The Third Degree

The One Thing Startups From L.A. Have in Common

Former MySpace CEO Mike Jones reveals.
mike jones headshot 4 08 11 The One Thing Startups From L.A. Have in Common

Me. and Mr. Jones (minus me)

In the past couple weeks, two startups from Science (the Betaworks of Los Angeles!) have tried to break into the New York City market, so it seemed like high time we gave Mike Jones, the CEO of Science and former CEO of MySpace, a call.

The Betaworks comparison refers to the fact that Science, which raised $10 million last November, uses its capital to “take deeper equity relationships” in startups than a typical VC firm, Mr. Jones said over the phone, noting similarities to Obvious Corp. and Idealab as well.

Science both launches its own companies and is intimately involved with the operations of the businesses it invests in. Like Betaworks, Science also eschews the i-word—i.e. “incubator”—opting for the more Hollywood-appropriate “studio.”

The incubator studio has added a number of companies to its portfolio already, including monthly subscription services Dollar Shave Club (razors), Whittlebee (kid’s clothes), and MeUndies (self-explanatory), as well as peer-to-peer marketplaces Dog Vacay (an Airbnb for dogs) and Eventup (an Airbnb for spaces) and Uncovet, which TechCrunch likened to a fancier Fab.

Indeed, it’s hard not to look at the Science club and see its startup influences. “There’s certainly new business models being created and in certain cases we like to apply those business models to segments of the market that they haven’t necessarily been applied to,” said Mr. Jones. “We don’t shy away from that by any means. We obviously really like subscription commerce, but we were not the first people to do subscription commerce.”

However, he noted, in many cases the subscription service pioneers that come to mind–like Shoedazzle and Birchbox—weren’t first-to-market either. “We all fail to talk about Columbia House and people that really understood this model—even Guthy-Renker for instance, the master of this stuff.”

Mr. Jones said Science gravitates towards, “businesses that have really high user-value, which typically means they’re in a role of facilitating transactions between users. Generally, we’re not focused on content-only business, like it’s just not part of our DNA.”

What about Los Angeles overall? If New York startups are characterized as being too lightweight on the tech side, what do people say about L.A. companies? “One of the general stereotypes for L.A. that you might hear is that L.A. startups are typically very revenue-focused,” said Mr. Jones. “I think that’s fairly true and I think one of the reasons for that is that in L.A. not a lot of large technology companies have big technology teams. [So] there’s not a lot of acqui-hire ability. Because of that, a lot of the companies that get built in LA. are focused on revenue and building sustainable businesses.”

Mr. Jones’s answer sounded a little like responding “I work too hard,” when an interviewer asks about your weakness. After all, isn’t the inability to monetize the worry about of companies coming out of the current boom? He insisted that’s not the case. “You could easily take the opposite view and say Instagram was not focused on revenue, it was focused on audience. Facebook built a fantastic business with a lot of revenue, but one could argue that if Facebook had focused on revenue in the early days, it would have diminished their ability to become the big audience business they are today.”

How does a tech scene function in a town fixated on the entertainment industry above all? According to Mr. Jones, it’s a unique opportunity. “I think when you look at companies like BeachMint and Shoedazzle and Honest Company where you have celebrity talent that’s really spending time and leveraging their audiences into launching new companies that’s certainly interesting and can be a strategic advantage for L.A.-based businesses, so I love that.”

In this case, the “talent,” Mr. Jones is referring to is Kim Kardashian for Shoedazzle, Jessica Alba for Honest Company, and everyone from the Olsen twins to Jessica Simpson for BeachMint.

But Mr. Jones swears it’s not just about the fame game. “We’re also seeing a lot of ecommerce companies coming out of L.A. and I wouldn’t have said previously,” he said. “Being in L.A. for a long time and doing a lot of investing in L.A., I’m seeing higher-quality businesses and concepts coming out of L.A. than I’ve seen in the past.”

So is everyone there sick of reading Alley vs. Valley headlines? “No, not at all. At the end of the day, I think each market has things that make it competitive. I love the financial services companies coming out of New York. Silicon Valley is a monster. We don’t compete against Silicon Valley. There’s no one that’s the next Silicon Valley. Silicon Valley is the next Silicon Valley. It’s fantastic and we should all love it.”

Follow Nitasha Tiku on Twitter or via RSS. ntiku@observer.com