s to blame for the Silicon Valley Bank mess? The internet investigates.

The near miss apocalypse: predictions for post SVB collapse.

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Want to fight climate change? Ask the influencers how to create a meaningful video.

SXSW transportation events heavy on hype light on details.

Get caught up on this week's career moves in L.A.'s tech world with our weekly roundup.

And check out our weekly 'Raises' roundup of L.A. startups that raised capital this week.

From Your Site Articles

As TikTok Faces a Ban, Competitors Prepare to Woo Its User Base

Kristin Snyder

Kristin Snyder is dot.LA's 2022/23 Editorial Fellow. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.

As TikTok Faces a Ban, Competitors Prepare to Woo Its User Base

Evan Xie

This is the web version of dot.LA’s daily newsletter. Sign up to get the latest news on Southern California’s tech, startup and venture capital scene.

Another day, another update in the unending saga that is the potential TikTok ban.

The latest: separate from the various bills proposing a ban, the Biden administration has been in talks with TikTok since September to try and find a solution. Now, having thrown its support behind Senator MarkWarner’s bill, the White House is demanding TikTok’s Chinese parent company, ByteDance, sell its stakes in the company to avoid a ban. This would be a major blow to the business, as TikTok alone is worth between $40 billion and $50 billion—a significant portion of ByteDance’s $220 billion value.

Clearly, TikTok faces an uphill battle as its CEO Shou Zi Chew prepares to testify before the House Energy and Commerce Committee next week. But other social media companies are likely looking forward to seeing their primary competitor go—and are positioning themselves as the best replacement for migrating users.

Snap

Alternatively, Snap is doing the opposite and luring creators with an ad revenue-sharing program. First launched in 2022, creators are now actively boasting about big earnings from the program, which provides 50% of ad revenue from videos. Snapchat is clearly still trying to win over users with new tech like its OpenAI chatbot, which it launched last month. But it's best bet to woo the TikTok crowd is through its new Sounds features, which suggest audio for different lenses and will match montage videos to a song’s rhythm. Audio clips are crucial to TikTok’s platform, so focusing on integrating songs into content will likely appeal to users looking to recreate that experience.

YouTube

With its short-form ad revenue-sharing program, YouTube Shorts has already lured over TikTok creators. It's even gotten major stars like Miley Cyrus and Taylor Swift to promote music on Shorts. This is likely where YouTube has the best bet of taking TikTok’s audience. Since TikTok has become deeply intertwined with the music industry, Shorts might be primed to take its spot. And with its new feature that creates compiles all the videos using a specific song, Shorts is likely hoping to capture musicians looking to promote their work.

Triller

The most blatant attempt at seducing TikTok users, however, comes from Triller, which launched a portal for people to move their videos from TikTok to its platform. It’s simple, but likely the most effective tactic—and one that other short-form video platforms should try to replicate. With TikTok users worried about losing their backlog of content, this not only lets users archive but also bolsters Triller’s content offerings. The problem, of course, is that Triller isn’t nearly as well known as the other platforms also trying to capture TikTok users. Still, those who are in the know will likely find this option easier than manually re-uploading content to other sites.

It's likely that many of these platforms will see a momentary boost if the TikTok ban goes through. But all of these companies need to ensure that users coming from TikTok actually stay on their platforms. Considering that they have already been upended by one newcomer when TikTok took over, there’s good reason to believe that a new app could come in and swoop up TikTok’s user base. As of right now, it's unclear who will come out on top. But the true loser is the user who has to adhere to the everyday whims of each of these platforms.

From Your Site Articles

We Asked Our Readers How They’re Using AI in a Professional Setting. Here's What They Said

Decerry Donato

Decerry Donato is a reporter at dot.LA. Prior to that, she was an editorial fellow at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

We Asked Our Readers How They’re Using AI in a Professional Setting. Here's What They Said

Evan Xie

According to Pew Research data, 27% of Americans interact with AI on a daily basis. With the launch of Open AI’s latest language model GPT-4, we asked our readers how they use AI in a professional capacity. Here’s what they told us:

Watch: Investing in Uncertain Times: Why a Reset in Valuations Could be Liberating for Founders

Speakers Include:

Kara Nortman, Partner at Upfront Ventures