I attended part of an all-day forum in Santa Monica recently that brought home this reality: A sizable chunk of L.A.’s economy is participating in a new way of doing business. Many business people today are taking an almost experimental plunge into an ecosystem that MBA grads of even eight or 10 years ago would find disorienting – maybe even horrifying.
The event was called, appropriately enough, the Next Generation Entrepreneurship and Global Crowdfunding Forum. It was aimed squarely at the tech-oriented entrepreneurs and financial backers who have clustered in L.A.’s Westside in the area often called Silicon Beach.
One strong underlying theme was that today’s business people are looking for a different way – that is, a better way – to work.
This yearning seems to stem from dissatisfaction with the way things have been done. After all, the results often have been contemptible.
For example, some at the forum opined that people have lost faith in the stock markets, what with their high-volume trading practices and other mysterious ways that seem rigged against small businesses and investors.
One panelist said that the unspoken pact between employer and employee has been forever broken. In the past, workers were more willing to labor hard and conscientiously for years in dedicated service, assuming their company would take care of them. Few assume that today. Pensions and generous employee benefits (at least in the private sector) are becoming anachronistic.
Howard Marks, the founder of StartEngine, a startup business accelerator, said that when he speaks to groups of students, he tells them that “my job is to keep you from getting a job.” In other words, entrepreneurship – making a job for yourself – may be your best way forward.
The dissatisfaction with the old ways, when coupled with the liberating power of the Internet, has led to a new way of doing business. Part of the new way is to discard pieces of the old. And it goes well beyond eschewing ties.
Marks, for example, said that when he’s assessing whether to allow a startup into his accelerator, he doesn’t do much in the way of traditional due diligence. He’s willing to make a bet based largely on whether he finds the people and their vision compelling.
And the traditional way for startups to get financial backing is a particular sore spot. Since something like 97 percent of all supplicants get no funding from traditional sources, there’s a growing interest in crowdfunding, which is basically using the Internet to solicit lots of small investments that can add up to a surprising total. Crowdfunding has been legitimized by a congressional act passed last spring, and the Securities and Exchange Commission is set to come out soon with rules governing it.
Despite the obvious peril with crowdfunding, it offers plenty of promise. And several panelists clearly were intrigued with that promise. An entrepreneur with a dream and drive who would get passed over 100 out of 100 times by traditional financiers may find his pitch – if clever and compelling – would get a good reception on the Internet. Indeed, some have raised big money this way already.
Put this all together: the hundreds of young tech companies already in Los Angeles; soon-to-be unleashed crowdfunding and the four startup business accelerators that already exist here. There’s a “rising tide” here, as one put it, that could end up dramatically altering the local economy in the future.
Yes, a lot of this experimental ecosystem could be disorienting or even horrifying to a traditionalist – no due diligence? – but all I can tell you is that I walked out of the forum interested, intrigued and curious about what’s next.
Charles Crumpley is editor of the Business Journal. He can be reached at email@example.com.
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