Snapchat Will Make Los Angeles A Stronger Tech Hub
December 2, 2016
If you were to write a history of Silicon Valley, you could do it by looking at a series of major diaspora. Companies like Google, Yahoo, Oracle and PayPal attract top talent for years; when they reach maturity or a major liquidity event, their talent disperses and germinates into the next generation of companies.
The fruit doesn’t fall far from the tree, and the tendency of these companies to start up and grow nearby their progenitors has contributed to the virtuous cycle that maintains the Bay Area as the premier destination for entrepreneurship and technology today. Now that Snapchat (OK, parent company Snap) has announced an IPO that could value the company at $25 billion or more around March 2017, it’s quite possible that the ensuing “Snapchat Mafia” could do the same for L.A. into the 2020s. And while no one company can single-handedly reshape the SoCal versus NorCal divide, Snapchat’s forthcoming liquidity event is timed alongside other major trends that can position L.A. at the center of future areas of growth.
Will the Snapchat Mafia take after Facebook or PayPal?
Many peg the origins of Silicon Valley to the moment when the Traitorous Eight left Shockley Semiconductor Laboratory for Fairchild Semiconductor in 1957. Members of that group went on to found Intel, AMD and dozens of other companies.
The most well-known recent example is, of course, the PayPal Mafia, whose ranks included Elon Musk, Peter Thiel, Max Levchin, Jeremy Stoppelman, Reid Hoffman, David Sacks, Dave McClure and Chad Hurley, among others. The group is together responsible for Tesla, SpaceX, SolarCity, Yelp, LinkedIn, YouTube, Palantir, Yammer, Clarium Capital, The Founders Fund, 500 Startups… the list goes on. The value created post-PayPal is so illustrious and far-reaching that it’s hard to imagine such a confluence of people like that again.
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But there are other, perhaps lesser, examples: Facebook alumni brought us Path, Quora, Asana and a fair share of VC funds. Yahoo alumni created WhatsApp, Chegg, Slack, SurveyMonkey and Cloudera. The founders of Instagram, Foursquare, Pinterest and Twitter all passed through Google at one point or another.
Today, L.A. has one of these bona fide tech superstars in its midst — one with the power to draw this kind of top talent down I-5. With at least 150 million daily active users and its stratospheric valuation, Snapchat is that company (for perspective, it was a mere seven years ago that Facebook was worth $10 billion).
If you’re young and ambitious and loaded with talent, where would you go? Facebook, which has already gone through its hyper-growth and innovation stage, or Snapchat, where you can contribute to rapid growth and have your work make a bigger impact? A number of such individuals, like former Facebook product head Sriram Krishnan, have already made the jump. More will follow.
Content: Return of the king
Of course, it’s not just inertia that will keep the diaspora of Snapchat talent within L.A.’s orbit.
“Content is king” has long been a mantra among Hollywood executives, but for the last 20 years, content producers have hardly been feeling like kings. The business model for selling and distributing content has — and still is to this day — become subject to radical disruption by new technology-driven players, mostly from the Bay Area.
First it was the rapid rise of the internet itself, which destroyed the classifieds business most newspapers relied upon to turn a profit. Then, Apple’s iTunes and iPod toppled the music industry from its height in the early 2000s. More recently we saw the rise of social media, which is still upending the traditional advertising model for online publishers and spawning new publishers powered by clickable and shareable content. And now, of course, we have on-demand video networks like Netflix giving theaters, film studios and traditional TV broadcasters a run for their money.
The last 20 years have seen this tremendous shift in content distribution platforms, away from the traditional media networks and toward the technology-driven platforms that deliver content on-demand via computer, tablet and mobile phone. In many ways, this has been the driving narrative of consumer technology in the 21st century: The traditional media establishment lost control of its distribution.
That trend is about to change, and we will see the balance of power start to shift back to content. The disruptive platforms that brought about this paradigm shift in media — Facebook, Apple, Amazon, Google, Netflix — have for the most part been established. Having permanently shifted the way people get their content, these entities are no longer competing with traditional media, but with each other. The rise of platforms is now becoming the war of platforms. Going forward, the game is less about old entities coming to terms with new players than it is about these new players fighting for primacy among themselves.
That war is being waged with content. Content is the differentiator between the warring platforms, and they are bidding up the price for quality creative. Already we’ve seen Netflix spend $6 billion on programming content in 2016, Amazon is spending $3 billion and Apple reportedly considered buying Time Warner. Twitter staked its hopes on broadcasting live sports like the NFL, while music platforms from Apple, Spotify, Amazon and Tidal compete for exclusive album releases.
All of this is good news for L.A., which is the world capital for content creators (rivaled only by New York City). Paired with the high-quality tech talent that Snapchat is drawing away from Facebook, Google and Twitter, there’s the potent mix of ingredients to accelerate a startup renaissance here in the Southland.
A vibrant alternative to tech monoculture
My friends from San Francisco complain about the rise of a tech monoculture in their city, and I understand what they mean. San Francisco used to draw creative and offbeat types from all kinds of backgrounds and with all kinds of interests, because it was beautiful, affordable and weird (in a good way). Not only is it much less affordable these days, it’s also less diverse and less interesting to those who aren’t totally focused on technology startups. Indeed, today’s Bay Area isn’t for everyone.
By contrast, L.A. remains a vast, vibrant and diverse patchwork of varying scenes, each a bit different than the next, yet still accommodating to a wide range of interests and pursuits. The tech scene here is growing and maturing; it’s easier than ever to raise capital and hire good talent. But perhaps the greatest feature of L.A.’s startup scene is that it could never take over the character of the whole city. A lot of people find that an attractive prospect.
The impact of that culture and diversity go beyond just quality of life — cue Google Glass versus Snap Spectacles. Spectacles have a fashionable cool factor that Glass ultimately did not — the product decisions that drove their respective developments were influenced by their environments. Snapchat’s L.A. roots give it a better sense of what’s cool, and what’s meaningful to its audience, whereas Silicon Valley focuses instead on what’s technologically achievable with less focus on what’s culturally salient.
Snapchat may become the PayPal of SoCal; its momentum and the prospect of Snapchat billionaires and millionaires let loose in L.A. is enough of a draw to put Los Angeles in many up-and-coming tech stars’ consideration set. Content is becoming an important factor in the next chapter of tech, something that is core to L.A. culture. One can already see how the L.A. DNA of Evan Spiegel is influencing Snapchat’s journey.
For those entrepreneurs getting tired of the constant class warfare and tech monoculture of the Bay Area, L.A. is cementing itself as an attractive option. The quality of life and relatively sustainable cost of living may prompt some to stay, as well. Snapchat will accelerate that trend, adding vibrancy to the tech culture of the city.