Where LA’s top consumer VCs are looking to invest

From a fundraising perspective, Los Angeles has become just the southern-most part of the Bay Area. Top-tier VCs from SF visit LA regularly, and entrepreneurs raise from investors upstate and downstate in one process. Anecdotally, as an LA resident of 4 years, there’s been a palpable uptick of entrepreneurs from the Bay Area who move down here after exiting to found their next company.

Los Angeles is a hub for a wide range of startups, but it has two major groupings: consumer-facing startups that tap into Hollywood’s marketing culture, and the deep-tech ecosystem created by the city’s role as a hub for aerospace, defense and R&D.

To track how the ecosystem for software and digital media startups here is evolving, I asked a few of the top consumer VCs based there to share some of the trends they are most excited about investing in right now:

  • Kevin Zhang, partner at Upfront Ventures
  • Mike Palank, partner at MaC Venture Capital
  • Effie Epstein, partner at Sound Ventures
  • Brett Brewer, partner at CrossCut Ventures
  • Courtney Reum, partner at M13
  • Ron Rofe, partner at Rainfall Ventures
  • Ryan Hoover, partner at The Weekend Fund
  • Dustin Rosen, partner at Wonder Ventures
  • Zach White, principal at Sinai Ventures

The key takeaway is perhaps the diversity of their responses: investors here are going deep into trends across the spectrum of consumer spending. Consumer health and transportation are mentioned, as they were in my surveys of VCs in London and in New York, but this group repeatedly predicts a new wave of interactive, social media startups (albeit with different perspectives on what it looks like).

Kevin Zhang, partner at Upfront Ventures

I’m a strong believer it’s the best time to be a game developer now. Every 10 years or so distribution shakes up, now giants like MSFT, Google, Sony, Epic, etc. are rushing in to shift gamers to subscriptions and cloud gaming, which means big exclusive content library building with lots of “non-dilutive” capital for developers. Games themselves are becoming bigger, cross-platform, cheaper to build and more accessible than ever thanks to advancement in game engine and networking tech. Related: there’s a new generation of mobile entertainment brewing at the intersection of short-form video, live, audience participation and social play; it’s marrying what’s worked with UGC and live video with in-app-purchases and retention tactics of casual games to create more accessible and bite-sized entertainment destinations.

Mike Palank, partner at MaC Venture Capital

While it used to be that great content alone made for a compelling entertainment experience, as we move into the future it will be the blending of great content and amazing tech that will truly capture and retain people’s attention. We’ve seen those funny Youtube videos of babies swiping pictures in physical magazines showcasing their expectations that everything is interactive. I think in much the same way, expectations around filmed media (movies + TV) will trend towards the interactive. We are seeing some truly interesting experimentation around interactive right now from companies like Netflix, Unrd, Eko, CtrlMovie, Playdeo, Hovercast, Aether, Within, Twitch and others.

The winners of the streaming wars understand this and I believe will supplement their content slates with interesting technology to make the viewing experience unique and participatory (Quibi has already announced some examples of this). At MaC, we are looking for those innovative companies that are re-thinking how consumers experience filmed entertainment to make it more experiential, interactive and engaging.

Effie Epstein, partner at Sound Ventures

At Sound, we believe that investors have an enormous responsibility to help shape the future we all want to see. To that end, we’ve been seeing a lot of promising innovation emerge around financial inclusion and digital healthcare. For example, Divvy Homes is a company that is making home ownership a possibility for the millions of Americans who struggle to afford a down payment, and Affirm is giving consumers a fair alternative to credit cards in an age where Americans are more in debt than ever. Meanwhile, TruePill is making it easier and more affordable for end consumers to access medication by changing the way medicine gets delivered, and Alma is making mental healthcare easier for consumers as well as for practitioners.

Brett Brewer, partner at CrossCut Ventures

This year, I’ve been focusing on investments in the future of mobility and transportation. Living in Los Angeles makes us not only hyper – conscious of the issues we currently face but also well-positioned to think about what the next phases of mobility advancement should look like. Leading the seed round in Wheels is a good example of my mindset right now—They’re breathing some exciting new life into the micro-mobility market.

Courtney Reum, partner at M13

I’m really excited to see what opportunities lie ahead in the health industry. It was only a few years ago you had to call the doctor’s office to make an appointment. But now you can make the appointment directly online. We’re also beginning to see consumers pay closer attention into improving their mental health which is important. Mobile apps are also making a huge impact into ways we take care of ourselves. Whether it’s a meditation app or connecting with a therapist electronically, these are just a few of the examples of the future of coping with mental health through technology.

Ron Rofe, partner at Rainfall Ventures

A broad shift toward financial conservation and environmental sustainability in consumer preferences is fueling the success of resale marketplaces and environmentally conscious direct-to-consumer brands.  We see companies like Casper and Allbirds implementing strict environmental standards in their manufacturing processes so that products are eco friendly from the ground up.   

I’m also looking for consumer facing platforms that make routine health and wellness more accessible.  We expect this trend to continue as consumers seek to maintain healthy lifestyles in the face of rising healthcare costs and opaque pricing. We also see practitioner discoverability as a massive pain point for patients and platforms like helloAlma.com having a transformational impact in this regard.

Ryan Hoover, partner at The Weekend Fund

Snap Kit is the next big platform for consumer social. Last year Snap introduced Snap Kit, giving developers the ability to integrate with its Bitmoji avatars, story sharing, and more. Since then it’s been adopted by large companies including Spotify, Reddit, Fitbit, Venmo, and Shazam in addition to emerging startups like YOLO, TTYL, Squad, Breaker, and WYA

YOLO illustrates how Snap’s Creative Kit can help with distribution. The app made it easy to ask Snapchat followers a question and quickly it became a fixture in the App Store, acquiring millions of users days after its launch.

Snap Kit is also being used to optimize onboarding. 70% of people that signup on Squad choose to login with Snap, and they’re not alone. Many other social products built for a Gen Z audience have found Snap to be a preferred login among the 13-24 year old base.

We should expect to see a lot more experimentation and success stories as Snap continues to expand its offering. It’s early.

Dustin Rosen, partner at Wonder Ventures

We are actively spending time looking in the mental health and emotional well-being space. Younger and older generations alike are becoming increasingly addicted to social media and their phones. This has had an adverse effect on mental wellbeing, in a way that’s different from traditional mental health issues that therapists and psychiatrists are used to seeing. So, we are looking for companies that understand the complexities/nuances of the problem and are looking to leverage technology to tackle this problem in a new and differentiated way.

Zach White, principal at Sinai Ventures

Over the last year, our team has become increasingly active in funding companies that service culturally impactful, but traditionally perceived as niche, consumer groups. I have consistently seen how providing value to these under-serviced cohorts not only creates organic virality around products and services, but also, how pent up consumer demand promotes outsized LTVs and attractive retention metrics. 

This general thesis has driven us to invest in everything from an accessible editing toolkit for the meme community (Kapwing), to a beauty brand for underrepresented skin tones (Uoma Beauty), to an e-commerce business selling fashion forward hijabs to young Muslim women (Haute Hijab).  While all very different in application, at their very core these companies democratize the access to participation in communities largely overlooked by the mass market thus far. By continuing to allocate capital to founders tackling this kind of connectivity, I believe we can create a tremendous amount of value for marginalized consumer groups around the world.