Business & Economy

Why the Dollar Shave Club deal is a big win for Silicon Beach

Dollar Shave Club CEO and co-founder Michael Dubin at the company's headquarters in Venice.
Dollar Shave Club CEO and co-founder Michael Dubin at the company's headquarters in Venice.
Jae C. Hong/AP

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Venice-based Dollar Shave Club – which sells men's grooming products by monthly subscription – has been one of the hottest start-ups in Southern California. On Tuesday night, Unilever announced it was acquiring the company. Financial terms were not disclosed, but the amount is reportedly close to $1 billion.

The company’s founders are cheering of course, but so are others in the Los Angeles tech community, dubbed Silicon Beach, which, though very much on the rise, is still at best a distant second-fiddle to Silicon Valley.

"Anything that sells for a billion dollars or more changes the perception," said Adam Lilling, founder and managing partner of the Santa Monica-based venture capital firm, Plus Capital. 

One major knock on Silicon Beach is that it hasn’t had a lot of "exits," which is when a start-up goes public or is acquired.

“When people try to struggle to figure out when was the last billion dollar exit in Los Angeles a lot of people think of Ticketmaster, so this is very valuable," said Lilling. 

Ticketmaster went public 20 years ago. Dollar Shave Club started just four years ago.

Lilling says the deal also speaks to what Silicon Beach does best: fostering companies that talk directly to their customers, as opposed to the companies in Silicon Valley, which primarily focus on technology.

"It really highlights what's next, which is companies are not just coming up with hardcore tech like Silicon Valley, but they're also coming up with new brands that they're marketing to the world," said Lilling. "It's not just selling razors, it's redefining how you sell products."

It was a YouTube video that's now been watched almost 23 million times that catapulted Dollar Shave Club to success.

"They were one of the first to build up a global brand using YouTube," said Jamie Montgomery, managing director of Santa Monica-based March Capital Partners. "Los Angeles is really a center for creating new content."

Unilever paid a hefty premium to tap into Dollar Shave Club’s young, loyal male customers to boost its other brands.

Montgomery says the acquisition will also have a more practical effect for start-ups in L.A., because investors will be cashed up and looking for new start-ups to put their money in.

"It allows new capital to be recycled into new companies, so it's tremendous for the overall ecosystem," said Montgomery.