HOW TO CREATE A STARTUP ECOSYSTEM

Ten Years of Growth as Lived by Amplify’s Paul Bricault  

Amplify is a pre-seed fund based in Venice, CA. Since 2011, Amplify has backed 80+ companies, which together have gone on to raise over a billion dollars in funding, with exits to Apple, Google, and FanDuel, among others. Amplify has taken a strong lead within the Southern California startup ecosystem, not only by investing and nurturing its own portfolio, but by operating a coworking space and event hub and providing regular data updates, including a blog and quarterly updates called the “LA Seed Report” (to subscribe, go here). Amplify’s 2019 annual roundup of the LA tech and venture scene provides a great framework for this interview with Amplify co-founder and Managing Partner Paul Bricault. This post originated as my monthly column, 'Notes from Silicon Beach' commissioned by the Canadian Film Centre

Nick DeMartino: Let’s start with your journey, which began in Ontario, as I understand it. 

Paul Bricault: Yes, I was born in Ontario – Sault Ste. Marie. I did my undergraduate at Western University in London, Ontario and then migrated to L.A. because I got a scholarship to USC University of Southern California here in L.A. to do my graduate work at the Annenberg School. After graduation I decided I would do my optional employment allowed under the F1 visa here in L.A., with the intent that I would go back to Canada afterwards. One thing led to another and I never left.  Initially I was in finance, then media, then what I do now.

ND: What drove that change?

PB:  I guess my career has been a series of beautiful accidents. It's hard to say whether it was serendipity or skill or intent, but I ended up at the William Morris Agency -- a top talent agency here in L.A. that is about to go public, actually. During the intervening years I was working at a consulting firm that focused on the intersection of technology on media -- I was working in finance, specifically focused on digital media. That was my stepping stone to work at the agency because at the time they were trying to build up a digital media practice. I ended up spending well over a decade at William Morris, serving on the board there and running digital media.

ND: How did you move to venture capital?

PB: While at Morris I set up a sort of a corporate venture fund, actually a joint venture with a firm called Accel Partners that was one of the first investors in Facebook and a bunch of other companies. We established what was called The Mailroom Fund in 2008 and that's where I found my true passion. After the merger between William Morris and Endeavor in 2009, I left the agency and joined The Mailroom Fund fulltime. From there I went to a fund called Greycroft Partners, with operations in New York and L.A. From there, I co-founded Amplify. 

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Dispatch from the Age of Influencer Marketing

Corey Vidal was on stage at VidCon 2011 sharing his journey from homelessness to stardom in a hotel ballroom crammed with screaming fans when a guy in a suit leaned over to me and screamed above the din: “This is fucking amazing – it’s the future of show business.” He was right, sort of. 

All of the elements of today’s massive “influencer marketing revolution” were in place back then – namely creators, fans, brands and agencies. Together, they are disrupting the half-trillion dollar advertising business, not to mention traditional celebrity culture rooted in films, television, and music. 

Talent is still at the heart of the industry. Early YouTube stars like Vidal, whose videos have been viewed 75 million times, have been joined by thousands of digital creators who make a living delivering content to fans, collecting a share of advertising revenue, and cutting lucrative sponsorship deals. (Note: Vidal launched BufferFestival, a digital creators showcase with help from IDEABOOST in 2012.)

The top tier of YouTube channels number attract tens of millions of subs and tens of billions of views, as shown herein stats site SocialBlade. Some 2,400 YouTubers have crossed the one million-subscriber mark, with four additional channels crossing that mark each and every day. Another estimated24,000 channels register more than 100,000 subscribers. Mainstream publications like Forbesand TV Guideregularly trumpet the massive paydays of top YouTube stars.

Savvy brands were quick to jump into social media’s new attention economy with sponsorships and other ways to capitalize on the popularity and authenticity of homegrown digital celebrities, who are trusted by fans who give their permission when they subscribe to a channel or view a video.  

Enter the Agencies

Hundreds of specialized agencies have emerged to help content creators find sponsorship dollars, and especially to help brands sort through the vast sea of what are now routinely called “influencers.”

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SoCal MEDIA TECH STORIES TO WATCH THIS YEAR

But please, don’t call them predictions!

Here's my latest column for the Canadian Film Centre under the banner, NOTES FROM SILICON BEACH. Year-end predictions in the tech world deal with the most buzzworthy topics: the Internet of Things, blockchain, cryptocurrencies, artificial intelligence, voice-enabled apps, 3D printing, beacons, autonomous vehicles, cloud based solutions, new areas for SaaS, wearables, quantum computing, 5G networks, mobile dominance, and all things China. Every one of these has a greater or lesser impact on the world of media, but not as much as the five I have chosen to examine.

So, as the New Year settles in, let’s take a look 2019’s big stories and trends that will impact the Southern California media/tech ecosystem.

Explosion of video choices

Netflix continues spend and borrow like crazy as it tops 150 million subscribers worldwide, crushing other digital on-demand services from competitors like Amazon, Hulu, YouTube and HBO Now. With a growing load of award-season hardware and an eye-popping capture of the biggest talent in TV (Ryan Murphy, Shonda Rhimes) and film (Alfonso Cuarón, Martin Scorcese, Netflix has triggered a massive disruption of the decades-old studio system. Attention must be paid.

Newly bulked up studios (Disney/Fox, Comcast, ATT/Warner, Comcast/Sky) as well as tech players like Apple and Amazon are fighting back with new direct-to-consumer video offerings that debut this year. Expect to see popular studio content vanish overnight from Netflix and Amazon as the new players use their deep libraries to play subscriber catch-up. According to one study, Netflix will have to triple its already jaw-dropping annual content spend to keep up with the combined market clout of Disney and Comcast with their new acquisitions. All of this, of course, fuels continuing cord-cutting and subscriber attrition for traditional multi-channel services (cable, satellite, phone).

Add to that dozens of niche streamers that are entering the fray with novel video business models. Examples include the hypergrowth of numerous e-Sports delivery systems, the unspooling of Jeffrey Katzenberg and Meg Whitman’s Quibi short form service, and Endeavor’s professional wrestling/MMA streamer.

Takeaway: An explosion of video services means an explosion of opportunity – more buyers, more competition, more deals, and, perhaps more profit. For suppliers, creative shops, technical personnel, and startups, this is the year to strike, because sooner or later, competition will weed out the weak. We’re already seeing contraction in the digital news sector as startups that were heavily capitalized are shuttering or consolidating.

Snakes swallow dogs

2019 will be the time for the geniuses behind those mega-mergers of 2017-18 (the snakes) to execute on the revenue and operational “synergies” promised to markets, even as further consolidation seems likely among tech and entertainment firms. Merger history is littered with failures to launch. Execution means that business units and departments are being merged and redesigned; some execs stay, some go, inevitably to other competitors that are ramping up. Missions and goals are upended.

To wit: the very first public words out of the mouth of AT&T’s media czar John Stankey rippled through the industry with a hint that Warner crown jewel HBO might have to become “broader” and more like Netflix. His boss suggested that 2019 would be “like childbirth” for the premium cabler. Ouch.

Smaller companies like CBS, Viacom, Lionsgate, MGM, AMC Networks, Discovery, and even Sony Pictures remain M&A prospects, dogs that may either merge or be swallowed by snakes like Apple, Amazon, Microsoft, or Verizon.

Takeaway: Disruption means opportunity, but it will take more research, effort and time to identify the right exec with the mandate and authority to greenlight and close deals.

Paralleling the Studio infrastructure

One group that this frenzy pleases is the real estate industry, which is ramping up for a banner 2019. Every part of the greater LA area is exploding with new construction, from the beach to the downtown-adjacent arts district, and everything in between, especially Culver City and Hollywood proper. Announcements of new speculative towers and complexes are quickly followed by new tenants among the big media and tech players.

Q4 of 2018 include huge real estate deals by Amazon, Netflix, Google, Facebook, Snap, Apple, Showtime, and HBO. The result will be the transformation of entire neighborhoods, with an explosion of employment, amenities, housing, technical support services (and traffic!!).

Takeaway: Some of these facilities will go online this year, so doublecheck addresses for every meeting. If you’re considering LA as a location for a branch office or relocation, put the time in with a knowledgeable advisor to make sure you factor in future locations of your key partners and customers along with issues like price, transportation, and neighborhood ambiance.

VR: The Once and Future ‘Next Big Thing’

SoCal was arguably the epicenter of the VR revolution that began in 2014 when Facebook purchased Oculus and launched an investment frenzy into what tech loves the most: the Next Big Thing. By 2016 investors had pumped $253 million into two dozen deals involving virtual and augmented reality start-ups in L.A. and Orange counties.

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REVIEW: Netflix's "Black Mirror: Bandersnatch"

<This review contains spoilers>

As somebody who has been looking at the coming of interactive storytelling as the “next big thing” for more than 20 years, Netflix’s release of “Bandersnatch” interactive movie from Charlie Brooker’s ‘Black Mirror’ team was cause for cautious celebration. Here for once we would have a major global media/tech brand willing to commit its credibility, technical team, and an IP crown jewel to an interactive story outside the formal videogame format. For years I railed that Netflix, Hulu, Prime and the other OTT providers offered less inventive ancillary content than DVDs and even less experimentation than cable, that much-maligned dinosaur.

Alas, my enthusiasm wilted, when leaks indicated that Netflix’s story format would rely upon the “choose your own adventure” trope – basically a branched narrative. Many have tried and failed with this warhorse from our childhoods. When Bandersnatch’s first user choice was the protagonists’ breakfast cereal, I was positively morose. Here we go again, I thought. Nevertheless, I persisted, and I’m glad I did. Very quickly it was clear that choices were consequential to the plot, forcing choices between two unappealing options. Sometimes, it seemed, my choice wasn’t the “right” choice, and the app performed its own form of reboot—a bit like those “previously on,,,” montages that we’re used to seeing at the beginning of a new episode. Sometimes when this happened, I was presented with the same two options, sometimes the choices were different. I’ve read that the story had five different endings and very large number of plot permutations. I found my way to three of the five, each time learning something new about the way the system worked. Overall, I’d give this one three out of five stars.

The engineers were successful in building an assembly engine that delivers seamless scene integrations with very few exceptions. Ditto with story continuity – the flashbacks or whatever you call them, included visual and audio confirmation of my choices every time. The gameplay (the interaction with the story and the app) is enhanced greatly by the content of this actual story itself, which centers on a young game designer bedeviled by trauma and mental issues as he is building his dream game, the Bandersnatch of the title (HT to Lewis Carroll and later to Philip K. Dick) based on a novel whose author cracked up violently before it could be finished. Boom: Ontogeny recapitulates phylogeny…. Along the way, our hero’s crack-up (or the reality of two parallel universes that can reboot) begins to embrace the actions of the Netflix user herself, which is mildly funny as presented.

Over the years I’ve quipped that interactive stories won’t become mainstream until they make me cry, a glib way of suggesting that the inherent problem with interactive stories is that they simply cannot achieve the dramatic compression, pacing, and narrative immersion of a traditional storyform, since the user is constantly pulled out of the story to do something. Did Bandersnatch overcome this problem? Not really, although the story segments that this app assembled did provide a lot of the same pleasure as other Black Mirror dystopian episodes, and an odd form of suspense was generated as different iterations of the story unfolded, a bit like ‘Groundhog Day.’ Like other Black Mirror entries, in Bandersnatch the characters can’t win, technology is in charge; choice is an illusion, and so forth. 

I was left with the conclusion that Black Mirror was a good choice for Netflix to test the backend authoring system given Brooker’s obsession with how tech and culture impact human consciousness. Whether Brooker & company use the platform with more success in the future will be interesting. Ditto as to whether other auteurs give the tech a shot in other story genres such as detectives, espionage, thrillers, action adventure, and even rom-com. (Note: Netflix previously released kids’ content using similar technology.)

Bottom line: Unlike many previous interactive story formats, the embedding of the technology into hundreds of millions of devices already signed up to a story delivery platform is wonderful. Though I had to work a bit to get the thing to work (it would not play via Dish Network; I had to update my Netflix iOS app on my iPad before I could view and play), overall, the results were worthwhile.  

CAN THE BLOCKCHAIN DISRUPT ENTERTAINMENT AND MEDIA?

Blockchain is a technology invented to serve as a transparent public transaction ledger for the cryptocurrency Bitcoin. Its design has inspired the creation of hundreds of other distributed applications (dApps), often backed by their own Bitcoin alternative currencies via Initial Coin Offerings or ICOs. In 2015 the value of ICOs was in the $5-10 million range, growing to around $5 billion in 2017. This year to date it’s around $10 billion. The global market for blockchain is projected to reach $60 billion by 2024.

Beyond this new way of raising capital, many entertainment and media entrepreneurs see the blockchain as a way to disrupt a broken media ecosystem deformed by immense centralized power, secretive dealmaking, complicated and unfair rights and payment systems, and poorly structured incentives for both artists and consumers.

I spoke to the founders of some of these businesses to understand why blockchain may enable better business models than other startups in the entertainment sector.

Documenting the Creative Process

Sendergram​ provides a blockchain-enabled file sharing, review, delivery, transaction and payments platform for digital media such as fine art, photography, and video. I spoke with cofounder Andy Rosen, who started his career as a rock photographer covering the punk music scene in London before moving to LA to build companies that produced music videos, web design, and then database software.

“There are two sides in our business,” said Rosen. “Pick your side – screwing the artist or not screwing the artist. I always want to protect the artist. So two years ago we set out to build a ledger for the creative process from the artist’s point of view. The creative business is quite abstract, things get lost in translation, are often subjective.”

Sendergram offers a blockchain registry for creative work, a function which is offered by other startups; but then, it tracks every contact, email, discussion, contract, update, and payment with its own communications system that records it all on the blockchain. Sendergram also aggregates a user’s media files whether they are housed in various cloud storage systems or even on their own hard drives, allowing users to easily find and safely share files. Sendergram can be seen as a cross between email, Slack channels and file sharing --- all tracked and secured by the blockchain.

Rosen is especially interested in the growing class of creator/prosumers, as well as distributed creative teams, agencies, and corporations with multiple vendors contributing to projects. Right now single accounts for the Sendergram beta are free, with business subscriptions paying a fee based on number of users on the account. The company is preparing for a funding round.

The Business of Film

Gjain seeks to use the blockchain’s distributed ledger to bring greater transparency to the financing, contracts and payment systems required for media content. Gjain will offer a suite of business services built on smart (self-executing) contracts from inception to distribution, investment to profit disbursement or tax write offs.

Co-founder Vlad Lodzinski hopes to position the company between the different players within the film finance and ownership value chain with a reengineered model that eliminates the secrecy and contractual opacity that characterizes many film finance deals.  

Gjain won’t replace legacy players, just make the process more efficient, cheaper, and fairer. He sees Gjain as part of an emerging global digital economy that will be powered by new technologies like blockchain and which will transform the way business is conducted. As he sees it, blockchain and artificial intelligence will help reduce risk for investors and improve financial returns for creators.

Gjain’s client base includes filmmakers (individuals and studios), investors (institutional, high net worth individuals, retail) and service providers (finance, distributors, legal, auditing). Lodzinski and his team of six based in London, New York, LA and Poland plan to launch in summer 2019, though tests are already in development with key partners. There will very likely be versions for different territories like Europe and North America to reflect different regulatory and finance factors. Gjain financial backing is targeted at traditional sources like private equity, and not a cryptocurrency.

Democratizing the Digital Studio

Crowded Cloud is an ambitious reinvention of the content production studio that uses the blockchain’s decentralized governance model to attract working professionals who want to have a say in new projects, as well to share in profits they help create with their creative contributions.

Lead by a former aerospace engineer and digital media services executive Javier Benavente, Crowded Cloud’s studio model reflects the distributed and global character of the media workforce. But unlike legacy legal and production models, in which all decision-making is held by a centralized corporate entity, Crowded Cloud embeds democratic decision-making into every phase of production.

Benavente will seek to raise $100 million in conventional funding by year’s end, with as many as ten shows going into production next year. Most of the cash raised will convert to Crowded Cloud’s own HAVI token and held in a Project Development Pool that can be applied to projects voted upon by token holders.  As with other tokenized systems, its market value increases as its use cases generate successful projects. Benevente plans to focus initially on catalog content that is ripe for conversion for multiplatform distribution, especially AR and VR.

His passion for building a democratic studio stemmed from Benavente’s own history in Hollywood, where he came to blows with a major studio over control of software his company developed for use in a motion picture.

A Studio in the Cloud

To execute on the distributed content production model, Crowded Cloud is partnering with MetaPipe, an existing virtualized visual effects and animation studio infrastructure.  I met CEO Aaron Estrada two years ago as the company was completing ABQid, an Albuquerque NM-based seed accelerator.

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