"Not just about Hollywood": LA writes the script for impact entrepreneurship

8 min read
17 Oct 2019

rom sustainable fashion brands Reformation and Toms to emerging health tech and ethical finance startups, Los Angeles has long been considered a leader in the social impact scene.

Companies no longer have to choose between profit and social impact: they can accomplish both, says Los Angeles-based serial entrepreneur Josh Sackman. 

Having spent the last decade building companies at the intersection of health and technology, Josh cofounded his most recent venture, AppliedVR, in 2015 with Matthew Stoudt and David Sackman. The aim was to utilize virtual reality to help treat patients experiencing chronic and acute pain. 

“Virtual reality therapeutics (VRx) has a demonstrated ability to improve patient outcomes for serious health conditions without the side effects or addictive tendencies of many pharmaceutical options,” says Josh. 

Photo: Startup Guide Los Angeles

With the message of “transforming healthcare through the power of pixels,” AppliedVR now offers a digital library of clinically validated, immersive and interactive experiences that draw users’ attention away from their pain and reduce their dependence on medications.

The company’s impact has already been felt in the local community. LA resident Amanda Greene, who has lupus, a chronic illness, as well as other autoimmune conditions, spoke earlier this year at the Virtual Medicine conference held in Los Angeles about how AppliedVR’s alternative treatment has reduced her pain and enabled her to better manage her daily routine. 

“We’re a team of passionate people who seek to create impact through our work, and who are motivated by the people whose lives we can improve,” says Josh.

Profit and purpose

AppliedVR is part of a growing cohort of companies spearheading social innovation in Los Angeles.  

One such venture is Aspiration, a company that offers ethical banking products and services to help people “spend, save, and invest in ways that do good for themselves and the world,” according to its cofounder and CEO, Andrei Cherny. 

Prior to launching Aspiration, Andrei had had experience dealing with financial institutions – from working in the Clinton White House to prosecuting financial crime as an assistant attorney general in Arizona. 

“It became increasingly clear to me over time that Americans didn’t trust their own financial institutions,” Andrei told Startup Guide. “This is what inspired me to create a new, consumer-friendly and conscience-driven banking option for Americans.”

The company operates on a “Pay What Is Fair” model: The only fee customers pay is the one they choose, even if that value is zero. Additionally, Aspiration helps customers make conscious and informed purchasing decisions through their very own impact measurement calculator.

“Ethical banking ensures people’s money isn’t contributing to harming people or the planet,” says Andrei. “Aspiration gives its customers the opportunity to move their money away from fossil fuels and firearms, which are industries heavily funded by traditional banks.”

People from New York and San Francisco are coming to LA to be part of the city’s laid-back yet enterprising environment, and industries are coming together to solve local problems.

More than a trend

Companies around the world are slowly waking up to the benefits of supporting a noble cause – for their profit marginsas well as their conscience – but according to Josh, impact entrepreneurship is far from a new concept in Los Angeles.

Companies such as the footwear retailer, Toms, have been part of the movement for over a decade with their “buy-one-give-one” model, and The Honest Company founded by Jessica Alba has been campaigning for ethical consumerism since 2011.

“LA is a city built on stories… and those stories are increasingly taking a purpose-driven lense to the world,” wrote Afdhel Aziz, the founder of LA-based think tank Conspiracy of Love in a 2018 Forbes article. He dubs LA the “Silicon Valley of social impact,” a place where a diverse mix of entrepreneurs, techies and creatives are collaborating to make real changes in society.

For Natasha Case, the cofounder and CEO of female-run ice cream brand Coolhaus, LA has proved itself to be “a lot more multifaceted than just being about Hollywood.” Having grown up on the West Coast, Natasha has seen the city evolve from an entertainment capital “built by bohemians and artists” to a hive of tech companies and startups across all sectors.

From gaming and entertainment to healthcare and transportation, Los Angeles has an array of industries that not only provide companies with a rich talent pool to tap into but also create opportunities for startups seeking to disrupt age-old industries. 

“The entrepreneurial spirit here is very much alive,” says Aria Cyrus Safar, the economic policy manager for tech at Mayor Eric Garcetti’s office in Los Angeles. “We’re seeing people from New York and San Francisco coming to LA purely to be part of the city’s laid-back yet enterprising environment, and industries coming together to solve local problems.”

Korea Town, Los Angeles. Photo: Abbie Bernet/Unsplash

Government support and community spirit

Collaboration seems to be the name of the game in LA. The creative and tech scenes, the nonprofit sector and local government are crossing over more than ever before through a collective desire to bring about change in the city.

A good example of this cooperation is the pledge from ride-sharing app Lyft to donate $50 million a year through its City Works initiative. Following its $24.3 billion IPO earlier this year, the company announced plans to work alongside the Mayor’s office to provide free or discounted rides to lower-income residents and improve the city’s transportation network. 

The government is also at the vanguard of encouraging social responsibility and civic engagement in Los Angeles. According to Mayor Garcetti, money is being directed into developing an infrastructure that supports the needs of the city’s diverse population as well as its local business community.

LA’s economy is looking good, too: The city has the third-largest GDP in the world, with a $1 trillion plus economy. In addition, venture funding to LA-area startups has quietly exploded over the last five years. In 2018, LA-based startups received $6 billion in VC funding, a dramatic increase from 2017 levels according to CB Insights and PwC.

“Los Angeles is in the midst of a remarkable moment,” Mayor Garcetti told Startup Guide. “We are taking big steps to confront the great challenges of our time: from climate change to education to economic inequality.”

Addressing diversity

Another challenge taken on by the Mayor's office is to ensure that LA's diversity is fairly represented in its tech industry." Although the city is one of the top five destinations in the US for “tech investment and corporate development,” according to a 2018 report by TechCrunch, many ethnic communities remain underrepresented in the sector’s workforce.

To counter this, in October 2018, a confluence of VCs and entrepreneurs joined Mayor Garcetti and the nonprofit Annenberg Foundation to launch Pledge LA, an initiative designed to help companies create more diverse workforces and increase their level of community engagement.

“We’re really trying to ensure that as tech in LA grows, it doesn’t end up being this unaware and tone-deaf industry that badly impacts the city’s communities,” says Aria, whose role at the Mayor’s office involves developing policy regarding technology and innovation in LA. 

“The tech community in Los Angeles is aware of instances in other US regions – like Silicon Valley – where tech hasn’t always been used for the best purposes and is conscious not to make the same mistakes.”

Downtown, Los Angeles. Photo: Sasha/Unsplash

As companies in LA are becoming more conscious of their social responsibility, so too, it seems, are local investors.

While there are not yet precise statistics on the amount of impact investment in LA companies, Josh says that a growing number of investment firms in the city are keen to support impact entrepreneurship.

“It’s not only niche social impact funds that are investing in startups,” he says. “Now, venture capital firms are seeking to invest in startup teams from diverse backgrounds who can create positive societal impact while building sustainable businesses.”

One such firm is LDR Ventures, which was founded with the aim of bringing women and founders of color into the picture and helping to mentor people traditionally excluded from the VC world. 

“We’re really looking to shine a spotlight on, and bring attention to, those who are underestimated and underappreciated,” says Maxine Kozler, Co-Managing Director for LDR Ventures.

Current challenges

But, while efforts are being made by individual firms to promote equality within LA’s wider startup ecosystem, the VC community itself is lagging behind. 

According to a 2019 venture capital survey conducted by Pledge LA, 81 percent of investors in the city are male while only 34 percent are people of color. 

Still, like many startup scenes worldwide, LA is in the process of figuring out how to level the socioeconomic playing field.

One upside is that the city is still far cheaper than New York and the Bay Area. But, as prices for housing and office space continue to inflate – and the city’s cost of living remains at 43 percent above the national average – entrepreneurs from certain economic classes could find themselves battling to stay afloat. 

Yet, since LA is, to use Aziz’s words, “built on stories”, the city is committed to fashioning a new narrative of change and progress. 

Aria says that bolstering social entrepreneurship in Los Angeles will come down to creating a more “diverse network of founders” and educating students from a young age to understand impact opportunities in tech.

“This is what we’re working on at the Mayor’s office,” he says. “The hope is that the more people we have from diverse backgrounds making products and services, the more issues of a diverse nature can be addressed.”

For a closer look at the movers and shakers in LA’s ecosystem, Startup Guide Los Angeles is available for purchase here.