Silicon Valley is the tech hub of the U.S., saturated with innovative startups, talented engineers, and the most prominent venture and angel investors. But move down 400 miles to Southern California, and Los Angeles has a technology sector of its own that is well established.
SoCal is home to the third largest tech ecosystem in the U.S. behind only Silicon Valley and New York, with a 12% share of early-stage startups nationwide, according to AngelList. It is also the fastest growing market, with the number of new startups growing at 5.3%, according to a recent presentation given by Upfront Ventures, using CB Insights Data, shed some valuable light on LA’s progress so far.
In 2013, over $1.5 billion in capital flowed into LA, compared to $700 million in 2010. That growth rate in capital is four times larger than the U.S average, and has led to 250 companies in Los Angeles raising at least $1 million in funding since 2012.
The year of 2014 is not yet over, and LA has already produced over $8 billion in exits. Notable IPO’s include the likes of TRUECar and Rubicon, while prominent companies like Oculus, Beats, Gravity, and Burstly have been acquired.
What is driving the growth of tech in SoCal?
For one, its people. According to the Kauffman Index, 530 people per every 100,000 are entrepreneurs, the most in the U.S. between 2011 and 2013. In addition, with just under 11,000 graduate students in engineering schools like USC Viterbi and UC engineering schools (including UCLA, Irvine, and San Diego), LA produces the most engineers of any U.S. city.
LA also has a strong base of local investors, who most importantly, are active. Of the Top 11 most active investors in the LA area, seven of them are locally based, CB Insights Data shows. That list includes Upfront Ventures, Mucker Capital, Greycroft Partners, Siemer Ventures, Rincon Venture Partners, Double M Partners, and Baroda Ventures. And with 25 accelerators, 35 incubators, and 38 coworking spaces, LA offers startups the guidance they need at an early stage.
Lastly, SoCal is considered a great place to live. According to a cost of living index from Areavibes (including metrics like groceries, housing, and utilities), the cost of living in LA is significantly cheaper than San Francisco and New York. Perpetual warm, sunny weather is also an attractive factor for startups deciding where to set up headquarters.
Well-positioned for the next step in tech
U.S. adults watch over five hours of video per day and that content is increasingly being consumed online – about 22 minutes of that average, according to eMarketer. LA specializes in video content creation: it plays home to many successful startups like deviantART, the leading artist social network, MiTu, the largest online Latino video network, and Maker, the number one producer and distributor of online video.
LA is also well positioned to capitalize on the constantly growing eCommerce industry. It is already the number one metro area for Retail and Trade sector employment, with over $400 billion in imports and exports going through LA ports in 2012, a U.S. record. Successful commerce platforms like TRUECar, a car buying and selling portal, the Honest Company, an online retailer of baby and home products, and JustFab, a fashion commerce retailer, trace their roots to LA.
Perhaps LA still has a gap to close on established tech hubs like Silicon Valley and New York, but it is quickly becoming a hotbed for new, innovative startups. With popular social apps like Snapchat, Tinder, and Whisper leading the way for LA, it won’t be long before the sunny SoCal city boasts its own leading tech ecosystem to the world.