LA startups don't sport inflationary valuations

Los Angeles-based startups carry a 30% discount in valuations vs their Silicon Valley counterparts

Tech startups in LA are in a unique position. They’re nestled in one of the largest creative hubs in the world, featuring a concentration of universities and students, a diverse community, and an unparalleled wealth of marketing and advertising experts. At Thursday night’s Vator Splash LA, Peter Lee of Baroda Ventures said definitively that “by far, the last three to four years have been the most active I’ve seen in LA.”

At one point in the evening, DFJ partner Heidi Roizen asked the panel a question: “we’ve seen a lot of Series A price inflation in Silicon Valley as everyone chases the same companies. Are you seeing that as well?”

The VCs on the panel all weighed in on the Series A scene in LA, and all generally agreed that the inflation seen in Silicon Valley isn’t rearing its head in LA.

“LA is a bit sheltered from the Valley presence,” said Peter Lee. “Generally speaking, there’s about a 30% discount down here compared to the Valley. In LA there’s a little more focus on monetization compared to the Valley, which is focused more on growth. Because of the DNA and skill set here, there’s more of a consciousness of monetization. More startups are going to exit quickly where small amounts are doable.”

Demand Media co-founder Shawn Colo echoed that statement, saying that “LA is a singles and doubles culture.” He added a little word of warning to startups that are thinking of raising more money than they really need:

“I do run into a problem where I want to acquire a startup, but they’ve raised enough money to price themselves out of a deal. If they had been smarter and raised less, they would’ve had a successful exit and could have made some money,” said Colo, who handles M&A deals for Demand Media. Some of Demand’s acquisitions include Name.com earlier this year, RSS Graffiti, IndieClick Media Group, CoverItLive, Pluck for $75 million, and Expert Village.

Image source: fairplex.com