Los Angeles (LA) is known for its creativity and entertainment. Silicon Valley (SV) is known for its technology and innovation. Because of the new technologies and changing consumer behavior, the fields of entertainment and technology are converging. Netflix, Amazon, Google, Facebook, Apple, etc. are changing how entertainment content is created, consumed, and monetized. The merging of entertainment and tech was the foundation of my own startup, EVER, I launched two years ago to satisfy the human curiosity that occurs when you see and like something new on TV. Pitching EVER took me from Silicon Valley to LA almost every week for over eighteen months. I navigated the entertainment industry relying on what little information was available in the marketplace on how this industry operates and my own background in technology and experience working in the Silicon Valley startup ecosystem for a few years.
In the most simplistic terms, in SV, a startup creates a product and is funded by a Venture Capital firm and sells its product to consumers/customers. If the product sells successfully, everybody involved in the process makes a lot of money. In LA, a production company (startup) creates a product (tv show/movie) and is funded by a studio (venture capital firm) and sells its product to the TV network/distributor (customer). If the product sells successfully, everybody makes money except the production company.
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I noticed a few key differences in how business is done in Silicon Valley vs Los Angeles. They are:
1. Introductions: For a startup to do deals, raise money, hire people, you need introductions. In LA, my focus was deal-making. I met a lot of people who were very excited about what we built and were eager to help me. But, this help came with a price tag -- sometimes up to $25k per month. Their point of view was that if they are helping me with an introduction or a deal that will make me a lot of money, they should be compensated for that in cash now; like a lobbyist. And, in LA, most of the deals are done in back rooms and not through a formal purchase process. In SV, the point of view is different. If people like your idea, they generally introduce you to people for deals, capital, or talent without any expectations. The assumption being that I might do the same for others and when I am in a position to help, I help. If somebody engages with you to work for a few months on a deal then, generally, they get equity in the startup and no cash. In LA the networking is cash driven and paid up front. In SV the desire to help make introductions is based on anticipated equity should the startup be successful.
2. Communication: People in LA are very good at making anything exciting. If you want to feel good about anything you are doing then just share the idea/demo with somebody in LA. They will tell you that the demo is the best thing they have ever seen and they can see it taking over the world, etc. They promise to help you get in the door, make introductions, and so on. As a startup founder, you want to hear that so you believe it. Often you never hear from these people again. Your emails and phone calls go into a black hole. In LA, less than ten percent of my meetings turned into good leads or valuable information and in SV the ratio is probably 30-40%. In SV, the conversations are more honest, direct, and realistic. People are just as busy in SV as they are in LA selling and networking but in SV people tell you the opportunities and challenges related to your startup. Overall, my experience in LA was that of smoke and mirrors, while in SV the culture is more accountable and, generally, people follow up on what they promise. It might have something to do with the players in the respective marketplaces. Tech people are not known to be great salespeople, we have to hire them. LA is full of great salespeople because they have to sell all the time to survive.
3. Openness: Every new idea is a secret in LA. People protect their ideas because they can be easily stolen. The entertainment industry is a tight, relationship-driven industry. If your idea is with an established entity, it most likely won’t get stolen because they have to maintain a reputation. The mindset in LA is not to tell anyone about your new idea until it is in production. SV is the opposite. People talk openly about their ideas with other people, get feedback and refine their ideas. It might be because the execution defines the success in SV, not just the idea. In LA, the execution is relatively easy. You have the producers, studios, and the network. The execution machine works well. In SV, the resources are available but the founder has to create the execution machine from finding people, investors, and customers.
4. Self-promotion: In both LA and SV, people are always self-promoting.The difference is that in LA, people do that for survival. Lots of people who work in the entertainment industry to create TV shows, movies, etc. do not have salaried jobs. They get paid per project. So, if you meet somebody when they are looking to get hired for a new project, you will always be a lower priority because they’re working on getting their next paycheck. In SV, lots of people have salaried jobs so when they are doing self-promotion, it is for their next gig. And, all startup founders are always promoting the startup and themselves but it is not for their next paycheck. Hence, the thinking is more long-term compared with LA.
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