Be Great Fest: If you mix celebrities, startups, a charity, and a DJ, will deals result?
Be Great Partners is one of a slew of recent incubators started in LA, and the host of the upcoming Be Great Fest, an event that aims to pull together investors, entrepreneurs, developer talent, and civic leaders with celebrities. The incubator's founder Lin Miao feels like celebrity is the most untapped reason to do a startup in LA. That's why the incubator isn't based in Santa Monica -- it's right off Rodeo Drive. "We believe location matters," Miao says.
Not everyone agrees. After a rush of celebrity endorsements -- particularly around subscription commerce offerings -- haven't played out well, plenty of experts have been critical of just slapping a celebrity on a startup, and certainly Viddy's star-studded $300 million round proved a disaster. We've been pretty critical of some of the more ham-fisted attempts as well.
But there's no doubt when leveraged well, celebrity is a huge asset, particularly for a mass-consumer brand. We caught up with Miao to talk about the other ingredients LA has to offer in this sponsored Q&A about the Be Great Fest.
PandoDaily: A lot of people say the challenge in LA isn't the quality of the talent, but finding enough of it. Is that what you've seen?
Lin Miao: The bigger challenge in LA is capital. We did a survey about the challenges of fundraising here, and companies told us they chose to go up to San Francisco, because there are only two or three large funds here, and if they say no, you are out of luck. Some companies then choose to stay up there, or stay because they are forced to. I think that's the biggest challenge. We hope with more incubators opening up and the large angel movement that will change.
There are a lot of incubators in LA? How are you different?
We typically don't come in the very beginning. We wait until companies have raised a little bit of capital and have a strong team but need more resources. The biggest thing they need are developers. That's the largest cost on their income statements. We have developers that we pay on our payroll that they can use. That's beyond what typical incubators provide like space. Those are nice things to have, but what they really need is quality support on the development side. These teams usually only have two to three developers, because that's all they can afford if they've raised $500,000 to $1 million. Those two to three developers can only do so much. As they try to scale, they can call us anytime and come in and help them at our cost, not theirs.
How many developers do you have?
Twenty-five. We aim to double that in the next year.
And do you invest as well?
Yes we do; we invest up to $50,000.
I know you believe that celebrities are a big untapped asset for LA startups. But a lot of people are critical of that strategy. When does it work in your view?
The issue with celebrities is they don't trust people. You have to be in their circle, or they're just not going to do it. That's the reason why we created these large scale events like the Be Great Fest. We needed a way to capture celebrity interest and bring them into startups; you have to do it in a way that's interesting. I think it's a movement that's still very, very early. We've seen a few celebrities angel invest, but it will take a few more years before they really open up their wallets.
Is that always a good thing? Is that the money you want? Celebrities aren't always the most sophisticated investors.
It's frequently not right now. There are so few celebrities and so many startups pitching to them. That means celebrities have the big advantage now, and they want a lot of equity. There is very little they will do for each startup in return. Until that changes, until the pool gets larger, they'll have a lot more control over the terms. We don't recommend it right now in most cases. They will command 6 percent to ten percent, and, yes, they have a great audience, and, yes, they will tweet and promote your company in some ways. But it's not worth it.
Tell me about the event.
It's a 1,000-person event bringing startups, investors, and celebrities together to support a great charity, Pencils of Promise. We'll show off our portfolio and have a great celebration. There will be an amphitheater with a huge stage and a DJ. A lot of our companies are very young and they want to meet people in a great environment.
I think LA is still a couple years away, but the most important thing we are trying to help to do now is keep startups here.