With Snap's IPO, Los Angeles prepares to embrace new tech millionaires

Blaine Lourd has long helped the movie stars, professional athletes and heiresses in Los Angeles manage their wealth. During the past few years, he has also noticed millionaires who made their money in technology begin to dot the west side of the city.

“What we have not had is our Google moment,” Lourd said, referring to Google’s initial public offering in 2004, which produced a horde of new millionaires in Silicon Valley.

Now such a moment may be upon Los Angeles. Next month, Snap, the parent company of the disappearing-message app Snapchat, which is based in the Venice neighbourhood, is set to go public — and in the process mint a wave of tech millionaires and billionaires in a city better known for its well-paid Hollywood stars.

That prospect has Angeleno real estate agents, money managers and luxury goods purveyors excited for a potential business windfall, akin to what their Silicon Valley brethren 375 miles to the north have seen time and again with tech IPOs.

“When it comes to tech companies, for the wealth managers and real estate guys, no one has really rung the register like the Snap thing that’s about to happen” to Los Angeles, said Lourd, whose wealth management firm, LourdMurray, is based in Beverly Hills. “My theme is that Snapchat is the moment.”

Recently, Snap said it was aiming to sell its stock for $14-$16 a share, putting the company’s value at $19.5 billion to $22.2 billion. That would make Snap among the biggest public tech companies by market capitalisation to have its headquarters in the Los Angeles area.

At that valuation, Snap’s two young founders, Evan Spiegel and Bobby Murphy, would walk away with holdings worth more than $3 billion each. Timothy Sehn, Snap’s senior vice president for engineering, would own shares valued at as much as $110 million. And dozens of other Snap employees could become overnight millionaires.

To capture some of these soon-to-be wealthy techies, Los Angeles real estate agents, lawyers and wealth managers have bought targeted search and Facebook ads, they said. Others are trying to spread word of their services through their networks of contacts. Tech employees are feeling the effects — some said they had been bombarded with LinkedIn messages from companies that find clients for these service providers.

“It will be amazing to see the tech industry take off,” said Lee LeGrande, a residential real estate agent at LeGrande Beach Homes, which sells property in Manhattan Beach and Hermosa Beach. In anticipation of new money from Snap workers and Silicon Valley techies, he said, he is building some luxury beach homes.
“When Snap goes public, I hope people see these towns are hard to beat for proximity to LAX and the clean beach,” he said.

Snap is trying to help its 1,900 employees prepare for the scrum for their money. One Snap employee, who asked to remain anonymous because the details were confidential, said the company had discussed bringing in academics from Stanford University to explain the effect that the IPO could have on their lives. Google used a similar strategy for its employees when it went public.
A spokeswoman for Snap declined to comment.

In the meantime, wealth managers and others are preparing their advice. Howard Rowen, a financial adviser at Bank of America in Los Angeles who manages money for entrepreneurs and tech workers, said techies who made fortunes at a startup might think they would hit the jackpot again. Instead, he said, that often does not happen and coders, engineers and others should regard the IPO as a once-in-a-lifetime event.

They should also diversify their assets, Rowen said. “Entrepreneurs have strong emotional ties to their companies and their stock, but things don’t always go right,” he said. “It’s hard to convince them that they need to invest in something other than their own company.”

Snap has changed the face of Venice, a once bohemian beachside section of Greater Los Angeles. When Spiegel and Murphy moved Snap to the area in 2013, they put the company in a single beach bungalow near the Venice Beach boardwalk. Now Snap’s employees have more than tripled from 600 people at the end of 2015, and the company owns and leases several buildings tucked discreetly amid shops and homes.

The Snap public offering portends future wealth for venture investors in Los Angeles as well.

“The next three to five years will be an absolute renaissance,” said Mark Suster, founder of Upfront Ventures, a venture capital firm in Santa Monica.

Given events like Snap’s IPO, “we’ll see those employees recycle their capital back into the ecosystem,” he added. “There will be an explosion of startups.”

Noting that Silicon Valley venture investors have long held Los Angeles in low regard, Suster said more were coming south. “There is a lot of money flowing into the community,” he said.

Not everyone is happy with the changes. Gentrification has pushed artists and working families out of Venice. Some restaurants have shut down because they can no longer pay soaring rents. In response, some politicians and residents in Venice have pushed for density restrictions, said Emil Schneeman, a real estate agent at Berkshire Hathaway Home Services.