A Customer's Perspective on the Future of Daily Fantasy Sports (DFS)

Given the recent legalization in NY, and that NFL opening kickoff is just 15 days away, I’ve been thinking a lot about the current and future state of DFS. I am not an investor in either of the well-known unicorns, and I’m ignoring legal issues, so most of my perspective is that from an avid consumer.

For some personal context, I have been playing fantasy sports in its different varieties since the late 80’s (when we would track baseball stats by hand using the weekly USA Today). I was an early adopter to DFS, playing both on FanDuel and DraftKings. I’m also an investor in a hedge fund that was established to play these sites (yes, they exist — more on that later). and have seen some of the inner workings. Before DFS, I was an experienced online poker player (supporting myself through law/business school) which has inspired much of the business model and software behind DFS, and is a good comp to understand where the industry may go.

It doesn’t matter if DFS is a game of skill or luck — either way the majority will lose their money over time

It’s important to understand the standard business model — players do not play against DraftKings and FanDuel, but rather against eachother. The obvious analogy is casino games — DFS is akin to the poker room, not the blackjack table. DFS sites earn their money by taking a rake, or a percentage fee of every contest entry. Standard is around 10%. So basic example, 100 people enter a $10 contest, the prizepool will be $900, with the site keeping $100. They don’t care who wins — as they say ‘the house always wins’.

Now if you take the argument that DFS is not really a game of skill (what you’d really be arguing is that the sites price all of their players perfectly efficiently, so it doesn’t matter who you select), players are certainly destined to lose. Variance will do its thing, but over time, they have a negative 10% ‘deficit’ on every bet made. Over time (the more you play the quicker it will go), you’re destined to go broke. This is the ‘model’ that drives the standard gambling industry — pick a side w/ a 50% chance of winning, but pay out an extra 10% ‘vig’ when you lose. The other obvious analogy here is the lottery.

Now if you take the argument that DFS is a game of skill, most people will STILL eventually lose all of their money. The relevant equation is ‘edge’ v. ‘rake’. The rake here is 10%. So the average player will lose 10% on the average transaction. You don’t just need to be above average, but enough to ‘beat the rake’ to be a profitable player. Unfortunately, this is much harder to do than most realize. So it really just winds up being ‘rate of loss’ — below average players lose money at a scary-fast pace, average players lose gradually, and slightly-above-average players lose slowly. There is room on this bell curve for winners — but it’s a tiny fraction, and most of them are pros (more on that later).

That being said, it is clearly a game of skill

While luck can certainly play a factor in any single contest (just like any single poker hand), over time the variance is flattened, and ‘edge’ is all that matters. The data is pretty clear here. Exacerbating this is that it is very hard to ‘spot the sharks.’ You’re not going the challenge Michael Jordan to a game of 1-on-1, or sit with deep stacks at a table full of poker pros — but that’s exactly what you’re doing most times you enter a DFS contest, you just don’t know it. The anonymity of DFS (this was the same in online poker) makes it difficult to gauge. You’d think that the pros are going to stick to the big money contests ($100, $500, $1000+ contests), but you’d be wrong — the rules allow them to enter hundreds of entries into the smaller fee contests — so they can put a lot of money to work against lesser competition.

It only gets worse

I watched this play out over years in the poker world:

1. bad players (‘the fish’) lose quickly, and don’t come back

2. the average to good players stay on the platform, and get better over time

3. the great players remain great

4. because of 1,2, and 3, the average level of play increases over time. This decreases everyone’s edge, making it even harder to overcome that 10% to profitablity

Now fortunately, new players are always coming onto the platform to fill (1) above. We can thank the $807M ($446M for Draftkings, $361M for FanDuel) of venture funding for this, so they can continually acquire new players by showing those awful commercials on loop on every station imaginable. But due to (4 — increased average level of play), these new players have an even greater deficit and fall off even faster.

This flywheel starts churning faster than you’d think. I started playing online poker in 2003, and just 4 or 5 years later, there was a noticeable difference. Sitting down at similar stakes today and it’s predominantly solid-to-great players

There is an entire ecosystem that most don’t realize exists

Don’t kid yourself. Everyone thinks they are one of the better players — or at least average. What they don’t realize is that they can be the smartest kid and the biggest football fan, but the deck is stacked against them. Content sites, both free and paid. Professionals spending investment-banker-like hours squeezing out their edge. Statistical models. Pooled capital (one pro not enough for you? How about a group of them working together!). Data feeds. Weather feeds. Scouts in the stands. Software scripts. Fish finders. It’s akin to PEDs for athletes. It doesn’t matter if they make up only 1% of the player base — one research report from McKinsey found that the top 1 percent of players put enough entries and money out their to be responsible for 40% of the entry fees. Even scarier, they reaped 91 percent of the profits.

Does the market then eventually cap out and begin to contract?

This one is still TBD. A lot of it actually comes down to perception and intention. At some point, many will realize everything I just laid out. Most will learn the old-fashioned way, by watching their account dwindle week after week. But you can say the same thing about the lottery, or traditional casino games. If enough play for the pure entertainment value, the above matters less. Don’t get me wrong, it still matters — few are entertained by losing money quickly and consistently.

My gut says yes, it caps out and then contracts. But if it caps out at a huge number, and contracts very slowly, it’s not an issue.

Social components will play a bigger role moving forward

If pure entertainment value is paramount to success, I believe social components will need to play a bigger role moving forward. After all, this is really what drove the success of fantasy sports to begin with — 10 friends getting together, being competitive, and talking smack. Have you not heard of the Tattoo League? Celebrities play, families/kids play, even the actual players themselves! The league that I’ve been in since I was 8 was started by my father and uncle with their friends that go back 50+ years. They’re all in very different places in their lives now– most married, moved to different states, different careers, some have passed away. It’s often the only day of the year they see each other, and keeps them connected. It’s one of the amazing constant reminders of my uncle who died of cancer three years ago, to be in a league with his fraternity brothers. The entry fee was $150 twenty-seven years ago, today it’s around $200 — so clearly few really care about the money. (I highly recommend Mathew Berry’s NY Times bestselling Fantasy Life, which celebrates every aspect of the fantasy world, including some truly uplifting stories that remind us why we play these games in the first place).

How do they do that?

Ironically, I think it’s by taking a step back — back towards the traditional, season-long leagues that built fantasy. Both sites have already teased or launched such product in anticipation for this season. The goal is a hybrid of traditional and DFS — bringing in the ‘best of both worlds’. You get to draft a new team every week, but accumulate points for the season against a group of people you know. I participated in a similar contest last year (we managed it offline since their was no tool), and it was a resounding success.

I’m hoping there are other products in the pipe that fit the different preferences of play.

Please don’t merge

It has been rumored for a couple of months that the two dominant players in the space are in acquisition talks. I certainly understand why they’d consider it: similar services, battle of advertising dollars, collective influence in legal battles, etc. But for the customer, it would stifle the innovation that I think is necessary to keep the entire industry viable. They are both already light-years ahead of the incumbents (ESPN, Yahoo, CBS) in terms of UI/UX, especially on mobile. And while seemingly identical, we’re seeing FanDuel and DraftKings begin to deviate slightly in product and branding from one another — DraftKings skewing more towards the more serious player, FanDuel catering to the casual masses.

We’re already seeing FanDuel and DraftKings begin to deviate in product and branding

I don’t know if this is the intention, but I get the impression that DraftKings is going for the more ‘professional’ vibe, while FanDuel wants to keep the casual player. Some nuances in product:

· Deeper rosters on DraftKings (addition of ‘flex’) increase skill component

· Complex scoring (addition of PPR scoring) increases skill component

· Inefficient pricing of players (DraftKings has much wider range of salaries) increases skill component

You’re seeing this in branding as well. While each launched ways to play in private, season-long contests, DraftKings refers to the feature as “Leagues”, while FanDuel calls it “Friends”. FanDuel also recently underwent a rebranding, and according to their home page: we made real improvements, built for everyday fans.” Some examples:

· Main value proposition is “Sportsrich,” or the experience…not huge prizepools

· Three Pillars they ‘stand for’:

1. Fair and level playing field — beginner contests, transparency into who is playing, capped entries

2. Fun and excitement — play against people you know, single-entry contests

3. Protecting and supporting our players — Bill of Rights, employees banned from playing, limits on play (in partnership w/ National Council of Problem Gaming)

So who wins?

Each approach has merit. The DraftKings approach will attract the sharks who contribute so much revenue, but at the risk of long-term viability. FanDuel’s strategy will sacrifice short-term to keep the masses long-term.

Ultimately, the customer wins with more options.

I think this football season is a real inflection point for these companies. I’m very curious to see how many players have dropped from last year to this year, and how many drop throughout the season. Either way, I’ll be there battling against the sharks!

Do you play DFS? Why or why not? What do you think the landscape will like like 3 years, and 10 years, from now?

I’m running a 100-person season-long DFS contest (hosted on DraftKings) with weekly and season payouts. $30/week, $50k prizepool. Taking entries for another week — if interested email me at davidrgoldberg@gmail.com

THE CREATION AND EVOLUTION OF A STRATEGIC VC

Up to this point, I’ve treated Corigin Ventures as a startup. In June 2014, Ryan Freedman and I had a vision, a hypotheses around building a successful value-add venture firm from scratch, and spent the next 18 months building, learning, testing, and adapting. Like any startup, we’ve made mistakes, and have had our ups and downs (fortunately many more ups!). We’ve been careful not to pigeonhole ourselves with a brand and outward-facing message, as it was ever-evolving. While it’s still a continuous process and feedback loop, we are confident we have found our own ‘product/market fit’. What follows here is a transparent look inside Corigin Ventures, including our core values and processes. Given one of those values is transparency, we’ve redesigned our website to provide this information to the public – hopefully other investors and founders, along with the rest of the amazing people that make up the startup ecosystem, will understand who we are, what we do, and why/how we do it.

A LITTLE HISTORY

To understand Corigin Ventures, it helps to understand its ‘backer,’ Corigin, a NYC-based, privately held real estate developer, owner, and operator, led by Ryan Freedman, its Chairman & Chief Executive Officer. The Company’s platforms span development, multi-family rental apartments, student housing, property management and lending.  Each platform operates under a culture based on innovation and excellence focused on delivering the highest standards within their respective asset classes.

Always a forward-thinking CEO, and appreciator of technology and its impact on businesses, Ryan dipped his toes in early-stage venture investing. Leveraging his own experience as an operator and company-builder, as well as the cross-industry relationships he built throughout the years, his early ‘portfolio’ looked strong: Lending Club (IPO’d 2014) , Compass, Zeel, Wheels Up, Zopa, Kashable, and Singularity University.

CORIGIN VENTURES 1.0

I came on as Director of the venture group (then called CPEG Ventures) in June 2014, and while I hit the ground running making investments and helping portfolio companies, a fair amount of my bandwith went to thinking bigger about our firm, the vision, and strategy to execute. I spent countless hours researching successful VC firms and best practices, and speaking to countless mentors who have been in this game way longer than I have (I’ve especially enjoyed reading posts from Mark SusterSemil Shah, and Rob Go). The first decision was to better understand our mission, given our unique dynamic as what many would call a corporate VC. We realized it was best to keep the venture business somewhat separate (its own full-time employees, with a focus solely on bottom-line returns), but to leverage the resources, expertise, and network of the ‘other side of the business.’ We also realized quickly that we needed to narrow our focus, both in company stage and sector. We couldn’t be experts in everything, and it would be impossible to be top-of-mind with founders and other investors if we were a jack-of-all-trades, but master-of-none.

So we re-branded as Corigin Ventures, and focused on Seed investments, dealing mostly with consumer companies. We spent the next 18 months making a name for ourselves in the industry, building out an exceptional team, and learning by doing (read about my first 18 investments, and how they were sourced, here). Overall, it has been a success, and like a true startup, it’s time to take this to the next level.

CORIGIN VENTURES 2.0

As of today, our portfolio consists of 28 companies. Though there is an obvious concentration in New York, investments span San Francisco, Los Angeles, Miami, Chicago, and Israel. Sectors include on-demand services, real estate technology, marketplaces, IoT, CPG, fintech, wellness, retail innovation, and more. I’m most proud of the amazing network of founders that we’ve been fortunate enough to partner with, and the progress we’ve witnessed first-hand. Many of our companies have raised follow-on funding, and we’ve co-invested alongside amazing firms: Arena Ventures, Bowery Capital, Brooklyn Bridge Ventures, Canvas Ventures, Corcoran Venture Partners, Expansion Venture Capital, Founder Collective, Galvanize, Grace Beauty Capital, FinTech Collective, First Round, ForeRunner, Khosla Ventures, Lerer Hippeau Ventures, Lightbank, Lux Capital, Mayfield Fund, NAV, Primary Venture Partners, Partech, Prolog, QueensBridge, Sherpa Capital, Slow Ventures, Techstars, Thrive, Tribeca Venture Partners, Vast Ventures, 645 Ventures, and more!

We now have the data, and the time, to properly reflect on the past, and to refine for the future. What follows is an overview of our learnings, insights, and strategies moving forward. Some of these may be obvious, and relevant to VC in general, and some are specific to us.

  • Stage: We can’t do it all, and we’re not the right fit for every founder. I meet amazing people every day, who are tackling problems and opportunities in almost every sector imaginable, but we need to stick to what we know well. This helps us gauge deals better, and provide meaningful value post-investment. So moving forward, Corigin Ventures will be focusing mostly on true Seed investments, with a bit of Pre-Seed and Series A.
  • Check Sizes: while we’ll still be writing $100k-$500k first checks, we’ve honed in on the variables that factor into this, including our potential value-add. Our time spent on a company should be correlated to that investment, so it only makes sense to spend time on the companies where that time is most effective.
  • #FundProblems – There are real advantages to being free of LPs and a fund. It helps us act quicker and be more flexible, as well as align ourselves completely with founders. (more on this topic to come, including the disadvantages)
  • People are everything in this business. Our team, our founders, their teams, and our collective networks, are the baseline for everything we do. It is an asset that can differentiate a VC firm, and needs to be cultivated over time.
  • Real Estate touches everything – While we’ve now made only 3 investments that are truly RE Tech, we have been able to leverage our multi-family and retail portfolio to move the needle for a variety of companies. Access to physical (and digital) mailboxes, pop-ups, permanent physical space, not to mention the cross-industry relationships that are involved with real estate. One of our goals for 2016 is to make this type of value-add more of a turnkey operation, as opposed to creative one-offs.
  • The values that drive us: Transparency, Authenticity, Collaboration, Curiosity, Integrity. If you’re not on-board with those, we’re not the right fit.

 

Please visit the newly designed website (www.CoriginVentures.com) to get the complete picture and vision. We welcome any and all feedback, positive and negative. And as always, if our story resonates with you, please don’t hesitate to reach out directly to me at dgoldberg@corigin.com.

Revisiting On-Demand Startups

It's been a few years now since the uprising of on-demand startups in seemingly every vertical. Time to revisit, and see which have proven to be mainstays and which have faded. I'm taking off my investor hat for this one. No hype, no press, no unit economics, no valuations. Just straight-up value to customers, well, this particular customer. 

Consistent Use

Uber - I'll admit it. I didn't have Chris Sacca's vision, and I was not the earliest of adopters here (my skepticism came from the higher pricing which has since been dramatically lowered). But since that first trip I took about 18 months ago, Uber has become an integral part of my life as a New Yorker. I'm still a subway rider, so only take about 25 Ubers a month, but I probably won't own a car as long as I live in the city.

Seamless - Every single day (helped by our corporate lunch program), and pretty self-explanatory. The more interesting note here is that none of the competitors (Postmates, UberEats, Munchery, etc) have been compelling enough for me to use more than once or twice.

Zeel - Yes, we're investors. But I also pay full-price. I was never a "massage-guy," only splurging on vacation or when staying at a nice hotel. Now, Zeel is an integral part of my life, as the on-demand-when-pain-strikes component is underestimated. My standard Saturday is now 2-hours-of-basketball-followed-by-a-Zeel-massage. Try it once, you'll be hooked.

Minibar - Missed this as an investor, still a strong user. My main use case has actually been purchasing a bottle of wine or liquor to bring later that evening to a dinner party. And of course anytime I run low on Macallan 12. Have never tried any of the competitors, as liquor is a commodity and I was always happy w/ Minibar's UI/UX and selection.

Tried and Faded

Handy/Homejoy/Slate - Tried 2 of the 3 cleaning services, once each. Neither was a overwhelmingly positive experience. More relevant, I felt no reason to keep this transaction 'on-platform,' and have a great cleaning lady that comes like clockwork every other week. 

UberEats - I had such high hopes, so I gave it multiple chances when temporarily relocating the Corigin Ventures team to WeWork Gramercy. But it missed the mark pretty much every time. Mediocre food, weak selection, and poor packaging. And not telling me you're sold out of free banana pudding when that's the only reason I ordered the cuban sandwich? Blasphemy.

Instacart - 0 for 2. First time took over 2.5 hours. Gave another chance, and they missed multiple items in the order, and another was melted by time of arrival. From what I hear, this was not a unique experience, and they still have some core competencies to work on.

Shyp - I used it once, and my wife used it a few times (typically for returns), but I just don't mail physical things that often, and most companies are now making returns quite simple with return labels. Also, don't sleep on the USPS, they actually offer many of the same features as Shyp for free. 

TheBouqs/UrbanStems - Tried each once, never again. My wife literally held up the bouquet and asked "this is it?". Paid 4x what I could get at a local bodega, and it was half the size. 

Haven't Tried (Yet)

FlyCleaners/Washio/Cleanly - I've always lived in a building with a concierge/valet, or had my cleaning lady do my laundry. But I get it. Laundry is a huge time suck so overpaying a little for the added convenience makes sense.

Luxe/Zirx/Caarbon - I don't have a car, so don't have much of a need for on-demand valet parking. But I have been temporarily commuting from NJ the last 6 weeks and have driven my parents car in quite a number of times. But still haven't felt the need to download any of the apps and give a try. I've always known where I was going, so using "Best Parking" app always did the trick at a much lower cost. 

Priv/Shortcuts - On-demand haircuts. Not sure I really get it. Seems like something I can schedule out later in the week. There's been a few occasions where I had a free afternoon, said to myself "may as well get that overdue haircut," and I didn't have much trouble booking something that afternoon. I also have concerns that if I found someone I really liked and trusted, I'd take it off platform as the provider is more important than the time.

Wag/Swifto - My dog is part of my family, and I've always had a dog-walker to taker Kylie out mid-day, so presumably I'm the target market. But similar to a cleaning lady, once I find someone I trust, I'm sticking with him/her. My offline guy runs a solid business, and always has a back-up if he's unavailable. Not sure the notification that my dog made a real life poop-emoji makes a difference here. 

 

I'll probably give most of the players in the last section a try, if even just to get a pulse of what's going on in this sector. And many of these companies are moving so fast that new features, markets, experiences will get me to give a 2nd chance to the ones that have yet to impress. But as new entrants pop up seemingly every few weeks, the bar is set pretty high, and true value needs to be delivered to make a lasting impression and become an integral part of my life (or my homescreen).

I'd love to hear your experiences. Which on-demand companies have changed your life? Which can you live without? Who did I miss? Let me know in the comments below.

Yogi-isms for Startups

I never got to see Yogi Berra play baseball. He last played in 1965, 16 years before I was born (he managed until 1985). But he was always a bit of a folkhero to me. Perhaps because I grew up the son of an insufferable Yankees fan (I'm a Mets fan and Yankee hater). You know, one who claims he had all the valuable rookie cards like Mickey Mantle's, but his mother threw them away. Or perhaps it was because he grew up in the town next to mine, and we'd frequently see him at our Little League games, as his grandson (named Larry, after him) played with us. He was kind, approachable, and of course, funny as hell.

Ironically, at least to anyone under the age of 50 or the most diehard Yankee fans, that's what he's probably most known for. His personality, and his famous "Yogi-isms," those pithy words that sometimes made you think, and sometimes made sense. Some argue that not all actually were originated by Yogi, and in his typical form, he stated "I really didn't say everything I said."

But don't be fooled, he was one heck of a ballplayer, underappreciated when compared to the big names of his time. But consider his accomplishments:

  • 18 time all-star
  • 13 time world series champion (10 as a player, a record)
  • 3 time MVP
  • More home runs than strikeouts in 5 seasons (including 12 strikouts in 597 ABs in 1950)
  • Inducted into Hall of Fame in 1972

Yogi passed away earlier this week, and I spent some time learning about the player, and the man, I had heard so much about. I read, and chuckled, at the over-50 Yogi-isms attributed to him. And what never really struck me until this moment, was just how much wisdom and wide-spread application there was to his comments. So in his honor, here are some of my favorite Yogi-isms, and how they relate to the startup ecosystem.

There will never be enough hours in the day, days in a week, or weeks in a year. Founders need to wear so many hats, and do the jobs of many.

As an investor (and founder), don't chase the hot trend or sector, and be the 6th or 7th person to the party. Have your own convictions, regardless of what the herd thinks. 

Pretty self explanatory. Don't ever give up, and let your will be one of your competitive advantages. Startups are really tough. Keep iterating, as it often takes one small detail for the proverbial lightswitch to turn on. 

Take advantage of history, and others' successes and mistakes. It kills me to watch you make the same ones again, when all you had to do was look.

I always hear investors and founders lament about the good ol' days, when people 'made things that mattered', and valuations weren't crazy. Personally, I think it's a load of crap, and am very excited for the incredible products and services being built. 

Some other favorites:

Yogi, you'll be missed. 

If you have any other Yogi-isms, please share in the comments below.

If Short-Selling a Startup Was Legal

DEFINITION OF 'SHORT SELLING'

The sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is motivated by the belief that a security's price will decline, enabling it to be bought back at a lower price to make a profit.

As VCs, we see see up to a dozen potential deals a day, with one real decision to make: Invest or Pass. In terms of our own actions, it doesn't really make a difference if a deal just barely misses the mark, or if we think this is the worst deal we've come across in years. Either way, it's a pass. But what if, like the public markets, individuals could sell-short those they felt were extremely overvalued? Perhaps there is another post in the future about whether this would ever be possible, and the ramifications on the industry, but for now I will give my thoughts on which companies I'd bet against - I won't name specific companies, but rather certain industries/trends. Hope I don't offend anyone. 

  • Any "vertically-integrated" e-commerce startup that has raised $2+M before launching a single product to the market. I don't care if "there's no dominant brand in the space" or if Red Antler is branding your product, you're overvalued at a $10M pre-money.
  • Any on-demand company that doesn't add value by actually being, you know, on-demand. Personal trainers, house cleaners, movers, dog walkers, blowouts. Most of these are relationship-based, and you want to schedule the same person to come over and over. The quality of work (or trust in that person) is far more important than getting it within an hour. See: HomeJoy.
  • Any startup trying to completely remove the residential real estate broker on sales. It may be feasible on rentals (though nobody has made a big dent yet), but purchasing a home is the single most important buying decision an individual can make, and there will always be a certain amount of handholding necessary. The relationship (and comp structure) may change, but we won't be living in a broker-less world anytime soon. 
  • Any startup directly competing with Uber. They are ruthless. Like the genetically modified dinosaur in the new Jurassic Park movie, they will eat/kill you even if they're not hungry anymore, just for sport.
  • Any startup with real technology at its core, that is outsourcing that technology. Seriously, guys?
  • Any startup completely reliant on a third-party platform. Sure, it can help you scale very fast. And there may be some big winners here, but there will be a lot of total losses along the way. Perhaps I'll just short the index here.
  • Any startup that needs to get to mass scale just to start earning revenue. These will be the first to collapse if/when there is any market correction, and there won't be soft landings.
  • Any startup w/ a CEO at the helm who has ever lied to us in the fundraising process, or shown a lack of integrity. They'll sink the company at some point, mark my words.
  • Any startup that optimized on valuation over the right partners (no, we are not always the right partner). Not only will they miss out on the value-add of those partners, they will dig themselves a hole for future funding.
  • Most single-product Internet-of-Things. They are getting crazy valuations, and taking too long to get to market, and then get real penetration. Most will not make it to a 2nd or 3rd product.
  • Most wearables, especially those taking simple notification/tracking technology and making it prettier.
  • Almost every new dating app not owned by IAC.
  • Any founder that says "There is no direct competitor". Either you're completely ignorant, or you're market is too small for others to want to get involved.
www.digeratilife.com

www.digeratilife.com

Have some thoughts on any of these? Have one of your own to share? Let me hear it in the comments!

LA Tech - Hype or Hope?

I just came back from spending a week out in Los Angeles, with the goal of scoping out the entire tech/startup ecosystem, from founders to investors to infrastructure. I had been hearing a lot about the growing scene, but needed to see it for myself. I've done this a few times before in other markets (Miami, Downtown Vegas), and have so far been disappointment.

My Process

I have been targeting LA for almost two months, and wanted to make sure I got the most out of my 5 days. So I began with a simple spreadsheet, where I'd continually add names of founders, investors, accelerators, coworking spaces, and anyone else potentially relevant. I'd scour blogs like TechCrunch, and leverage data sites like AngelList, Mattermark, and CBInsights. I also leveraged LinkedIn to see who in my network could help me connect. Then I started reaching out - either through connections when possible, or just old-school cold emails when necessary. I wound up with a solid list of potential meetings. But to ensure quality over quantity, I ended every email with a request - to send me a shortlist of 3-5 people that I should meet. I cross-referenced, and as to be expected, many of the same names appeared over and over again. So they got moved to the top of the list. I wound up with 20 meetings over 4.5 days. I tried to group them by location as best I could, and I was off (in my convertible rented from Relay Rides).

Investors

Since Corigin focuses on Seed investments, I met with likeminded investors. So I can't speak much to the late-stage players out West. But overall, I was thoroughly impressed with the investors I met with. Upfront Ventures seems to be leading the LATech charge (with their newly raised $280M fund), so I started there. I subsequently met with Karlin Ventures, Pritzger Group, Arena Ventures, Atom Factory, Wavemaker, Core Innovation Capital, Demarest, CAA Ventures, Mucker Capital, and Amplify (I wasn't able to connect with some others, like Crosscut Ventures). Each has their own focus, whether stage, vertical, or geography. While all focus on local investments in LA, few limit themselves, and are opportunistic about investments outside the geography. This is important for an early ecosystem. It's no surprise that many of these funds come out of entertainment groups, a mainstay of LA. I'd be happy to coinvest with these firms any day.

Founders

It was a small sample size, but I was also impressed with the founders I met. There seems to be some really strong storytellers and branders running "tech-enabled" consumer companies. I see this as an area LA can really dominate.

I was also surprised to find a tremendous female-founder contingency. From Kelsey Doorey of Vow to be Chic, to Lee Greene of Wearaway, Ashley Crowder of VNTANA, Espree Devora of WeAreLATech, and Angel Anderson of NailSnaps, all proved savvy and scrappy.

And every person I ran into, had another 3 talented individuals that I needed to meet. While I didn't have the time, no doubt I will expand my network on my next trip.

Talent

While no area can match the pure talent, especially on the engineering side, of San Francisco, Los Angeles has an amazing talent pool, especially given the newness of the area. I attribute this to 3 factors:

1) Lifestyle - unlike some other areas like Detroit and Downtown Vegas, it's hard not to fall in love with Los Angeles. Whether it's beachfront Santa Monica, Hollywood, or Williamsberg-esque Silver Lake, I enjoyed everything about the area (other than the traffic). This makes it easy to attract, and retain, talent. I met quite a few who migrated from the Bay purely for lifestyle purposes.

2) Schools - UCLA and USC have churned out some impressive talent, and have incubated some great companies. Their entrepreneurship programs are top notch, and have only gotten better as LA has proved itself a worthy competitor to New York and Boston.

3) Incumbents - LA has been a breeding ground for some great exits. TrueCar, Oculus, and Maker have all exited already, with Tinder, Snapchat, and The Honest Company all members of the unicorn club. As companies like that grow (and exit), people take their learnings (and compensation) to work at emerging startups, or start their own. Many also give back to the ecosystem by becoming angel investors, further adding fuel to an already burning fire.

My Conclusion

Overall, I am extremely bullish on the LA Tech ecosystem. While of course there is still room to grow, all of the necessary characteristics are present. I expect LA to consistently hold down third place behind SF and NYC, and hopefully Corigin can be a participant.

 

I'd love to hear your thoughts on the LA Tech ecosystem. What does it need to take it to the next level? And if you are someone I missed on my trip, please connect!

Because the world needed another blogger

I've been thinking about starting a blog for quite some time now. To me, venture capital and entrepreneurship are inspiring and collaborative, and we all benefit from collective experiences and learnings. Writing has always helped me work through my thoughts, and by doing so publicly, I am hoping to spark interesting and intellectual conversation.

Disclaimer: I haven't given this too much thought yet. Wouldn't be the first time for an impulse decision.  There is no product roadmap for this blog. Hence the name, VC Ramblings. I plan to write about whatever is on my mind at the time. One day it could be a deep dive into an emerging trend or market, the next my personal experiences with a product or service, and another a "why we invested" post. I plan to write openly and honestly, and encourage feedback and dissenting opinions. I tend to write conversationally. Like a startup, I'll throw a lot of spaghetti against the wall, and see what sticks.