LOS ANGELES — Critical mass is always good.
And the stock market debut of Snap Inc. may be just the turning point that gives the greater Los Angeles tech scene its due. The flashy IPO, which valued the Snapchat parent at over $31 billion, followed Facebook’s $2 billion buy of Oculus in 2014 and Unilever’s purchase of Dollar Shave Club for $1 billion last year.
Much like the conversation being had around L.A.’s rise within fashion, with the influx of designer presentations — from Tommy Hilfiger and Rebecca Minkoff to Tom Ford and Louis Vuitton — there are enough eyeballs on L.A. tech to beg the question of: Now what? And for the fashion tech space, specifically, does this mean more investments or IPOs?
“The L.A. tech community is one of the hottest start-up markets in the world right now,” said Shawn Gold, corporate marketing officer of El Segundo, Calif.-based TechStyle Fashion Group, which owns JustFab, FabKids, ShoeDazzle and Fabletics.
Gold is the former head of marketing and content at MySpace, which News Corp. paid $580 million for in 2005. He joined the company last year, just before it revealed the name change from JustFab Inc. to TechStyle in a bid to bring its roots in data and technology to the forefront. The company’s on track to hit $1 billion in sales in about two years.
“The Snap IPO is another proof point to the innovation happening in Los Angeles,” Gold said. “It will serve to bring more talent and investment to the community, which will fuel the growth of even more disruptors. Fashion is next.”
Mike Karanikolas, cofounder and co-chief executive of Revolve — another heavyweight among the digital fashion brands in the Los Angeles area, based out of Cerritos — is thinking along the same lines.
“Snap is a great embodiment of what makes the Los Angeles tech scene so exciting — the combination of great tech and creative talent together in one city, and the IPO should only bring more attention to all that the city has to offer,” he said.
Dee Murthy, cofounder of Five Four, said: “It’s a big milestone for the L.A. community. To have an IPO of that magnitude further reinforces that L.A. is becoming the cross-section of technology and entertainment. L.A. in the past has had a hard time attracting top-tier investors. An exit like this changes perception and shows that megabrands and businesses are still being born in Los Angeles.”
Five Four is a men’s subscription box company that’s expanding its portfolio of brands, which includes its namesake along with Grand Athletic Club and Mercer and Clay, a grooming line set to be released this year. The company’s expected to double its revenue this year to about $100 million.
The IPO should also funnel new money into L.A.-based investors and entrepreneurs that have been a part of Snap, which could potentially be reinvested into start-ups, said Katherine Power, ceo and founder of Clique Media Group, which owns Who What Wear, MyDomaine, Obsessee and Byrdie.
“It’s certainly reassuring to investors to see this kind of an event, as there haven’t been a ton of IPOs for these highly valued companies in recent years,” Power said.
For Clique Media in particular, Snap’s IPO could prove a boon in other ways since the company uses the platform to obtain feedback on its brands or for its advertisers.
“Typically, when companies have an IPO, they are often more motivated to open new revenue streams,” Power said. “So, as a content and commerce company, CMG will be watching to see if, when and how Snap tackles this.”
However, some see the Snap offering as having little direct impact on L.A. fashion.
“I don’t feel our industries are closely related,” said Corey Epstein, the cofounder and co-chief executive of digital premium denim brand DSTLD. “Snapchat is a social media platform and not well-developed for a fashion brand, unlike Instagram and Instagram Stories. At the end of the day, our investors are different. So I don’t think it will push people to want to invest in direct-to-consumer fashion. Instead, it will make people more interested in companies with inflated valuations and high-risk/high-reward investments — more like the typical unicorns Silicon Valley is chasing. The recent Dollar Shave Club acquisition is more relevant since it demonstrates success in the e-commerce space.”
DSTLD, based out of West Hollywood, took a less-traveled path to raise money with a Regulation A+ offering, which opened last year. The process, also called a mini-IPO, is part of Title IV in the JOBS Act and allows for companies to bypass more traditional routes of fund-raising to enlist the broader public to invest.
Still, even if there is no trickle down effect onto e-commerce or other players in the general fashion tech space locally, many agree, it’s a contribution to the overall buzz surrounding the area’s fashion, food, art and tech scenes — and their convergence.
“L.A. is absolutely having a renaissance, and the fact that Snapchat wants to stay based in Venice is a testament to that,” Epstein said.