Los Angeles, When Franklin D Roosevelt opened the defense industry to African Americans it created an economic boost, and migrated many black people to Los Angeles. Now this was around the 1940’s where Central Ave was congested with music, arts, culture and politics showcased by minorities at underground ‘after hour’ establishments. We can now fast forward and highlight the dominance and influence that our culture has had in these industries across the world.
In 2022 there is a new Renaissance in LA that isn’t being discussed, and it’s starting in start-up tech. In recent years, Los Angeles has seen an exciting shift to becoming one of America’s top startup ecosystems. Despite closing the third-highest number of funding deals nationwide, as recent as Q3 of 2021 (CB Insights), just 2% of VC investment partners in Southern California identify as Black or Latinx and less than 10% of VC-funded companies are led by women or people of color (PledgeLA). Snoop Dogg Is Now The Official Owner Of Death Row.
‘As we celebrate Black History Month, there’s an important story to be told about the Black renaissance currently happening in Los Angeles amongst high-growth startups and the entertainment industry. Whilst progress has been slow, last year there were more new Black-owned businesses proportionate to the total population than at any time in the last quarter-century’ -Kauffman Foundation.
In a recent interview with The Ingenious, Principal Attorney, Almuhtada Smith touches on the many startup companies he has seen and assisted in making six figures in current times.
Sparks: I’m from the East Coast and wasn’t able to experience what took place in the Harlem Renaissance, but I was able to see the residual impact. Living in Los Angeles, how can you describe the impact of the LA Renaissance in real time and where you think the shift from entertainment to technology happened?
I don’t describe it as a shift from entertainment to technology but the incorporation of the tech world into the entertainment industry culture. There is a group of amazing entrepreneurs, investors, and creatives of color who are developing a thriving startup ecosystem rooted in tech and innovation here in Los Angeles. The story of Silicon Beach, LA’s tech hub and rival to the San Francisco Bay Area’s Silicon Valley, is well documented. Google opened its Venice campus in 2011. Microsoft, Yahoo!, Facebook, Snapchat, and Tinder opened up LA offices in subsequent years. And while LA County is now higher ranked than New York City for most available job postings in tech, LA’s tech scene has still suffered from a lack of diversity.
The late great Nipsey Hussle understood innovative ideas were not only housed and bred at these big corporate tech companies, but could be found and developed by creative thinkers right in his own community. In June 2017, Nipsey opened up his Marathon Clothing Store in South LA at the corner of Slauson and Crenshaw and referenced it as the world’s first “smart store.” In 2018, he went on to open Vector90, a co-working technology space and STEM center in the Crenshaw district. Nipsey did not want his community to be left behind in today’s ever-growing technological world. He was intentional and took impactful actions to incubate and sustain creative talent right in his own neighborhood. At 20 years old, Iddris Sandu was the technologist that worked alongside Nipsey and created an app where customers could unlock augmented reality experiences and access exclusive content by interacting with objects in the store. Sandu continues to design for the future, and is a huge part of the culture – as evidenced by Jay-Z’s Marcy Venture Partners’ investment in Sandu’s sLABS.
I think when more high profile entertainment musicians and influencers like Nipsey and Issa Rae, began to showcase LA’s story as a tech city, more and more diverse audiences could see themselves a part of this LA Renaissance – feeling seen, included, and empowered. As you may know, Rae’s hit HBO show ‘Insecure’ created a spotlight on South Los Angeles, showcasing the diverse communities and impactful spaces viewers wanted to be a part of. Issa has consistently been “rooting for everybody Black” and has also invested in Black-led startups like data company Streamlytics, and break out skincare brand, Topicals. Other celebrities like Will Smith, Kerry Washington, Keshia Knight Pulliam, Nas, Jay-Z, and Serena Williams have also invested in minority-owned and operated, LA-based startups.
Leading investors in the entertainment industry understood the importance of this diverse strategy, but a new segment of social impact investors are also making change in this sector. LA-based funds like Slauson & Co., have received corporate backing and aim to “democratize” the entrepreneurship journey by bridging the gap between untapped founders and more equitable access to capital. For those who have historically been overlooked by the traditional venture ecosystem, Slauson & Co. is creating and opening new doors to capital and resources fostering economic inclusion led by founders and investors of color. The fund has invested in diverse, LA-based startups like Valence, Compliant, EngineEars, and Group Shop.
The impact of all these individuals and initiatives on the emerging culture has been transcendent, empowering Angelenos across a multitude of skill sets and industries, and ultimately reshaping what it looks like for LA-based economic development and tech innovation.
Sparks: And so how does your work fit into all of this? Tell me about ARS Counsel?
ARS IP Law Firm, P.C. (“ARS Counsel”) is a boutique law firm that handles all facets of intellectual property, licensing, corporate, real estate, and entertainment law. I launched ARS Counsel with the objective of providing the premium level of legal services that an AM 100 ranked firm would offer, except at the pricing structure of a boutique firm. Why? Because I wanted to ensure there was a service offering of a high caliber for entrepreneurs that may otherwise be unable to engage this level of this service at the early stage of their business. One of the most exciting parts about working with entrepreneurs is that we are able to work with some incredibly innovative minds who are working towards creating and redefining both the built and immersive virtual environments.
Our “Of Counsel” relationships with some of the top attorneys in licensing, financing, commercial real estate, entertainment, corporate, and technology adds invaluable expertise to our firm. Our primary focus is to understand a client’s objective and then achieve the best possible outcome with maximum efficiency. Some examples of work we offer for clients include filing trademark or patent applications, advising clients on legal issues with metaverse technology and business models including blockchain and NFTs, and drafting documents for capital raising transactions.
Like many other entrepreneurs, I identified a market failure and gap where many law firms have difficulty connecting their resources to entrepreneurs of color, and decided I wanted to become part of the solution. There is definitely a market need for diverse attorneys who provide services to the startup community, as well as more mature, lower-middle-market companies. Over the past few years, we’ve helped fill that gap and have provided legal work for many of the individuals and companies within the Los Angeles startup ecosystem.
Sparks: How important is your role in the beginning stages of a start-up company?
I think a lawyer’s role is very important at the beginning stages for any new company. Lawyers can assist with critical business development items like corporate formation and managing your cap table. I advise founders to keep their ownership structure clean and simple, with properly documented terms. Every stakeholder’s equity that is tied to the company, including founders, employees, consultants, and advisors, should be on a vesting schedule. It’s imperative to not allow people to leave your company with a large equity stake that they did not rightfully earn, which could potentially leave your company uninvestable in many instances. Most investors want to see vesting as an assurance that all company stakeholders are in the game for the long-term and their investment dollars are being put to work. The full amount of equity promised to everyone involved should not be given all at once, so that everyone is incentivized to stick with the company and help it grow.
I also advise my early-stage startup clients that Intellectual Property (IP) ownership is equally important to documentation and cap table management. Having an experienced lawyer advise on IP protection will help safeguard your company’s ideas in the long run. Ensuring your company has these agreements in place is essential for potential investors reviewing and assessing your capital structure and other elements of due diligence.
Sparks: What advice would you give companies who are struggling to connect with investors and raising capital?
If I were a founder looking to raise money, I’d start by doing a ton of research through Crunchbase – a platform for finding business information about private and public companies. There, you’re able to search startups that have received funding within your vertical and see who has invested in them. I’d compile a list of target investors through Crunchbase and find connections to individuals at each investment firm through platforms like LinkedIn. I’d also attend conferences like AfroTech, SXSW, and CES to meet investors at various events. Venture capital firm, A16z has a live podcast on Clubhouse that’s worth checking out, and podcasts like “This Week in Startups” can also be helpful in learning how to identify and pitch investors as well. Just make sure you perfect your pitch while you’re searching for investors to pitch to.