Venture Capital Alone Won’t Lure Multimedia


In an attempt to create and support home industry, Mayor Richard Riordan opens a Technology Venture Forum at the Beverly Hilton today designed to bring aspiring entrepreneurs--especially in the hot field of interactive multimedia--together with venture capital investors.

Meanwhile, the SuperComm show of advanced telecommunications equipment and software continues at the Anaheim Convention Center, offering multimedia entrepreneurs access to suppliers and industrial customers.

It’s a fertile mix and a commendable effort to give Los Angeles and Southern California a lift in the emerging business of “computerized movies” that has aroused civic ambitions from San Francisco to Seattle to New York. All those cities are helping fledgling multimedia companies with money and rent-free quarters.


So Los Angeles proposes to do the same, with so-called “incubator” facilities where media entrepreneurs can share use of computers and image-creating equipment--”a kind of multimedia Kinko’s,” quips one start-up partner.

Venture capitalists are interested but reserved. “We’re eager to be supportive; Mayor Riordan was a venture capitalist himself,” says Brad Jones, managing partner of Brentwood Associates. But young companies should understand that “the need is for something unique, not just another CD-ROM title.”

All the talk about multimedia is tentative because it’s a business-in-progress right now--”a bunch of talented people looking for financing to make movies before the invention of the movie theater or the standardization of the projector,” as writer and program developer Stan Cornyn puts it.

The 900 companies listed in Carronade Group’s Multimedia Directory--everything from four-employee start-ups to Walt Disney Co. itself--are only a fraction of the true number.

“Orange County, where graphic designers simply set up shop, is an unacknowledged center of this business,” says Rohit Shukla of Los Angeles’ Economic Development Corp. In Torrance, 150 multimedia-related companies have formed a mutual help association called Digital Bayside, yet few are listed in any industry directory.


So to understand how the business will develop--and how Southern California can really support home industry--it’s best to take a look at individual companies.


Vortex Media Arts in Burbank has grown in a year to 37 employees and more than $1 million in sales--and is profitable--yet wants to attract substantial capital or even a buyout from a larger firm.

Vortex, founded by five software entrepreneurs, has played it prudently. It produces CD-ROM programs for larger companies, such as Time-Warner, Electronic Arts, Broderbund Software and Hasbro toys, strictly on their money--in the form of advances against royalties.

“But it’s hard to get ahead,” says Rick Giolito, chief financial officer. Right now Vortex is adapting the Madeline series of children’s books to interactive discs. “Our advance is $3 on a disc that sells for $20 wholesale. But it costs $300,000 to produce the program, so 100,000 of those discs have to sell before we earn any royalty,” Giolito explains.

That would be a mammoth seller in today’s CD-ROM market, so Vortex in the new age is in the position of artists and authors throughout the ages, working hand-to-mouth.

Giolito says Vortex will succeed because of the talent it can call on in Southern California. But he is skeptical that City Hall can do much to help. “City Council politics won’t allow help for one area if it isn’t given to all,” he says. “So nothing gets done.”

Geismar & Groth Interactive in Culver City is a partnership of Peter Geismar, a onetime television news producer, and Barbara Groth, a veteran of IBM’s early ventures into multimedia. The firm, with six employees, is working on CD-ROM programs based on Deepak Chopra’s self-help book “Ageless Body, Timeless Mind.”


They should be big sellers, but Geismar worries that a small company like G&G; won’t get shelf space at computer retailers such as Comp USA, Egghead Software and Best Buy. Program producers abound in multimedia, but distribution channels are scarce.


Soon, “distribution will be on-line,” says Richard Royce, head of VentureXpo, a Torrance start-up that hopes to sell business consulting services on the Internet. Royce cites Pacific Bell’s Media Park network, which offers producers access to sound effects, editing and other services. “It’s a virtual studio,” he says.

It’s a clue to multimedia’s future--an industry of independent producers needing finance and distribution--that looks a lot like the Hollywood studio system that brings forth films and videos from thousands of contractors.

Indeed, the film industry is already on-line, says media expert Martin Greenberger of UCLA, who notes that computer networks allowed director Steven Spielberg to edit “Jurassic Park” while on location in Poland making “Schindler’s List.”

And that in turn is a clue to what Southern California must do to attract and retain this new industry: If producers can work anywhere, they can live where they want. So the community has to provide good schools and amenities to hold on to business. In the future--as today--a good place to live will be a good place to do business.