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XLos Angeles Venture Activity Was Up in Q3, Despite Early Concerns
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.
Key takeaways:
- Exit activity saw a major uptick nationally, recording the second highest exit values on record in Q3.
- Local exit flow was the second lowest going back to 2014, but experts say there's little reason for concern
- L.A. saw fewer deals in Q3 than anytime since 2016, but also the highest amount of capital invested since that year, showing a preference for quality over quantity
- 2020 is on pace to establish a record high for total capital raised for VC funds, but big funds are having most of the success while smaller funds are struggling
Despite predictions of a black swan event amid the worst pandemic in a century that shows little sign of improving soon, venture capital exit activity saw a major uptick in the third quarter, according to the PitchBook-National Venture Capital Association (NVCA) Venture Monitor released Tuesday. Dealmaking and fundraising were both also robust in Los Angeles and beyond.
"L.A. had a very strong quarter," said PitchBook VC Analyst Kyle Stanford. "Los Angeles has completed the third highest number of deals in 2020, behind only San Jose/San Francisco and New York."
If there was weakness to be found, it would be that much of the action is taking place at later stages and bigger funds, not the younger companies and newer funds that dominate Los Angeles. Seed fundraising was anemic in the last quarter. Through Q3, $1.9 billion has been raised across 30 first time funds representing a record low of 3.3% of total capital raised.
Los Angeles saw the fewest number of deals in Q3 since 2016, but also the highest amount of capital invested since that year, mostly due to the nearly $2 billion Elon Musk's SpaceX raised in August. Companies that flourished during the stay-at-home economy also benefited, such as Zwift, a Long-Beach based online fitness platform that raised nearly half a billion dollars in Series C funding last month.
Investors say they were determined to focus more on quality over quantity, paying a premium to fund top startups for the long haul.
"This continues a trend that we were experiencing before COVID, which is larger seed rounds to support a longer runway," said Mark Mullen, co-founder and managing director of Bonfire Ventures, a Santa Monica-based B2B seed fund that closed a $100 million second fund last month. "Now with COVID and its current and unknown long-term economic effects investors are focusing even more on fewer companies and providing more runway to those companies."
As the stock market surged in the third quarter, companies like Snowflake, Palantir, Asana, and Unity had wildly successful IPOs, putting this year on pace to a record year for exit values, behind only last year.
L.A. saw a number of significant exits like Signal Sciences, which was acquired for $775 million in August. Blockfolio, a financial management platform, was acquired for $150 million in August. Sense360, a data insights platform, was acquired for $44 million last month.
But overall exit flow was the second lowest going back to 2014, except for the fourth quarter of last year. Still, investors caution that quarterly data should always be taken with a healthy dose of salt.
"It is just a quarter out of tens of quarters," Mullen said. "Deals go up and down in different periods. We have had three profitable exits in the last six months in L.A., which is our most in a six-month period. M & A in the world was way down in Q2 and Q3 due to COVID and is now having a resurgence."
Mullen added an optimistic note. "You may see a record Q4 and Q1 2021," he predicted.
As LPs seek out growth in a low-interest rate environment that looks like it will last for years, venture funds have raised a record $56.6 billion across 228 vehicles since the beginning of the year, which is already more than the $54.9 billion raised in all of last year. But big established funds like Greylock Partners Fund XVI of $1.0 billion and Meritech Capital Partners' Fund VII of $817.9 million are eating up most of the pie, while first time funds face a "herculean task" to raise capital, according to the NVCA.
"The consolidation of capital continues toward larger, later stage companies and established VC funds," said Bobby Franklin, president & CEO of NVCA, in a written statement. "While both of these trends are potential signs of concern for the long-term health of the VC lifecycle, overall the ecosystem has shown strong resiliency in the past six months."
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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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TikTok’s Latest Ad Strategy: Let Brands Crowdsource Creators
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.
TikTok’s newest advertising program will allow brands to crowdsource content from creators.
Branded Mission, which the Culver City-based video-sharing app announced Wednesday, is currently being beta-tested. The program lets brands release briefs containing specific creative directions—such as incorporating a specific hashtag, visual effect or audio—with the goal of procuring videos that will become promoted ads. Creators with at least 1,000 followers will be compensated with cash payments if the content performs well.
Creators participating in the “authentic branded content” program, as TikTok described it, can choose which brand initiatives they wish to participate in—with each Branded Mission “page” highlighting details like how much money a creator could potentially receive for participating. TikTok told Business Insider that it’s testing various payment models, including a first-come, first-serve model as well as “boosted traffic” compensation.
“Creators are at the center of creativity, culture and entertainment on TikTok,” the social media firm said in a statement. “With Branded Mission, we're excited to bring even more creators into the branded content ecosystem and explore ways to reward emerging and established creators.”
TikTok’s previous advertising strategies have relied on creators with large followings, with the recently announced TikTok Pulse targeting users with at least 100,000 followers. Branded Mission, on the other hand, gives creators with smaller platforms a chance to make more revenue beyond programs like TikTok’s Creator 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.
Greater Good Health Raises $10 Million To Fix America’s Doctor Shortage
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.
The pandemic highlighted what’s been a growing trend for years: Medical students are prioritizing high-paying specialty fields over primary care, leading to a shortage of primary care doctors who take care of a patient’s day-to-day health concerns. These physicians are a cornerstone of preventative health care, which when addressed can lower health care costs for patients, insurers and the government. But there’s a massive shortage of doctors all over the country, and the pipeline for primary care physicians is even weaker.
One local startup is offering a possible answer to this supply squeeze: nurse practitioners.
On Wednesday, Manhattan Beach-based Greater Good Health unveiled $10 million in new funding led by LRVHealth, adding to $3 million in seed funding raised by the startup last year. The company employs nurse practitioners and pairs them with doctor’s offices and medical clinics; this allows nurse practitioners to take on patients who would otherwise have to wait weeks, or even months, to see a doctor.
“This access and equity issue is just going to become more pervasive if we don't do things to help people gain more access,” Greater Good founder and CEO Sylvia Hastanan told dot.LA. “We need more providers to offer more patients appointments and access to their time to take care of their needs. And in order to do that, we really need to think about the workforce.”
There has been a growing movement in the medical industry to use nurse practitioners in place of increasingly scarce primary care physicians. California passed a law in 2020 that will widen the scope of nurse practitioners and allow them to operate without a supervising physician by 2023. Amid a shortage of doctors, there’s also the question of what will become of the largest and longest-living elderly population in recent history, Baby Boomers. Public health officials are already scrambling for ways to take care of this aging demographic’s myriad health needs while also addressing the general population.
“By the time you and I get old enough where we need primary care providers to help us with our ailments and chronic conditions, there aren't [going to be] enough of them,” Hastanan said. “And/or there just isn't going to be enough support for those nurse practitioners to really thrive in that way. And I worry about what our system will look like.”
Nurse practitioners function much like doctors do—they can monitor vitals, diagnose patients, and, in some cases, prescribe medication (though usually under the supervision of a doctor). Nurse practitioners need to get either a master’s degree or higher in nursing and complete thousands of hours of work in a clinical setting. All told, it usually takes six-to-eight years to become a nurse practitioner, compared to 10-to-15 years to become a practicing physician.
Greater Good Health’s platform puts nurse practitioners in often years-long care settings where they manage patients—most of whom are chronically ill, high-risk patients that need to be seen regularly and thoroughly. This allows them to follow up more carefully on patients they have managed for years, instead of catching up on a new patient’s history and treating them in the moment. Patients, meanwhile, don’t have to see a rotating door of clinicians and can talk to a provider they already have an established rapport with.
The one-year-old startup will use the funding to provide learning and development opportunities for its nurse practitioners and also connect them with each other through virtual support groups. Burnout has been an issue across health care during the pandemic, spurring an exodus of nursing and support staff and leaving health care facilities woefully understaffed. Greater Good hopes that keeping nurse practitioners in more stable, years-long care situations and offering them career development opportunities will help retain them and keep them in the workforce longer.
“We want them to be well-rounded and balanced both in work and life, and we see that returns us healthier, more engaged and ready nurse practitioners,” Hastanan said.
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.
Plus Capital Partner Amanda Groves on Celebrity Equity Investments
On this episode of the L.A. Venture podcast, Amanda Groves talks about how PLUS Capital advises celebrity investors and why more high-profile individuals are choosing to invest instead of endorse.
As a partner at PLUS, Groves works with over 70 artists and athletes, helping to guide their investment strategies. PLUS advises their talent roster to combine their financial capital with their social capital and focus on five investment areas: the future of work, future of education, health and wellness, the conscious consumer and sustainability.
“The idea is if we can leverage these people who have incredible audiences—and influence over that audience—in the world of venture capital, you'd be able to help make those businesses move forward faster,” Groves said.
PLUS works to create celebrity partnerships by identifying each client’s passions and finding companies that align with them, Groves said. From there, the venture firm can reach out to prospective partners from its many contacts and can help evaluate businesses that approach its clients. Recently, PLUS paired actress Nina Dobrev with the candy company SmartSweets after she had told them about her love for its snacks.
Celebrity entrepreneurship has shifted quite a bit in recent years, Groves said. While celebrities are paid for endorsements, Groves said investing allows them to gain equity from the growth of companies that benefit from their work.
“Like in movies, for example, where they're earning a residual along the way, they thought, ‘You know, if we're going to partner with these brands and create a tremendous amount of enterprise value, we should be able to capture some of the upside that we're generating, too’,” she said.
Partnering in this way also allows her clients to work with a wider range of brands, including small brands that often can’t afford to spend millions on endorsements. Investing allows high-profile individuals to represent brands they care about, Groves said.
“The last piece of the puzzle was a drive towards authenticity,” Groves said. “A lot of these high-profile artists and athletes are not interested, once they've achieved some sort of level of success, in partnering with brands that they don't personally align with.”
Hear the full episode by clicking on the playhead above, and listen to LA Venture on Apple Podcasts, Stitcher, Spotify or wherever you get your podcasts.
dot.LA Editorial Intern Kristin Snyder contributed to this post.