It would be hard to throw a rock down Avenue of the Stars without hitting someone who manages a fund; after all, Century City has become one of L.A.’s leading financial centers. However, venture capital firm Upfront Ventures is getting ready to leave its 16th-floor suite there to move into a former phone company switching station on a Santa Monica side street.
Why is Upfront heading west? That’s where the entrepreneurs are.
“That’s all we care about,” said Yves Sisteron, co-founder and managing partner of Upfront, “finding new entrepreneurs.”
The firm’s new Santa Monica office space is designed to draw them in. The creative office has indoor and outdoor event space, and Sisteron wants it to become a “clubhouse” for entrepreneurs: He believes there’s no better way to find the next great business founders than to give them space to work down the hall so you can bump into them on breaks.
Upfront, which changed its name from GRP Partners last year, is No. 1 on the Business Journal’s list of largest venture capital firms in Los Angeles, based on assets under management, having managed more than $1 billion over four funds. It is about twice the size of the second largest, Steamboat Ventures in Burbank. Since it was founded in 1996, Upfront has invested in dozens of companies, 15 with market values exceeding $1 billion each. According to data provided by PricewaterhouseCoopers and the National Venture Capital Association in Arlington, Va., Upfront was the most active VC firm in the L.A.-area last year, buying into eight companies.
When being pitched, Sisteron and his partners often focus less on the business itself and more on the business founder. Sisteron said that way he doesn’t overthink the value of a company.
Ultimately, the firm sees every investment as a bet on an entrepreneur that will either pan out or not.
“If they succeed, we succeed,” said Sisteron. “If they don’t succeed, it doesn’t matter what value you paid, you lose the money just the same way.”
Upfront makes its money when it sells companies or they go public. Some of the firms it invests in, such as Santa Monica website personalization firm Gravity, recently sold to New York media giant AOL for $91 million, turn out to be very profitable. Big hits like that make up for the duds.
While Upfront has been in Los Angeles since Sisteron and Steven Dietz co-started the firm, the big change over the last few years is that more of its portfolio companies are here, too. Only 15 percent of Upfront’s 2000 fund was committed to L.A. businesses, but today, the firm invests two-thirds of its money in local companies. Sisteron said that’s primarily due to the city’s emergence as a launching pad for Internet businesses, such as Gravity and TrueCar, a Santa Monica automotive pricing portal, both Upfront portfolio companies.