3 Reasons to Invest in SoCal Technology Companies

Brian Garrett, co-founder of CrossCut Ventures (http://www.crosscutventures.com) explains why to invest in tech companies in Southern California. He delves into the advantages of putting money in “Silicone Beach,” a recently flourishing startup space.

  1. Diverse mix of companies provides unique investment opportunities
  2. Less competitive environment with more cooperation
  3. Difficult path to monetization breeds robust entrepreneurs

Having been an investor down here in Southern California for the last 10 years, I’ve seen the good and bad in the evolution of this market, and I think there are three really unique characteristics that make this a great market. So Cal Technology Community has blossom in the last 4 years. We have better opportunities here than we’ve ever seen. But, there are three really unique qualities that I think set as apart from New York and Silicon Valley.

The first is we have such a broad set of industries that are unique to L.A. We have media, we have apparel, we have the celebrity influence, we have a broad set of manufacturing industries. All of these, sort of a confluence of all these industries has led to some truly innovative businesses particularly in the e-commerce base or in social or mobile. We’ve really developed a unique DNA in and around the confluence of these industries and the skills that come out of them.

The second piece that I love about Southern California is there is just as great collegial atmosphere, and it’s sort of a factor that we are not paid attention to by groups like TechCrunch who are watching Silicon Valley and New York. We don’t have consistent media coverage of all the innovation and greatness that’s coming out of this market. So this needs a less competition and every entrepreneur down here is rooting for the other entrepreneur. And we’re all in it together in an attempt to build a great community in Southern California that will last for the next 20, 40 years.

And then last piece is some of the successes of this market and you know, success breeds the next generation of success. Some of the most successful that we had in ’04, ’05, ’06 companies like PriceGrabber, and JamDat and LowerMyBills and Intermix Media – these companies, they won’t be described as the sexiest businesses ever built. Their business models were not sexy. They weren’t big platform companies, but they were incredible entrepreneurs that figured out how to make money. And the reason they had to figure that out is because we’re under-capitalized. There’s not a lot of venture dollars down here to support this ecosystem. So these entrepreneurs bootstrap their way, and figured it out how to take a product and a business and turn it into a profitable endeavor that didn’t require fund raising millions of millions of dollars.

And so it’s sort of the—these three concepts that make this a really interesting market. It’s a broad set of industries -- media, apparel, celebrity influence and all of them leading to innovative business models to an incredible atmosphere of everyone supporting everyone trying to build great companies.

And then three, this unique mindset of build companies that are profitable and profit strive exit value not platforms that don’t necessarily have business models sitting underneath them.

Those three characteristics have made this an incredible market and I think the best is yet to come for Southern California.