As the number of tech companies in the region grows, so does the number of tech workers, whose high salaries put them at an advantage in both LA's renting and buying markets.
According to the most recent Regional Housing Needs Assessment, from 2020, which determines how much housing must be built between 2021 and 2029, Los Angeles needs to construct more than 456,000 units of housing, or around 57,000 per year, to keep up with demand. But the city is anticipated to build just short of 231,000 in that period, or around 29,000 per year. And the flood of new tech workers is only exacerbating the problem.
The average tech salary in Los Angeles ranges from $114,000 for marketing and design positions to more than $148,000 for developers and engineers. This beats out the median annual household income in LA county, which is just over $71,000, according to the U.S. Census Bureau.
High salaries put tech workers at an advantage in both the renting and buying markets, but it’s major liquidity events, such as a company being acquired or going public, that allow people to put down massive down payments or all-cash offers that really give them an edge, said Matt Canzoneri, CEO and co-founder of home-buying platform DwellWell. “They’re not relying on their high paychecks,” Canzoneri said. “They all of a sudden come into a windfall of cash that shakes up the market.”
Developers are more likely to build and price rental units and homes for purchase at rates that people in tech can afford, but are out of others’ budget.
The city’s IPO activity really started picking up in 2021, when companies including Dave and Rivian went public. According to data from PitchBook, the region saw 18 tech IPOs in 2021. That’s more than double the number of IPOs it had in 2020, when seven companies IPO’d, and more than triple the number of tech IPOs in 2019, when five tech companies went public.
LA has also seen a lot of M&A activity in the last few years, PitchBook data shows. In 2021, 434 tech deals took place in the region, worth an average of $377.6 million. That’s up from 284 deals in 2020 worth an average of $246.2 million.
Developers are more likely to build and price rental units and homes for purchase at rates that people in tech can afford, but are out of others' budget. And with the sheer lack of housing units overall, people who don’t make enough money are getting pushed out of certain areas.
According to apartment rental platform RentCafe, the average apartment for rent in Santa Monica costs $3,958, with 95% of the apartments in the area costing more than $2,000 per month. Meanwhile, the average home value is more than $1.9 million, according to Zillow. In Los Angeles overall, the average rent is $2,734, with 74% of the apartments costing more than $2,000 per month. Houses cost $972,828 on average.
Though tech aggravates the housing problem, tech may also provide unconventional solutions: Construction tech companies can create additional housing at a much faster pace than traditional development projects. “We have to look at clever ways of innovating and building our way out of the supply deficit, and one of the ways that we can do that is to limit the time and cost of constructing a home,” said Aisling Carlson, a local startup founder. “Technology can play a key role in adding value there.”
Modal Living, which builds prefab “accessory dwelling units,” sees a heavy concentration of business in Southern California, according to CEO Colin Jube. Adding another unit to a backyard offers “a really good solution for places like LA that have a lot of single-family neighborhoods,” Jube said. California offers a reimbursement of up to $40,000 for households that build an additional unit on their property.
“If you take any average single-family neighborhood in LA or anywhere, there’s really no way to get new, affordable housing into that neighborhood,” Jube said. “It’s built out, and typically zoning will not allow for apartment buildings or other types of housing types. So ADUs are a great way … to add housing density.”
Adding another unit to a backyard offers “a really good solution for places like LA that have a lot of single-family neighborhoods.”
And ADUs aren’t the only things that can be prefabricated. Some companies are building entire homes before they hit a plot of land, often at a much quicker rate than traditional construction. In a city where the construction of new units of housing is slow going, prefabricated housing can be a fix, said Steve Glenn, CEO of Plant Prefab. This kind of building “can make the construction process more efficient from a labor standpoint, from a productivity standpoint, and from a time standpoint, to make it less costly to actually build.”
Though construction tech like this sounds exciting in theory, these solutions must go hand-in-hand with something less cool: Los Angeles zoning laws. “There are way more people that need housing than housing exists,” Jube said. “At its core, that’s really a zoning issue. LA in particular … has a disproportionate amount of single-family zoning.”
A study released in March by UC Berkeley’s Othering and Belonging Institute found that 78% of residential land in the greater Los Angeles area is zoned for single-family housing.
This means there’s fewer housing units per square mile. From there, it’s basic economics of supply and demand: If construction isn’t keeping up with the increasing demand for housing, prices go up and inevitably get too expensive for the people who’ve lived in the city their whole lives.
For reference: In the Bay Area, which is also feeling a housing crunch, 85% of all residential land is zoned for single-family-only dwellings.
“There’s a housing crisis everywhere. But it’s particularly bad in those two cities, and both of those cities suffer from some of the same issues,” Jube said. “Developers that would otherwise be happy to build higher-density projects simply aren’t allowed to because of zoning.”
More than three-quarters of residential land in the greater Los Angeles area is zoned for single-family housing, but the city and the state are working to make room for more housing units and to rezone.Photo: Nat Rubio-Licht/Protocol
And often, tech’s decision makers are all in on this kind of zoning, with the posh Bay Area town of Atherton being a prime example. Tech executives from Netflix, Google, Electronic Arts, and others wrote strongly worded notes to the city council after it proposed legalizing the construction of multifamily properties. Billionaire tech investor Marc Andreessen wrote to the council that apartment buildings would “MASSIVELY decrease our home values” and “IMMENSELY increase the noise pollution and traffic.”
But it’s not all doom and gloom. LA and the state are working on a number of solutions, including the recently approved LA Housing Element, which requires the city to rezone to make room for a minimum of 255,000 units of housing and could rezone for up to 1.4 million, LA city planner Matthew Glesne told Protocol. Two bills also received support from state legislators in late August that boost home-building by allowing developers to construct housing units on commercial land.
But the city has a long way to go. “We have the second fewest homes per adult of major cities in the country,” Glesne said. “Certainly the lowest income among us pay the price for that.”
Protocol data researcher AJ Caughey assisted with reporting on this story.
Facing a volatile market and a largely grim outlook deep into 2023, executives are naturally focused on doing more with less and protecting their cash flow. As leaders look for opportunities to increase efficiency across the business, they tend to prioritize the invoice-to-cash process last.
In partnership with Wakefield Research, Versapay surveyed 1,000 C-level executives at companies with a minimum annual revenue of $100 million on their accounts receivable digital transformation efforts. Our research revealed that companies whose AR operations are most impacted by current indicators of the recession also have yet to make significant headway with digital transformation — and their customer experience is paying the price.
With customer retention doubly important during a downturn, B2B companies can’t afford to neglect their buyers’ experience in the billing and payment process.
Accounts receivable has the most immediate impact on cash availability. So, it's not surprising that CFOs are feeling the brunt of the current economic climate’s effects: inflation, rising interest rates and labor shortages topped CFOs’ list of the biggest headaches facing their AR.
When inflation soars, cash in hand today is worth more than it will be tomorrow. Rising material and production costs put pressure on profit margins, and growing interest rates increase the cost of borrowing. Any delay in receiving payments has a powerful effect on operating capital.
Companies that have not yet completed their AR digital transformation (our research finds this is most businesses) leave money on the table by not doing so.
Companies that are early in their AR digitization efforts are more likely to be impacted by the effects of the recession, and our research confirms this.
Among executives who identified supply chain disruptions as a source of strain for their AR team, 53% said they have a great deal of work left to do in digitizing their AR. This was substantially higher than the average response across all executives (at any stage in their AR transformation journey) of 32%.
Similarly high, at 49%, was the proportion of executives who identified rising interest rates as a source of strain for their AR team stating they're still early on in their AR digitization efforts.
Companies with higher rates of automation in their invoice-to-cash process are better equipped to face economic headwinds simply because they can bring cash in faster.
But, slow internal processes only account for one part of why businesses get paid late. The other — larger, I’d argue — reason why B2B companies get paid late is due to customer disputes and dissatisfaction. This is a challenge that automation alone can’t solve because it requires suppliers to foster more collaboration and transparency with their buyers.
For this reason, companies trying to optimize cash flow during the current downturn should make customer experience in the invoice-to-cash process their focus.
Invoice disputes are typically caused by issues such as missing or damaged goods and conflicting expectations around credits and discounts. What we found, however, is that the culprit is often not the goods or services themselves, but human error and miscommunication during the payment process.
A customer’s negative experience during the payment stage can have more consequences for a business’s bottom line than one might think. Most executives we surveyed said miscommunication in the payment process has led to their company losing future revenue or getting paid less than they’re owed (82% and 85%, respectively).
But poor customer experience is too often part and parcel of B2B billing and payments. And executives are aware of the problem: 72% of C-level executives willingly admit their AR department is not customer-oriented enough (CFOs understand this even more, with 81% agreeing).
In the absence of tools designed especially for accounts receivable (on the supplier’s end) and accounts payable (on the buyer’s end) to collaborate, finance departments must rely on traditional methods of communication like email and phone. This makes it difficult for customers to get clarity on important information like payment terms and deadlines, creating a disconnect between suppliers and their customers.
This confusion ultimately delays payments, directly impacting the bottom line. Typical AR automation tools don’t solve this problem, instead they focus only on improving back-office tasks like invoice creation and cash application. Even where artificial intelligence excels, like matching incoming payments with their corresponding invoices, exceptions will still emerge and those require human collaboration to resolve. These are important and powerful digital tools for AR, but unless they consider CX, they only go halfway.
A Collaborative AR Network addresses the root causes of delayed payments by making it easier for AR departments to collaborate with their customers over the cloud.
Versapay is the first AR automation solution designed to address the human side of AR by empowering buyers and suppliers to work together to solve challenges in real time. Our Collaborative AR Network is what you get when you combine industry-leading AR automation, a next-generation B2B payments network and all the collaboration tools we’ve come to expect from modern cloud-based apps.
As a result, AR departments are able to bridge the divide between them and their customers and enjoy:
In this bear market, improving customers’ experience of the actual transaction process is a measure that businesses can’t ignore if they hope to preserve cash flow.
“We have this thesis here: Cloud was always the missing ingredient in blockchain, and Vendia added it in,” Wagner (right) told Protocol of his and Shruthi Rao's company.
“We sometimes joke at Vendia that we love nothing better than a failed blockchain experiment,” Wagner said. “Blockchain has certainly gone through this amazing hype cycle. We’re in that post trough-of-disillusionment phase. Probably half of our deals in the last year are replacements of failed blockchain attempts.”
The operational challenges of blockchain technology, including single-machine limitations, lack of throughput and scalability, high costs, and the difficulty of integration, meant that many pilots failed to deliver value, according to Wagner.
To solve those problems, he and fellow co-founder Shruthi Rao, Vendia’s chief business officer, reimagined the idea of blockchains and distributed ledgers in a cloud-native way, launching Vendia in 2020. Its fully managed and serverless Vendia Share platform for building real-time, decentralized data applications allows customers to more easily share code and data across clouds, companies, geographic regions, accounts, and technology stacks.
Shruthi Rao and Tim Wagner reimagined the idea of blockchains and distributed ledgers in a cloud-native way, launching Vendia in 2020.Photo: Vendia
“We have this thesis here: Cloud was always the missing ingredient in blockchain, and Vendia added it in,” Wagner said. “We took this very different approach, this very cloud-friendly, cloud-scaling-type approach to building it, so at the core of our technology is a cloud-centric blockchain. By building it in the cloud, we have access to essentially unlimited amounts of storage, unlimited amounts of network capacity, unlimited amounts of processing capacity. That makes it possible for us to do things that conventional blockchains can’t: [Deliver] much higher throughput, lower latency, more processing power, lots more parallelism, easier integration.”
Vendia has received $50 million in funding to date. Its customers range from startups to large mid-market and enterprise companies across markets such as settling roaming charges in Africa and Asia for telecom providers; airline supply chains; large-scale construction management; and the mortgage, hospitality, and automotive industries. They include BMW, Aerotrax Technologies, and consulting firm Slalom.
“We typically replace early attempts to use Hyperledger Fabric or Quorum or one of these other systems,” Wagner said. “But a lot of it, frankly, is companies who are staring at the high cost of building it all out in a custom way through a custom development in-house or outsourced versus trying to get it as a platform. One of the hardest things a company can do is ensure that their data and their partners’ data is always correct, consistent, complete, and up to date.”
Prior to starting Vendia, Rao had been head of business development for blockchain at AWS, including its Amazon Managed Blockchain product that supports the open-source HyperLedger Fabric. Wagner had been using the same technology at cryptocurrency company Coinbase.
“The interesting question we kept asking ourselves was, ‘What’s the problem, what’s the missing ingredient here?’” Wagner said. “I would sum it up simply as just saying this first generation of blockchain technology ignored the cloud. They ignored scalability, they ignored cloud integration, they ignored the fact that everyone else was migrating to the cloud.”
Rao said she met 1,092 unique customers while at AWS. No matter what industry they were involved in — financial services, energy, media, entertainment, gaming — they all had one big story of why they were “desperately” trying to use blockchains, according to Rao. The customers said they had many partners, invested in lots of data-making mechanisms — from IoT and mobile to edge computing and digital transformation — but the enormous amounts of data produced by those activities were getting stuck in partner and cloud silos.
“For these companies, the problem was, ‘We’re not getting access to our data that we need to make real-time decisions in a meaningful time so we can respond to market changes rapidly,’” Rao said. “Irrespective of how much investments they’ve made in AI and ML and analytics and all of these wonderful data-crunching mechanisms, they were just getting a small sliver of data.”
“I would sum it up simply as just saying this first generation of blockchain technology ignored the cloud.”
Wagner, meanwhile, had been vice president of engineering in 2018 and 2019 at pre-IPO Coinbase, which was running some of the largest regulated distributed ledgers in North America.
“I had this just sad realization that while cryptocurrencies and distributed ledgers were sort of working for speculation, they didn’t really work for enterprises,” he said.
Before joining Coinbase, Wagner spent about six years at AWS and started what’s now known as its serverless division — which included AWS Lambda, its serverless compute service — with Rao eventually running business development for the group.
“When I created Lambda, it was about democratizing and simplifying access to the cloud versus going and renting a server from AWS,” Wagner said. “We kind of think of Vendia as a similar idea: It’s about democratizing and simplifying blockchain capabilities for customers who then don’t really have to understand how that works. We deliver it in the SaaS fashion. They don’t have to deploy it, and frankly, they don’t even really have to understand it. They can get the business value out of it without necessarily becoming experts in writing solidity or hiring Hyperledger Fabric developers or any of those pieces.”
Vendia launched just after the start of the coronavirus pandemic, which further highlighted corporate challenges in the supply chain and pressure on the travel industry, particularly airlines.
“It took what was already a wonderful sort of addressable market for us and added a sense of business urgency,” Wagner said. “[It] created even more of an awareness and focus on the limitations and lack of appropriate data-sharing mechanisms, of cross-company data-sharing needs and requirements. The focus on cost-cutting and efficiency and passenger experiences, corporate travel, and the need for corporations to be able to replan their travel — some of those have actually been very beneficial for us.”
One of Vendia’s airline customers has about eight joint-venture partners to get passengers to their destinations. When a customer books a flight from San Francisco to Cancún, Mexico, for example, that airline would fly the passenger from San Francisco to Dallas, and one of its partners would then handle the Dallas-to-Cancún leg of the trip.
The initial passenger booking would come to the airline through its Salesforce CRM system. To convey needed information to its joint-venture partner handling the flight from Dallas to Cancún, in the past, Vendia’s customer would download its Salesforce data into an Excel spreadsheet and clean up some of the macros so it only shared information that the partner needed to see, such as the trip segment, the passenger’s name, the passenger name record number, the date, seat number, and other details. It would then send the information to the partner, which could be using a different CRM system.
“I had this just sad realization that while cryptocurrencies and distributed ledgers were sort of working for speculation, they didn’t really work for enterprises.”
“It’s all very manual, it’s all very duct-tapey, and throw in the fact that they have eight joint venture partners and many, many more code-share and segment-share partners … The point-to-point-to-point integration, especially on these complex flights, becomes that much harder,” Rao said.
Vendia Share instead takes care of orchestrating the data-sharing among the different airlines. The product enables businesses to have full visibility into all activities and transactions without worrying about their origin, as transactions are immutable through the power of distributed ledger technology, according to Rao.
“We make sure that whoever is supposed to get the data gets the data in real time, within five milliseconds, so there’s no back and forth of manual movement,” Rao said. “And everything is on the ledger so you can see who you shared [with], what you shared, when you shared … and you can do fine-grained analysis of what has been shared.”
Support for AWS is generally available, support for Microsoft Azure is in beta, and Google Cloud Platform support is targeted for the first quarter, according to the company.
Vendia announced its latest funding, a $30 million Series B round, led by NewView Capital, in May. The company, which has just under 100 employees, is using that money to scale its engineering and continue building out its cross-cloud platform, including support for Google Cloud Platform.
“There’s just this general idea to meet customers where they are: the cloud that they’re on, the APIs or data access that they prefer to use, the systems that they have their data in, like Salesforce, for example,” Wagner said. “On the go-to-market side … we’ve pushed into automotive, into the travel sector and financial services — that’s kind of where we got started — and they all have some really amazing business networks and use cases for us to tap. But they’re equally exciting and challenging opportunities in health care, in energy and consumer goods, and lots of these other spaces as well. To get there, we need a larger go-to-market team and more collateral. So that’ll be the other opportunity: to use those funds to grow out and expand our sector penetration.”
