With the Los Angeles tech scene exploding, CrossCut Ventures raises $125 million to invest


Image Credits:

CrossCut Ventures, a Los Angeles-based seed investment firm has just closed its fourth (and largest) fund with $125 million in new cash.

It’s been a long road for the firm’s three co-founders, who have been investing in Los Angeles since 1997. In that time they’ve seen the city’s technology scene evolve in fits and starts, but now, with companies like Snap, Dollar Shave Club and Oculus bringing billions of dollars down from Silicon Valley, a wave of investor interest has followed — and with their new fund they stand to reap the benefits.

“We’ve been looking for that since 2008,” which is when the firm launched its first institutional investment vehicle, says Brian Garrett, a co-founder and managing director at CrossCut. “we are now in a place where those tentpole companies, like Snap, and Oculus, and Dollar Shave Club… we can build those companies here.”

Indeed, the seed stage investor has already had success with its previous investment vehicles, which have put $50 million in capital to work behind 70 companies that have raised $1.3 billion in follow-on funding. And 66% of those investments were made in companies based in Los Angeles.

“Los Angeles is capturing the attention of institutional LPs, which is leading to the virtuous cycle of innovation. Tech  companies have hired thousands of people and brought a ton of talent down here and those people will go off and start their own businesses,” Garrett says.

Indeed, CrossCut had set out to raise only $100 million, but there was so much interest from limited partners — the funds that back venture firms — that the venture firm hit its hard cap for fundraising at $125 million.

The firm has certainly come a long way from the $5 million it raised for its first vehicle in the dog days of 2008 as the global financial crisis was taking its toll on economies around the world.

The entire CrossCut Ventures team: (from right) associate Sarah Moret; Clinton Foy, managing director; Brett Brewer, co-founder and managing director; Brian Garrett, co-founder and managing director; Rick Smith, co-founder and managing director; Michael Tam, associate


From that small, first fund, things grew slowly and steadily for the partners at CrossCut, Garrett said. The firm’s second fund, raised in mid-2012, was a modest $16 million, and it raised a significantly larger fund in 2014 as the Los Angeles market as it exists now was beginning to take shape.

The increasing investment pools in some senses mirror the pace of acceleration of the Los Angeles ecosystem, but in those early days, the CrossCut founder said things were not necessarily that rosy.

“Here’s the story,” says Garrett. “[CrossCut co-founder] Rick Smith and I left cushy venture jobs to start Crosscut… I had no savings and bought a new house in the Pallisades with a big mortgage.” Then the bottom fell out of the economy.

“There wasn’t a fee stream coming off the fund,” Garrett said. “I was consulting with anyone who would help me around strategy and business development… and got pulled in with a public company turnaround… a lot of what we were trying to do was replicate venture models in Brazil.”

The company was called Que Pasa and Garrett helped it raise an $11 million PIPE. That deal, ultimately led to an acquisition.

Meanwhile, another CrossCut co-founder, Brett Brewer had gone to a company in Kansas City called AdKnowledge. While still working with CrossCut, Brewer helped AdKnowledge raise $40 million from TCV and scaled the business to $300 million in revenue, Garrett told me.

“We were the largest seed fund in LA at the time at $5 million we were running this thing out of coffee beans on nights and weekends,” Garrett said.

In fact, the firm’s latest addition as partner, Clinton Foy, actually began at CrossCut as an unpaid venture partner back in 2014. “We brought him in as a partner ahead of fund three not even sure we were going to raise fund three. Foy has brought eSports, gaming, and mobile streaming experience to the partnership — and has already scored a pretty big win as the co-founder of the Immortals e-sports team.

The first fund has now returned 4 times its money from 18 investments — 11 of which netted positive returns. And the firm’s second fund is one-third returned with a paper valuation at nearly 5 times its money, given the fair market value write ups of the deals in the portfolio, Garrett said.

There are currently 32 companies in the portfolio and 12 of those investments were made in the last year.

Typical check size for the new CrossCut fund will be potentially as much as half of a $2.5 million to $3.5 million dollar round, but the firm doesn’t want to stray too far from traditional early stage seed investing, according to Garrett. However, at nearly two times larger than any other seed fund in town, the firm has a bit more dry powder.

As with previous vehicles, the fund will primarily look to invest in Los Angeles and Southern California, but it will look elsewhere too — as long as the potential investment has some need to tap the Los Angeles market, the firm is interested in taking a look.

Los Angeles, could, however, occupy a more central place in the investment thesis given the activity from startups that exists here.

Indeed, the appearance of new investment firms coming in at later rounds have made the city’s venture scene more robust, and brought a new attention to the companies coming out of LA.

Investors like Mark Suster at Upfront Ventures have been beating the drum for Los Angeles as an epicenter for technology investment for a number of years. Through the Upfront Summit, which his firm launched a few years ago, Los Angeles investors and entrepreneurs have had a marquee showcase  to pitch all of the things that Los Angeles can offer to a tech company — and the opportunity that exists for investors, Garrett said.

But Upfront, which has been in Los Angeles since 1996, and other investment firms like Greycroft Partners, which established themselves in Los Angeles more recently (and, in the case of Greycroft, have offices in other geographies from which to commit capital) have managed to provide the later stage capital that was the oxygen the local ecosystem needed.

For Garrett, the presence of a broader investment base is great for a firm like his, which need later stage investors to fund their portfolio companies past a Series A round (which is the time that CrossCut will tap out to let other investors lead). 

“What happened is that the ecosystem believed that there were next generation businesses to be built,” said Garrett. “For us it was Ophir [Tanz] at GumGum and Jason [Nazar] at DocStoc and David Lee.”

That was around 2008 to 2011, right before Upfront Ventures began to really publicize Los Angeles as the hot new place to go for tech startups, according to Garrett. “I will fully then say that Mark Suster created a lot of awareness and a megaphone and a spotlight that got shone and we have been a great beneficiary of his outward efforts,” he said.

These days, the firm’s investment interests are as diverse as the Los Angeles ecosystem it supports running the gamut from artificial intelligence, to blockchain technologies, to gaming and eSports. The firm has also backed companies in automation, “big data”, digital marketplaces, and software as a service.

“I was CrossCut’s very first investment as they formed the fund back in 2008.  It’s been amazing to watch their success and growth.  They have quietly and humbly built one of the best reputations in VC by working tirelessly on behalf of their portfolio companies.” says Jason Nazar, founder of DocStoc (sold to Intuit) and now a co-founder of Comparably.  “They deserve a lot of credit for catalyzing this ecosystem and were the first to recognize the opportunity and build a fund and brand around it.”

At this point, for CrossCut and Los Angeles, the important thing is the solid foundation on which new startups are being built. “It’s a perfect storm of a lot of factors,” said Garrett, but the Los Angeles tech scene now has grown and “contributes to this idea that tis will not be a hyped and busted ecosystem.”


Companies like Tesla and SpaceX have reinvigorated Los Angeles manufacturing, aerospace, and automotive industries, while young data scientists from the University of Southern California are doing amazing work around big data, Garrett said.

“It’s a ten year story arc, right now there’s no branded money down here that is being built to catalyze innovation that has the ability to build a viable standalone investment firm in Southern California.” That’s an opportunity for a firm like CrossCut, with its new capitalization, to stake a pretty large claim for itself in a tech ecosystem that is still developing.



More TechCrunch

The U.K.’s self-proclaimed “world-leading” regulations for self-driving cars are now official, after the Automated Vehicles (AV) Act received royal assent — the final rubber stamp any legislation must go through…

UK’s autonomous vehicle legislation becomes law, paving the way for first driverless cars by 2026

ChatGPT, OpenAI’s text-generating AI chatbot, has taken the world by storm. What started as a tool to hyper-charge productivity through writing essays and code with short text prompts has evolved…

ChatGPT: Everything you need to know about the AI-powered chatbot

SoLo Funds CEO Travis Holoway: “Regulators seem driven by press releases when they should be motivated by true consumer protection and empowering equitable solutions.”

Fintech lender Solo Funds is being sued again by the government over its lending practices

Hard tech startups generate a lot of buzz, but there’s a growing cohort of companies building digital tools squarely focused on making hard tech development faster, more efficient, and —…

Rollup wants to be the hardware engineer’s workhorse

TechCrunch Disrupt 2024 is not just about groundbreaking innovations, insightful panels, and visionary speakers — it’s also about listening to YOU, the audience, and what you feel is top of…

Disrupt Audience Choice vote closes Friday

Google says the new SDK would help Google expand on its core mission of connecting the right audience to the right content at the right time.

Google is launching a new Android feature to drive users back into their installed apps

Jolla has taken the official wraps off the first version of its personal server-based AI assistant in the making. The reborn startup is building a privacy-focused AI device — aka…

Jolla debuts privacy-focused AI hardware

OpenAI is removing one of the voices used by ChatGPT after users found that it sounded similar to Scarlett Johansson, the company announced on Monday. The voice, called Sky, is…

OpenAI to remove ChatGPT’s Scarlett Johansson-like voice

The ChatGPT mobile app’s net revenue first jumped 22% on the day of the GPT-4o launch and continued to grow in the following days.

ChatGPT’s mobile app revenue saw its biggest spike yet following GPT-4o launch

Dating app maker Bumble has acquired Geneva, an online platform built around forming real-world groups and clubs. The company said that the deal is designed to help it expand its…

Bumble buys community building app Geneva to expand further into friendships

CyberArk — one of the army of larger security companies founded out of Israel — is acquiring Venafi, a specialist in machine identity, for $1.54 billion. 

CyberArk snaps up Venafi for $1.54B to ramp up in machine-to-machine security

Founder-market fit is one of the most crucial factors in a startup’s success, and operators (someone involved in the day-to-day operations of a startup) turned founders have an almost unfair advantage…

OpenseedVC, which backs operators in Africa and Europe starting their companies, reaches first close of $10M fund

A Singapore High Court has effectively approved Pine Labs’ request to shift its operations to India.

Pine Labs gets Singapore court approval to shift base to India

The AI Safety Institute, a U.K. body that aims to assess and address risks in AI platforms, has said it will open a second location in San Francisco. 

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

1 day ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets