By SARA FISHER

Staff Reporter

Where's the money?

Los Angeles' technology industry has voiced this lament so often that it hangs over the city almost as tangibly as the smog.

Los Angeles attracts a level of venture capital that is wildly out of step with the number of local technology companies. Explanations and proposed solutions abound, but the best explanation may be an unpopular one: L.A's tech industry is simply too immature to attract the level of money it wants.

"A lot of people in this industry think that the recent spurt in the L.A. tech industry is temporary," said Bill Manassero, executive director of the Software Council of Southern California. "VCs (venture capitalists) look at Intel and Microsoft up north and figure that is where the action will continue to be. Outside of aerospace, L.A.'s tech industry hasn't been around long enough to prove that it has staying power."

Statistics reflect venture capitalists' skepticism when it comes to large-scale investments in Los Angeles. According to PricewaterhouseCoopers LLP, venture capital investments in the Los Angeles market (which includes L.A., Ventura, and Santa Barbara counties) totaled $274.8 million in 1997, a mere pittance compared to the $3.4 billion VCs poured into Silicon Valley last year. In the first quarter of 1998, the L.A. market received $83.7 million in venture funding, about 10 percent of Silicon Valley's $811 million for that period.

L.A.'s relative trickle of venture capital funding is falling far short of what is needed to support the thousands of tech companies that range from software to biotechnology. The Economic Development Corp. of L.A. County says there are 145,600 high-tech manufacturing and engineering jobs and 49,000 software development jobs in L.A. County. The EDC has not yet tabulated the number of jobs created by L.A's new-media, Internet-related and biotech companies.

The fact that no one has yet dedicated sufficient resources to even determine the number of tech companies or tech jobs shows just how overlooked the local industry is. And venture capitalists, observing that fact, seem to have concluded that the industry is not yet ripe for large-scale investment.

Changing that perception represents a long process upon which the industry has just recently embarked. This year, Mayor Richard Riordan's New Media Roundtable has trotted out the monikers "Tech Coast" and "Digital Coast" to refer to Southern California's general tech industry and new-media industry, respectively.

For reprint and licensing requests for this article, CLICK HERE.

Prev