Best Cities for Startups – Los Angeles

By Adriaan Brits | Wednesday, 01 September 2021 | Feature, Startup

Los Angeles is known for its creative people, from A-list Hollywood actors to relatively unknown artists. Increasingly, LA is also known for its startups, many of which take advantage of the creative skills of local workers.

Startup Genome rates the city No. 6 overall worldwide for startups. It also comes in at No. 4 in global ecosystem funding and No. 10 in global ecosystem talent, with total early-stage funding of $3.6 billion compared to a global average of $431 million, and an ecosystem value of $120 billion compared to global average of $10.5 billion.

LA is also renowned for its world-class universities, including Caltech, the University of California at Los Angeles, and the University of Southern California. “We built a rock hard community, and seeing LA now, as one of the top startup cities in the world, is a testament to the power of community,” Cam Kashani, co-founder and CEO at COACCEL: The Human Accelerator, told Startup Genome.

A few sectors do particularly well in LA. One of these is Adtech, with regional companies spending $9.1 billion on ads in 2018 (48% of total spending for all of California). PayPal holdings bought Honey Science for $4 billion in 2020, and the digital marketing platform System1 raised $270 million in 2017.

Another strong sector is gaming. Several large companies in this space are headquartered in LA, including Scopely, Activision Blizzard, and ESL Gaming (North America). Electronic Arts purchased the independent video game development studio Respawn Entertainment for $455 million in 2017, and the mobile gaming company Scopely raised $400 million in 2020.

LA is also a great place for startups focused on the life sciences, a sector that employs about 122,000 people in the area. Many of these work for Amgen, the world’s largest biotech firm. Plus, LA boasts more than 10 life sciences-focused incubators.

LA is a great startup city for a number of other reasons.

Talent and Money Abound

LA’s great universities – five of which are regularly ranked in the top 50 nationwide – turn out plenty of software engineers, data scientists, and other well-educated workers. In fact, universities in Southern California produce more than 13,000 technology graduates every year. USC and UCLA’s Price Center for Entrepreneurship & Innovation also provides invaluable training for future startup employees. 

Not only does LA have a never-ending pipeline of top talent, but it’s also home to enthusiastic investors. According to Pitchbook, the city’s local startup ecosystem is becoming more mature as larger venture capital funds have arrived, along with large technology companies like Google and Netflix that want to have a substantial presence in the epicenter of world entertainment.

“In the early days, I think the technology environment was pretty thin," Mike Jones, CEO of Science, Inc., a Santa Monica-based incubator and investor, told Pitchbook. "The (major VC) firms were really headquartered in San Francisco, and they kind of looked at Los Angeles like a scouting arm. Over the last 10 years, that's changed substantially." In fact, PitchBook VC Analyst Kyle Stanford said LA completed more deals in 2020 than any other US city aside from San Jose, San Francisco, and New York. For example, Signal Sciences was acquired for $775 million in August 2020. Plus, there are a variety of investors specializing in industries like real estate (Fifth Wall), consumer goods (BAM Ventures), healthcare (Digitalis), and life sciences (Westlake Village BioPartners).

Although nearby Silicon Valley provides stiff competition for funding, it gives the LA area a boost in other ways. The city provides a substantial pool of high-quality job applicants. Plus, LA has learned from the Valley’s mistakes and is in many ways a more attractive location. “LA has the second-mover advantage when it comes to the startup scene,” Anna Nguyenova of TubeScience told Forbes. “It has everything the Bay area doesn't have and it's able to learn from the mistakes startups have made in Silicon Valley. The office and living rent is significantly cheaper, there is more space to grow, more land to build on and it has one the highest numbers of students graduating with a STEM degree.”

Lucas Pois, CEO and founder of SparkXYZ, summed it up nicely. “The Los Angeles [startup] ecosystem is booming,” he told Forbes. “We have had an incredible influx of early-stage capital and we produce the most engineering talent in the country.”

LA Is Especially Great for Creatives

As you might expect, with Hollywood and myriad other creative industries in the LA area, many creative types consider LA to be the ideal home base for their startups. One of them is Leura Fine, the founder of interior design services firm Laurel & Wolf. She based her company in West Hollywood in part because LA is one huge melting pot.

"We're an incredibly diverse city," Fine told Business Insider. "You have pockets of people from literally all over the world." She added that because LA is a major hub for interior design, she was able to attract a lot of top talent in the industry who might have gone elsewhere. “We have been able to attract incredible talent, people who already live in Los Angeles, but also people who are interested in relocating to Los Angeles from the Valley and from NYC because it's a great place to live, a great quality of life, and it's great for creatives,” she said.

Moreover, Disney offers accelerator programs aimed at the entertainment industry. Disney Accelerator provides select companies with access to its parent company’s wide range of creative expertise and resources, with the goal of helping them develop new entertainment experiences and products.

All Kinds of Startups Thrive in LA

In addition to tech companies and those offering creative products or services, lots of other types of businesses have found a good home in LA. As Founders Institute points out, these include:

• Content creation: Because content creation fuses creativity and technology, LA is the perfect location for a startup in this sector. Maker Studios, Fullscreen, and Awesomeness TV are examples of content creation companies that have done well there.
• Commerce: According to Founders Institute, LA is the largest retail and trade employment metropolitan zone in the US. As such, about 36% of all apparel jobs in the country are located in this city. 
• Communications: Several startups in the communications space have established themselves in LA, including Snapchat, Tinder, Whisper, and textPlus. 

And that’s just the beginning. You will find successful LA entrepreneurs in sectors ranging from video games to biotech to ecommerce. It helps that the city has one of the busiest international airports in the world, along with a seaport that handles almost half of the port traffic in the US – which means customers are easy to find, and materials and supplies easy to obtain for almost any type of business.

About the Author

Adriaan Brits

As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.