Monday, June 4, 2012
Insights and Opinions: The LA Discount
For this morning's Insights and Opinions, section, where we feature the voices of Southern California's technology industry, we have an article from Howard Marks, the co-founder of Los Angeles startup accelerator StartEngine and co-founder of gaming giant Activision. Howard asks why there is a discount for Los Angeles tech startups, in terms of valuation.
Why are Los Angeles tech startups valued at a discount in comparison to startups in Silicon Valley, New York, and other cities?
For example, LA startups graduating from accelerators are receiving convertible notes ranging between $1mm-5mm cap with a discount of 10 to 20 percent, while Silicon Valley startups are receiving convertible notes at $8 million to 12 million with no discounts.
Let’s look at the factors to why we question LA startups being valued at a discount:
LA is an emerging top tech city. According to a recent study, the Startup Genome, LA is listed #6 in the world for startup ecosystems, based on average throughput, behind #5 Tel Aviv, #4 Toronto, #3, London, #2 New York, and #1 Silicon Valley. (More...)
Read the rest of Howard's article, The LA Discount.