Music Entrepreneurship in LA: Last night was Learn About the New LA Incubators/Accelerators night for Lean LA, hosted by Pete Mauro, Patrick Vlaskovits, and Joe Zulli at the Santa Monica Civic Auditorium. As usual, the place was packed with an enthusiastic crowd — 300 or so people this time — most of them current, former, or aspiring entrepreneurs in the Los Angeles area. As a nice token of gesture, the admission price came with a meal ticket that you could use to redeem at one of the food trucks sitting outside of the auditorium. (I had the burger.)

Los Angeles Incubators/Accelerators Representatives

Photo Courtesy of Lauren A Hayes

There were representatives from Start Engine (Howard Marks), Idealab (Allen Morgan), upStart.LA (Dan Dato), K5 Launch (Amir Banifatemi), Originate (Jeff Scheinrock), Amplify (Jeff Solomon), Muckerlab (Jeff Rannala), and Launchpad LA (Sam Teller), and the panel was curated by venture capitalist and founding partner of 500 Startups, Dave McClure. Each representative gave a brief introduction and history of what each organization did, and explained their interest in getting involved with the Los Angeles startup scene in the upcoming years.

Why come to Los Angeles, as opposed to, say, Silicon Valley, San Francisco, or New York? According to them, LA has an enormous potential for growth because of its demographics — it has the highest concentration of educational institutions in the area (USC, UCLA, UCI, CalTech, Harvey Mudd, etc.) and a diverse and multicultural talent pool that results from people coming to the city from all over the world. What the incubators/accelerators are trying to do right now is to create an infrastructure that would allow these talents to meet, collaborate, and realize innovative solutions and business models that would help the city to sustain itself in the 21st century. The raw talent is there, but the consensus seems to be that much of it is disorganized and often not put to good use. The panel discussions consisted of candid talks about the current startup scene in LA and what this might mean for the city in the upcoming years.

Here’s a quick chart that gives an overview of each organization: Los Angeles Area Incubator & Accelerator Cheatsheet
(Courtesy of Patrick Vlaskovits, more details here.)Start Engine: 120 Startups @ $20,000 per year
Idealab: 4-6 Startups @ $50k – $500K a year
upStart.LA: 5-10 Startups @ $18,000 each class (1-2 classes per year)
K5 Launch: 10-50 Startups @ 25K-$200k
Originate: 10-15 Startups @ $100K-$1.5 million per investment
Amplify: 20 Startups @ $50,000
MuckerLab: 20 Startups @ $21k a year
Launchpad LA: 20 Startups @ $50k a year

So the good news is that for people interested in entrepreneurship, there are literally millions and millions of dollars sitting around right now looking for innovative ideas, people, and teams willing to work on these types of projects. Accelerators/incubators also have an educational mission embedded into them — the majority of these organizations assign “mentors” to each funded company in order to help get the startup get on its feet, as a way to increase its odds at success. The ones that are proven to be successful move onto the next phase where they’ll be considered for seed funding and/or other types of investments that allow for the company’s expansion. To start, though, all you need is an idea and show that you’re willing to work for it.

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The majority of the panelists have said that a big reason why they’re in Los Angeles is because of its strong presence and long history in art, entertainment and interactive media sectors, which they’re currently looking to get more involved in. If these ventures become more commonplace in the city, there should be more gigs and jobs available for artists and musicians in an overall sense. Having known a lot of talented people who moved away or found some other means of supporting themselves, this was fairly welcoming news and a hopeful sign that the situation among artists in LA may actually improve in the future.

Lean LA Meetup

Photo Courtesy of Chris Dumler

Maybe because this panel was mainly tech-oriented, though, there wasn’t much talk about content production: How were artists and musicians going to be involved with this new process? The panelists all agreed that “product people” (i.e. engineers) were important, and many of them had made it a requirement that you have at least one person on your team who could “actually build” your product before they would agree to fund your idea. In the entertainment industry, artists and musicians would also have to be considered an essential component in the process in order for it to be considered truly innovative.

The whole SOPA/PIPA debacle seems to have brought up a lot of bad blood that has been brewing between Hollywood and the tech sector, which isn’t likely to be resolved any time soon. Nonetheless, if founders are looking to utilize content made by the studios, they’re going to have to figure out a way to work with them without losing an eye. But this is likely to get expensive for startup companies, given that Hollywood has shown that it’s willing to fight for its share of the pie. Even disregarding legal issues, the costs of its usage is likely to add up really quick, and business models based off these ideas may only be available for high-profile companies like iTunes, Pandora, Grooveshark, and so on. This also puts the company in a precarious position, since it would be functioning simply as a distributor of another industry.

In the music world, smaller companies have attempted to bypass this problem in two ways: One option is to hire studio musicians who create music “something like” a well-known song or music, but different enough to skirt copyright laws. The second is to pass the responsibility of content production to the user, letting anybody and everybody upload new material for the rest of the users to see. Even when it’s done well, the former runs the risk of sounding like a cheap knock-off of something else, while the latter has issues of quality control and its difficulty in maintaining the long-term interests of serious musicians, due to the lack of reliable feedback and compensation mechanisms. What both methodologies have in common is that there’s often a distance that can be felt between the product and the artistic process — its as if an engineer and a MBA got together in a room and hammered something out, deciding to fill it up with “some content” after the fact.

Lean LA Jeff Solomon

Photo by Jeff Solomon

This method is, incidentally, how Hollywood often does it in their own ranks: figure out the business plan first, then contract (or in some cases cultivate) their musicians in order to fit that model. These practices can sometimes successfully generate “hits” or create revenue in the short-term, but as most people know by now, its fallout rates are very fast and getting faster and faster as time goes on. If the startup community wishes to differentiate itself from what the major studios are doing, then creative minds would have to be involved from the process from day one, as founders and co-founders. Art and entertainment can said to be pure “user experience” and cannot always be measured on utilitarian grounds, so it’s necessary for its processes and feedback to run on different kinds of metrics. The fundamentals will always be there, but artistic appreciation and production is something that requires a different kind of skill set.

The good news is that, like top-notch programming and business minds that exists in LA, a lot of talented artists and musicians right now are “floating”, largely unaffiliated and desperately looking for opportunities like these to come by. An entertainment company that can create its content in-house would be cheaper, faster, and produce much more interesting results. In most cases, they’re likely to get paid more and more often than they are now. Artists also have the built-in tolerance to risk and uncertainty due to their experiences having to make a living from gig to gig. So the talent is there, if needed.

There’s an issue of culture that needs to be addressed, however — there are signs that schools are moving towards a more entrepreneurial mindset, but more likely than not artists and musicians will need some basic training in business and/or technical skills after they graduate in order for them to function as effective founders or startup employees. Accelerators and incubators can help to bridge this gap through the mentorship programs that they provide to their clients. In the new LA startup scene, people who can successfully balance art with other skills are likely to be in high demand in the near future.

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It’s true that the majority of entrepreneurial projects end in failure. But, as one panelist remarked, the end of an idea is not the end of the world because even if a startup fails, it produces people with startup experience that can be then dovetailed into other companies that are on the rise. The overall goal of the movement is to create an ecosystem in LA that’s similar to that of Silicon Valley, where there exists a tolerance of risk and failure while its talent pool continues to stay and contribute to the needs of the community. In the wake of the financial crisis, the sector as a whole still continues to grow — Dave McClure argued that New York’s current tech scene might have been inspired by the panic of 2008-2009, when investors threw a lot of money at entrepreneurial ventures because they weren’t able to see growth in any of the other sectors.

Whatever the case may be, this presents an opportunity for startups and small businesses to exert their presence on today’s landscape. The entrepreneurial movements in Silicon Valley, San Francisco, and New York have supposedly already “happened” — Los Angeles is an exciting place to be because it’s “happening right now”. It’s an opportunity for people to get involved and have a hand in reshaping how the city will look like in the future.