By Taylor Van Arsdale and David Rosenfeld
Like it or not, the name Silicon Beach sums up in two words what’s been happening lately in Venice and Santa Monica where an emerging group of Internet companies have staked claim to a mini Los Angeles tech boom.
With cool ocean breezes and surfboards these fresh new companies have been able to attract some of the best young talent of a generation. So it wasn’t long before Google, Yahoo and Microsoft took notice and moved in, a sign Silicon Beach is here to stay.
Whether you subscribe to the newly coined moniker or not, there’s no denying the area is at the forefront of some of the most interesting emerging technologies. Let’s face it, this is the best climate in which to create bold dreams, and venture capitalists are taking a hard look at some of the brightest new players in the field.
At the Grail Project, a team of web developers is busy on their laptops in what feels like someone’s house on the Venice Beach boardwalk. The crew is spread out on couches in the living room with floor-to-ceiling glass doors opened completely to the ocean breeze. Nalgene bottles sit near a kitchen sink. Upstairs in the loft area monitors and wires fill a dining room table. The job also comes with full access to bikes, surfboards and skateboards.
“My philosophy around startups is always over spend on the office because then you can pay people value salaries and attract great talent because the space is so great,” said founder and CEO Ryan Magnussen, who has some pretty lofty ambitions for this particular startup.
“Our goal is to redefine the way people discover and consume content, namely news and video,” he said from a third-floor balcony, shielding the sun with a pair of aviator glasses.
Magnussen grew up in Palo Alto in the heart of Silicon Valley so even as a young business student at USC in the early 1990s, he had his mind geared toward a growing industry at the time called the Internet. In 1995, with $20,000 and still in business school, he and a partner started Zentropy, one of the first web development companies in history. Four years later, the company earned $80 million in revenue with major entertainment industry clients such as MGM, Paramount and FOX.
“A lot of the times when I was pitching I was actually explaining what the Internet was,” Magnussen said.
A few years after selling the company, in 2003 he started Ripe, which launched on-demand TV channels across broadband and mobile phones, notably before YouTube. He sold that in 2009 and just about a year ago started Grail.
Through its own algorithms and a user’s Facebook profile, the Grail Project will offer streaming content tailored to your interest. A web site and mobile app are expected to roll out later this year. Magnussen said he started the company in Venice specifically because of Silicon Beach.
“I found the collective group down here was growing so rapidly and I needed to be around this sort of climate to build a company,” he said. “It’s kind of been widely recognized as the place to build a business.”
But it’s not like it used to be in the online world. Given the stiff competition these days, Magnussen said he would actually be concerned if no one was doing something similar.
“Now especially in the digital space if you have a good idea it usually has other things being done that are close or similar,” he said. “It’s actually a good sign that there are different competitors.”
Next door to the Grail Project is theCHIVE, which started in 2008, bringing viewers humorous video and photos. The web site earned a name for itself in recent years through several high-profile news story hoaxes.
Further north in Santa Monica, 29-year-old Sam Friedman is the CEO and Co-Founder of ParkMe.com – a multi-national company responsible for an app that lets consumers find parking (either in lots or on the street) in real-time.
Their bustling office is divided into a tech area where programming details take place, a data team that fills in all the parking data users need and a marketing division. Located on the 3rd Street Promenade, the company has a laid back feel to it, encouraging employees to play darts and take breaks to walk or get a cup of coffee.
Friedman and his co-founder Alex Israel came up with the idea after they couldn’t find a parking space in Santa Monica one night and missed a film.
“I thought let’s do something about this problem,” said Friedman, who considers himself a person who can fix things. “I had no idea what that meant but I figured if parking was tough for us, it’s definitely tough for everyone else. We were just out of college and had no idea about parking or technology or business but were naïve enough to just start.”
The two realized they needed to gather information but also knew they needed real-time statistics.
“It’s out there, but it’s not readily available,” Friedman explained. “The key is to know pricing and availability, and there were a lot of details to sift through to get to this final product.”
ParkMe formed alliances with vendors to upload live, real-time data for their consumer base as well as major aggregators like Fandango, Fusicology and MovieFone. Their ParkMe widget when installed on websites provides a map of parking and an interactive experience for users. They also generate revenue through parking companies, who are eager to tap into the advertising capabilities of the ParkMe app. Users can determine quite quickly which lots are not only available but how much they will cost by the hour.
“We didn’t realize at first but parking data is extremely valuable. One of our major capital investors is Bill Ford, one of the owners of the Ford Motor Company, and Ford sees this as a natural addition to car systems. People are already using navigation devices and parking would be an addendum to these systems,” Friedman explained.
In fact, the company just signed a deal with a major auto company to integrate the ParkMe data and app into a GPS system.
“This will be the first time a car will roll out with built-in parking data added to a navigation system. So now your car can tell you where to park,” said Friedman, who won’t say yet which car company is the lucky recipient, but quipped, “It is a German company.”
Nate Redmond, Managing Partner of Rustic Canyon, currently one of the largest venture capital firms in Los Angeles, eschews the name Silicon Beach.
“I don’t believe it to be a very accurate representation,” he said. “Naturally by extension, with the growth of a Silicon Valley everyone wants to apply that same moniker to every other region. With New York, there was the Silicon Alley tag that stuck there for a little while and now it’s just kind of become New York and technology. And I’m hoping we see the same thing happen in LA very soon.”
And yet, like the great view at Grail, Rustic Canyon’s plush offices overlook the ocean and palm trees of Santa Monica’s Palisades Park, to which Redmond joked, “Sure, and as with New York, you overlook a lot of alleys.”
The witty Redmond, who hails from Michigan, has a background in engineering, with a masters degree from the University of Michigan College of Engineering. He began his career as a consultant to technology firms on new product development and business strategy.
He went on to manage investments and advisory work at early-stage technology companies for one of the most well regarded professors at the Harvard Business School, and about a decade later came to work for Rustic Canyon.
“We came out of the media industry and were at the forefront in the shift in media,” Redmond said. “We look to enable new consumer experiences both directly with new services as well as indirectly by companies that allow others to do that.”
They invested early for instance in Gaikai, a cloud-based gaming technology that allows users to play major PC and console games instantly without downloading or installation.
“It’s been interesting to see the development of the ecosystem here,” he said. “Southern California has been building off a long engineering heritage, out of the aerospace industry and a terrific university system. There are more technical graduates in Los Angeles County than anywhere else in the country.”
During the mid-90s tech bubble, funding went into areas such as Boston, New York and the Bay Area, which grew exponentially. “What we’ve seen in the last 10 years is a slow march forward in terms of development and really over the last two years an emergence of Southern California as yet again another leader.”
A recent study by The Kauffman Foundation, found Los Angeles beat out San Francisco, New York and Boston as the most entrepreneurial city in the United States.
“That’s not solely technology but it speaks to the entrepreneurial culture that is really at the fabric of this region,” Redmond said. “So you take that and marry it to the technical underpinning and the technical graduates that are coming out here every year and then the proximity to this huge market here, and to Asia, and I think you have the foundations for real, long-term success.”