Monday, June 4, 2012
Insights and Opinions: The LA Discount
Story by Howard Marks
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.
Letís 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.