Tech boosters are stumping for a Silicon Valley contender down south, and conference halls and bars are brimming with entrepreneurs looking to join a growing community that includes a huge new Google campus in Venice and a wave of Internet start-ups.
Entrepreneur Sam Friedman believes the name suggests a “poor man’s Silicon Valley.”
The co-founder and chief executive of Parking in Motion, a Santa Monica-based start-up whose mobile application helps users find available parking spaces, says LA should come up with its own tech identity.
Engineers continue to flock to the Bay Area for jobs, causing a shortage of talent farther south. Entrepreneurs complain that the region’s research universities aren’t doing enough to encourage graduates to pursue start-ups. Despite the cluster of companies in Santa Monica, the region still faces geographical challenges, with tech companies spread out over a vast area surrounding Los Angeles.
And venture-capital funding is still tough to come by and is dwarfed by the amount of investment occurring in the Bay Area and other large metropolitan areas.
In the first three quarters of 2011, LA’s $298.6 million in tech investments was less than one-tenth of that raised by Bay Area start-ups, and about one-quarter of what firms raised in New York, according to a report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters. And while startup money in those other regions is climbing past pre-recession levels, tech funding in LA has been slower to bounce back, with investments this year on pace to decline from 2010, the MoneyTree report said.
“LA is one of the most undiscovered tech hubs in the country,” said Mark Suster, a partner at leading venture-capital firm GRP Partners. Although GRP has “doubled down on LA” in recent years, “you still have to pull teeth to get Silicon Valley venture capitalists to get on a Southwest flight down to LA.”
Also hampering the region’s efforts to win a spot on the US technology map is its lack of a homegrown tech powerhouse. Silicon Valley’s numerous all-stars include Google, Apple and Facebook, while Seattle has Amazon and Microsoft. Chicago has daily deals giant Groupon; Washington, D.C., has rival LivingSocial. And New York has gained ground with Internet companies that include Tumblr and Foursquare.
But LA has struggled to field its own contender, with nearly all of its companies either midsize players or, more often, in the very early stages of development. That’s set off a start-up frenzy among entrepreneurs hoping to create the next “monster hit,” said Diego Berdakin, president of BeachMint, a Santa Monica company that operates e-commerce web sites with products designed by celebrities.
“There is no $30-billion behemoth technology company that’s emerged recently, and that’s where you’re seeing people aim their sights. They want to build the new Groupon, the new Amazon,” said Berdakin, 26. “I think that attitude is very pervasive.”
Southland developers and investors think they stand a good chance. They say the current tech scene in LA has moved past the first-generation stage, with many serial entrepreneurs now on their second, third or fourth ventures. That’s brought a breadth of experience and expertise to the area and paved the way for new startups to form.
Although traditional venture capital funding has been inconsistent, especially from firms outside Southern California, first-round investments for Internet-specific start-ups are outperforming the rest of the tech space in LA County, with $90.7 million, or 26 deals, completed so far this year, compared with $63.6 million, or 20 deals, in all of 2010, the MoneyTree report said.
(Los Angeles Times)
