When Cross Culture Ventures merged with M Ventures in 2019 to create Hollywood-based MaC Venture Capital, its founders didn’t expect it would quickly collect $600 million in assets under management, becoming the largest seed-stage venture firm in Los Angeles.

The firm announced in late October it raised $150 million for its third fund and has already written checks to ten companies at $2 million to $3 million each, across a variety of different sectors.

“We just didn’t want to be pigeonholed,” said Marlon Nichols, who cofounded the firm. “While we do view ourselves as a generalist firm, we always say we’re a generalist firm being run by sector experts.” 

Across L.A. in Santa Monica, another seed-stage firm has a different plan. Crosscut Ventures announced it would begin honing in on specialized tech sectors and move away from the “generalist” label it held for 17 years.

As the startup sector locally began to evolve, so too has the venture community. Los Angeles can boast its standing as the fourth most active venture hub in the U.S., per Pitchbook, pumping an average of $2.8 billion into the global startup ecosystem every quarter between 2014 and 2024.

During that same time period, the growing Los Angeles startup sector saw an average of $3.1 billion in global venture dollars. But it wasn’t always like that. While Bay Area venture capitalists were writing checks in the tens of millions to each startup, Los Angeles firms were able to give $7 million to each in 2004.

“Los Angeles has changed quite a bit in terms of the startup and venture sector,” said Steve Moyer, a professor of finance and business economics at the University of Southern California. “And that culture does have an impact on how venture firms operate.”

A nascent tech sector

Brian Garrett grew up in Los Angeles. He attended Stanford University in 1991, getting his hands dirty in building the first internet bubble that was forming in Silicon Valley. Ten years later, he moved back to L.A.

“My professor, who I asked for help, laughed at me and said there’s no such thing as tech in Southern California and there is no venture ecosystem. So what are you doing?” Garrett said. “I think that probably made me even more driven to make it happen.”

In 2001, Garrett met Rick Smith at Palomar Ventures, a small early-stage venture firm focused on information technology and enterprise-grade platforms, prompting frequent trips back to the Bay Area.

“I kind of got this sense that I had no advantage,” Garrett said. “Venture is about brand and reputation and I was the 50th VC to see a deal in Silicon Valley. And it just felt like I had to convince myself I was smarter than the other 49 to see something in this company that everyone else had not seen.”

Garrett began to look for talent in his backyard. What Los Angeles lacked in business-to-business technologies, it made up for in startups harnessing the web – particularly ad networks and direct-to-consumer brands. In 2005, consumer goods was the most popular funding sector for venture firms in Los Angeles, according to Pitchbook. 

When Garrett, Smith and Brett Brewer founded Crosscut Ventures in 2007, it was one of the earliest seed-stage venture firms in Southern California. Garrett’s earliest investments included GumGum, a Santa Monica-based computer vision platform that used data sets to drive visual content in advertising, and the online retail platform ShoeDazzle which quickly saw favor with beauty influencers on YouTube. 

“When we started, there wasn’t enough activity to be more specific than a generalist fund,” Garrett said. “It was very much the street fighter mentality of like, we just have to build SoCal one deal at a time and we’re all going to rally together to create this ecosystem.”

But the startup landscape started to change. In 2023, Los Angeles firms put $4.89 billion into B2B startups, and $3.23 billion into IT firms – making up 65% of all funding. In 2024, after five funds, $306 million, and 200 investments later, Crosscut decided to hone in on its strategy. In late October, the venture firm announced it would focus only on “frontier technologies” – energy and power, advanced manufacturing and materials, and space, defense and security.

“What started to change in 2015 is you start to see more enterprise. You started to see gaming, you started to see a whole bunch of diversity in the types of businesses that were being built,” Garrett said. “And it started to make it more difficult to be a generalist, right? Because now it was then you have new funds rising up to say, I specialize in only this, and the entrepreneurs are attracted to that. They want domain specialists.”

Moyer said, startups in niche and highly technical fields may benefit from a more specialized investment firm.

An evolving industry

After spending years at Intel Capital, swimming in the vast and bustling venture ecosystem of the Bay Area, Nichols decided to strike out on his own. He cofounded Cross Culture Ventures with a colleague who lived in Los Angeles.

“There was a decision point,” Nichols said. “Do we become another Silicon Valley-based seed stage venture fund amongst the other hundreds, or do we enter an emerging ecosystem where we could potentially stand out? We chose the latter, and I ended up moving to L.A.”

Indeed, in 2014, long after the Dot-Com boom, there were only 90 active venture firms in L.A. Now, there are 334, including Nichols’ MaC Venture Capital. The firm has made investments in a variety of industries, including financial technology, health care, IT and property technology (“We’ve tried a couple proptech plays and they didn’t work out right,” Nichols said. “So it’ll be hard for us to embark on another proptech investment.”). But he points to the firm’s proptech misfire as a reason why it remains a generalist fund. 

“If you’re a fintech fund and the market doesn’t like fintech companies and doesn’t give them good valuations, it’s very difficult to generate returns,” Moyer said.

Crosscut and MaC’s diverging strategies point to the evolution of Los Angeles’ startup and venture ecosystem. Between 2014 and 2024, the number of early stage venture firms more than doubled. And venture firms have fluctuated when it comes to their favorite industries. In 2003, L.A. venture firms put the majority of their money – 20% – into network management software. In 2024, that industry saw just 2% of venture funding from L.A., while financial software received 46%. 

“Right now, if you think about Silicon Valley, you think about computer science grads writing big (artificial intelligence-language models) algorithms, right?” Garrett said. “But down in L.A., you need to be in a lab space, you need to be bending metal, you need to be designing components and you need to be building systems. And that requires hands-on collaboration in the office. It’s all happening in El Segundo, Torrance, and Hawthorne.”