Private equity has a new home on the West Coast. The place is named Silicon Beach. This three mile stretch of the Los Angeles basin coastal area, including parts of Santa Monica down to Venice Beach, has become a hotbed of private investment in new Internet startups in the last few years. The activity has been so jumpy; now even Amazon, Google and Facebook are literally establishing offices in the neighborhood to actively engage with startups and grab some of the new idea goodies for themselves directly.
The name of the location, being a play on Northern California’s Silicon Valley in San Jose and Freemont, is apt because the high majority of startup prospects are technology-related with a heavy emphasis on Internet based products. The investment activity involved is no passing fad either. In the first quarter of 2013, affected Silicon Beach startups realized $96.3 million in just three companies in terms of financial support. This figure didn’t include all the angel investing and behind the scenes private equity moves also going on in the area.
As a result of the success stories cropping up from one specific location, Silicon Beach is now getting everyone’s attention, from new private investors keen to get in on the act to loads of startups looking for the big opportunity. The consolidation of so many players who rely on each other for mutual success is notable. Where else can an entrepreneur literally walk down the street and be able to talk to multiple venture capital firms all within the same location and within minutes of each other? A visual display of where each player type is in Los Angeles currently speaks volumes answering that question.
There are other players besides the big tech giants and private investors competing for startup attention as well. A number of incubators and support labs have set up shop, helping startups get closer to realization and actual business growth. The University of Southern California and private equity have partnered together to create the Viterbi Startup Garage, intended to help boost startups and send them in the right direction.
Those private equity partners who have already settled in early are now reaping big profits. The sale of AwesomenessTV is one example, generating a return of funding to exit totalling $117 million. The sale of Goodreads was also an eye-opener, nearing as much as $150 to $200 million in return to investors.
So the chase for the next big thing in Silicon Beach may now be starting its maturity phase with the introduction of big players buying offices there. However, many involved in private equity and startups still believe there is plenty to be had along the beach.
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