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As it adds Jeremy Milken to the partnership, Watertower Ventures nears $50 million close for its new fund

Derek Norton and Jeremy Milken have known each other for twenty years. Over their longtime personal and professional relationship, the two Los Angeles-based serial entrepreneurs have invested in each other’s companies and investment firms, but never worked together until now.

Milken is taking the plunge into institutional investing, joining Norton as a partner in Watertower Ventures just as the firm prepares to close on a $50 million new fund.

It’s an auspicious time for both Los Angeles-based businessmen, as the LA venture community sees a wave of technology talent relocating from New York and San Francisco in the newly remote work culture created by the COVID-19 epidemic.

“I see two things happen. One people look at the effects of where the market’s going. We’re seeing a lot more companies that are starting up now as a result of a [the pandemic],” said Norton. “New company formation is happening faster than before covid. [And] a lot of venture capitalists that have relocated to LA. They’ve moved down to LA for lifestyle reasons and they’re saying that they don’t need to go back to San Francisco.”

For Milken, the opportunity to get into venture now is a function of the company creation and acceleration of digital adoption that Norton referenced. “The pandemic is accelerating change in the marketplace. Things that might have taken a decade are taking two years now,” Milken said.

These opportunities are creating an opening for Watertower Ventures in markets far beyond the Hollywood hills. The firm, whose original thesis focused on Los Angeles, San Francisco, and New York, is now cutting checks on investments in Texas and Utah, and spending much less time looking for companies in the Bay Area.

Derek Norton, founder, Watertower Ventures: Image Credit: Watertower Ventures

Norton’s latest fund is the only the most recent act in a career that has seen the investor traverse the financial services digital media and the early days of the internet. Norton built Digital Boardwalk, a pioneering internet service provider and the second commercial partner for the trailblazing browser service, Netscape.

Later, at Jeffries Technologies, and the $120 million Entertainment Media Ventures seed and early stage venture capital fund, Norton was intimately involved in bringing tech to market and focusing on early stage investments. With that in mind, the Watertower Ventures group, which launched in 2017 with a small, $5 million fund, is a return to those roots.

The plan, even at the time, was always to raise a larger fund. After founding and running the boutique investment banking business at Watertower Group, Norton knew he had to raise a starter fund to prove the thesis he was working on.

That thesis was to provide a bridge between early stage companies and large technology companies using the network that Norton has built in the Southern California tech and entertainment community over decades.

“We want to take our contacts at Google, Apple, Facebook, Disney, Microsoft, Cisco, Verizon, AT&T, Comcast, and other companies we believe should have a relationship with our portfolio companies, and help the CEOs and management teams more effectively do business development,” Norton told SoCal Tech when he closed his first fund in 2017. “We want to connect them to the right person at those companies to create a commercial relationship. That has a really large impact on early stage companies, who typically don’t have a deep network of relationships, and the ability to get to those type of people. It’s because of our advisory business that we have those relationships, and that’s also why those relationships stay fresh and active, versus people who aren’t in those businesses. It’s almost a full time job to maintain that, and that’s where our value-add is.”

Milken, who has spent his professional career in entrepreneurship, was ready to try investing, and was intimately familiar with Watertower and its portfolio, as an investor in the firm’s first $5 million fund.

“Two years ago we started having those conversations,” said Norton in an interview. “As Jeremy exited his business in September it created the opportunity to go out and raise together as the evolution of our partnership.”

Jeremy Milken, general partner, Watertower Ventures. Image Credit: Watertower Ventures

With the new capital coming in, Norton expects to back some 30 to 35 companies, he said. And, in a testament to the first fund’s performance, which has it in the top decile of venture funds for its vintage, Norton said he was able to raise the capital amidst the economic uncertainty caused by the COVID-19 pandemic. Some 70 percent of the existing portfolio has been marked up, according to Norton.

Even though limited partners, the investors who back venture funds, were reluctant to commit capital to new firms in March and April, fundraising returned with a vengeance in June and July, according to Norton. The paper performance likely was enough to woo additional limited partners and individual investors including TikTok chief executive Kevin Mayer, the former head of streaming at Disney.

Mayer’s presence in the firm’s investor base is a testament to the firm’s pitch to founders. “We view fundraising as a massive distraction for these early stage companies from their business. We try to deliver that network that’s ours to those founders,” said Norton.

“I think we’re in a unique position starting with a fresh fund here,” says Norton. “Uncertainty creates opportunity and people are bringing solutions. We haven’t noticed any slowdown whatsoever, we’re working with twenty five companies per week. Since the inception of the fund, we haven’t seen deal flow at this level.”

Fox Sports to broadcast the full season of NASCAR’s virtual race series

Esports racing, helped by record-setting viewership, is hitting the big time.

Fox Sports said Tuesday it will broadcast the rest of the eNASCAR Pro Invitational iRacing Series, following Sunday’s virtual race that was watched by 903,000 viewers, according to Nielsen Media Research.

While those numbers are far below the millions of viewers who watch NASCAR’s official races — the last one at Phoenix Raceway reached 4.6 million — it still hit a number of firsts that Fox Sports found notable enough to commit to broadcasting the virtual racing series for the remainder of the season, beginning March 29.

The races will be simulcast on the FOX broadcast network, Fox Sports iRacing and the FOX Sports app. Races will be available in Canada through FOX Sports Racing.

Virtual racing, which lets competitors race using a system that includes a computer, steering wheel and pedals, has been around for years. But it’s garnered more attention as the spread of COVID-19, the disease caused by coronavirus, has prompted sports organizers to cancel or postpone live events, including the NCAA March Madness basketball tournament, NBA, NHL and MLB seasons as well as Formula 1 and NASCAR racing series.

Classic. @JimmieJohnson checks in live with @JeffGordonWeb during the #ProInvitationalSeries and says he needs to “learn different cars” for his 2021 schedule. 👀

(And Jeff helps him notice a bit of damage 😂) pic.twitter.com/5gFgl1f0e3

— FOX: NASCAR (@NASCARONFOX) March 22, 2020

NASCAR ran its first virtual race in the series on Sunday in lieu of its planned race at the Homestead-Miami Speedway, which was canceled due to COVID-19. Not only was it the most watched esports event in U.S. television history, it was Sunday’s most-watched sports telecast on cable television that day.

50 seconds of #ProInvitationalSeries virtual engines. CRANK IT UP! pic.twitter.com/wyG1JhFkPQ

— FOX: NASCAR (@NASCARONFOX) March 22, 2020

“This rapid-fire collaboration between FOX Sports, NASCAR and iRacing obviously has resonated with race fans, gamers and television viewers across the country in a very positive way,” Brad Zager, FOX Sports executive producer said in a statement. “We have learned so much in a relatively short period of time, and we are excited to expand coverage of this brand-new NASCAR esports series to an even wider audience.”

Granted, there aren’t any live sports to watch in this COVID-19 era. Still, it bodes well for the future of esports, perhaps even after the COVID-19 pandemic ends.

“The response on social media to last Sunday’s race has been incredible,” said four-time NASCAR Cup Series champion Jeff Gordon, who is announcer for Fox NASCAR. “We were able to broadcast a virtual race that was exciting and entertaining. It brought a little bit of ‘normalcy’ back to the weekend, and I can’t wait to call the action Sunday at Texas.”

You can see what the virtual racing looks like here in this clip from Fox Sports.

NASCAR isn’t the only racing series to turn to esports. Formula 1 announced last week that it would host an esports series, the F1 Esports Virtual Grand Prix series, with a number of current F1 drivers alongside a number of other stars.

The virtual Formula 1 races will use Codemaster’s official Formula 1 2019 PC game and fans can follow along on YouTube, Twitch and Facebook, as well as on F1.com. The races will be about half as long as regular races, with 28 laps. The first race took place March 22. The first-ever virtual round of the Nürburgring Endurance Series kicked off on March 21.

Blood banks in El Paso are ‘overwhelmed’ by donations after mass shooting

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After a devastating mass shooting, El Paso’s community pulled together to donate blood. 

A gunman opened fire in a Walmart on Saturday morning, injuring at least 23 people, CNN reports. Police confirmed “multiple” fatalities. This is the 249th mass shooting in the United States this year, according to the Gun Violence Archive, which means there have been more mass shootings than days in 2019. 

The City of El Paso put out an urgent call for blood donors as hospitals drained their supply to treat the victims. 

Blood needed urgently. Multiple injured transported to various hospitals. Blood donation centers Vitalent Blood Services at 424 s Mesa Hills and 133 N Zaragoza

— EL PASO POLICE DEPT (@EPPOLICE) August 3, 2019 Read more…

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Cities that didn’t win HQ2 shouldn’t be counted out

Scott Andes
Contributor

Scott Andes is the program director for the National League of Cities City Innovation Ecosystem program.

The more than year-long dance between cities and Amazon for its second headquarters is finally over, with New York City and Washington, DC, capturing the big prize. With one of the largest economic development windfalls in a generation on the line, 238 cities used every tactic in the book to court the company – including offering to rename a city “Amazon” and appointing Jeff Bezos “mayor for life.”

Now that the process, and hysteria, are over, and cities have stopped asking “how can we get Amazon,” we’d like to ask a different question: How can cities build stronger start-up ecosystems for the Amazon yet to be built?

In September 2017, Amazon announced that it would seek a second headquarters. But rather than being the typical site selection process, this would become a highly publicized Hunger Games-esque scenario.

An RFP was proffered on what the company sought, and it included everything any good urbanist would want, with walkability, transportation and cultural characteristics on the docket. But of course, incentives were also high on the list.

Amazon could have been a transformational catalyst for a plethora of cities throughout the US, but instead, it chose two superstar cities: the number one and five metro areas by GDP which, combined, amounts to a nearly $2 trillion GDP. These two metro areas also have some of the highest real estate prices in the country, a swath of high paying jobs and of course power — financial and political — close at hand.

Perhaps the take-away for cities isn’t that we should all be so focused on hooking that big fish from afar, but instead that we should be growing it in our own waters. Amazon itself is a great example of this. It’s worth remembering that over the course of a quarter century, Amazon went from a garage in Seattle’s suburbs to consuming 16 percent — or 81 million square feet — of the city’s downtown. On the other end of the spectrum, the largest global technology company in 1994 (the year of Amazon’s birth) was Netscape, which no longer exists.

The upshot is that cities that rely only on attracting massive technology companies are usually too late.

At the National League of Cities, we think there are ways to expand the pie that don’t reinforce existing spatial inequalities. This is exactly the idea behind the launch of our city innovation ecosystems commitments process. With support from the Schmidt Futures Foundation, fifty cities, ranging from rural townships, college towns, and major metros, have joined with over 200 local partners and leveraged over $100 million in regional and national resources to support young businesses, leverage technology and expand STEM education and workforce training for all.

The investments these cities are making today may in fact be the precursor to some of the largest tech companies of the future.

With that idea in mind, here are eight cities that didn’t win HQ2 bids but are ensuring their cities will be prepared to create the next tranche of high-growth startups. 

Austin

Austin just built a medical school adjacent to a tier one research university, the University of Texas. It’s the first such project to be completed in America in over fifty years. To ensure the addition translates into economic opportunity for the city, Austin’s public, private and civic leaders have come together to create Capital City Innovation to launch the city’s first Innovation District at the new medical school. This will help expand the city’s already world class startup ecosystem into the health and wellness markets.

Baltimore

Baltimore is home to over $2 billion in academic research, ranking it third in the nation behind Boston and Philadelphia. In order to ensure everyone participates in the expanding research-based startup ecosystem, the city is transforming community recreation centers into maker and technology training centers to connect disadvantaged youth and families to new skills and careers in technology. The Rec-to-Tech Initiative will begin with community design sessions at four recreation centers, in partnership with the Digital Harbor Foundation, to create a feasibility study and implementation plan to review for further expansion.

Buffalo

The 120-acre Buffalo Niagara Medical Center (BNMC) is home to eight academic institutions and hospitals and over 150 private technology and health companies. To ensure Buffalo’s startups reflect the diversity of its population, the Innovation Center at BNMC has just announced a new program to provide free space and mentorship to 10 high potential minority- and/or women-owned start-ups.

Denver

Like Seattle, real estate development in Denver is growing at a feverish rate. And while the growth is bringing new opportunity, the city is expanding faster than the workforce can keep pace. To ensure a sustainable growth trajectory, Denver has recruited the Next Generation City Builders to train students and retrain existing workers to fill high-demand jobs in architecture, design, construction and transportation. 

Providence

With a population of 180,000, Providence is home to eight higher education institutions – including Brown University and the Rhode Island School of Design – making it a hub for both technical and creative talent. The city of Providence, in collaboration with its higher education institutions and two hospital systems, has created a new public-private-university partnership, the Urban Innovation Partnership, to collectively contribute and support the city’s growing innovation economy. 

Pittsburgh

Pittsburgh may have once been known as a steel town, but today it is a global mecca for robotics research, with over 4.5 times the national average robotics R&D within its borders. Like Baltimore, Pittsburgh is creating a more inclusive innovation economy through a Rec-to-Tech program that will re-invest in the city’s 10 recreational centers, connecting students and parents to the skills needed to participate in the economy of the future. 

Tampa

Tampa is already home to 30,000 technical and scientific consultant and computer design jobs — and that number is growing. To meet future demand and ensure the region has an inclusive growth strategy, the city of Tampa, with 13 university, civic and private sector partners, has announced “Future Innovators of Tampa Bay.” The new six-year initiative seeks to provide the opportunity for every one of the Tampa Bay Region’s 600,000 K-12 students to be trained in digital creativity, invention and entrepreneurship.

These eight cities help demonstrate the innovation we are seeing on the ground now, all throughout the country. The seeds of success have been planted with people, partnerships and public leadership at the fore. Perhaps they didn’t land HQ2 this time, but when we fast forward to 2038 — and the search for Argo AISparkCognition or Welltok’s new headquarters is well underway — the groundwork will have been laid for cities with strong ecosystems already in place to compete on an even playing field.

This city is letting people try out self-driving cars for free

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If you’re visiting Arlington, Texas, and have been itching to try out an autonomous vehicle, you’re in luck. 

Starting Friday, three Drive.ai self-driving cars (and eventually five) will be available to ride — for anyone, not just office workers, city officials, or a select group of “early riders.” Back in July, Drive.ai piloted the autonomous Nissan NV200 vans in Frisco, Texas. The Arlington deployment will be around for the next year.

“This is a not a quick demonstration,” CEO Bijit Halder said in a phone call this week.

If you’re interested, you can download the Drive.ai app or order a car from a kiosk at five pickup points. The cars are taking passengers along three routes that hit the Dallas Cowboys stadium, the Texas Rangers ballpark, the Arlington Convention Center, restaurant districts, and other venues.  Read more…

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Richard Linklater made an 'I Pee With LGBT' ad to protest Texas' anti-trans bathroom bill

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Who said great art can’t be a sing-songy rhyme?

The award-winning director of Boyhood and a bunch of other movies that make you cry recently produced an ad to help fight his home state’s proposed anti-transgender bathroom initiative, SB6. 

Titled “I Pee with LGBT,’ the ad features a Texas utopia where people get to the use bathroom of their choice, free of harassment and discrimination. The current bill would require transgender people to use the bathroom that corresponds with their sex assigned at birth.

The ad is great, and thankfully doesn’t include either Ethan Hawke or Julie Deply crying. Read more…

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