When you hear the phrase “Los Angeles economy,” the first thoughts that pop into your head are probably about slow business growth, the struggle to create jobs or the sluggish recovery from recession.

The last words you might expect to hear are words like “momentum” or “boom.” But believe it or not, more experts and pundits are using those words to describe L.A.’s changing economy in light of a new report from a group called Startup Genome. This group has taken on the ambitious task of meticulously studying business conditions in cities across the world and ranking them based on how favorable they are for the growth of startups.

Of all the global cities included in Startup Genome’s report, Los Angeles ranked third, behind only Silicon Valley and Tel Aviv, Israel. That might sound surprising, but a closer look shows that, despite our trouble attracting businesses and creating middle-class jobs, Los Angeles – with its unique economic infrastructure, resources and demographics – has actually planted new seeds that, if nurtured properly, could blossom into one of the first truly 21st century economies.

Los Angeles has always been a place where creative, new ideas are currency. Creative output is woven inextricably into the fabric of the city’s culture and its economy. We’ve seen that throughout our economic history, as movie studios, record labels and others have made entertainment our primary export. It makes sense, then, that a particularly high volume of entrepreneurial innovation would originate here. But there are several other factors that also make Los Angeles a prime point of origin for startups.

First, Los Angeles is a place where access to capital for innovative ideas is abundant. Since so many of L.A.’s wealthy make their living in entertainment, media and other related industries, there is already a culturally established precedent for risky capital investment in new cutting-edge businesses. So despite the fact that the broader local economy has been anemic, Los Angeles has a higher volume of people with lots of money – and who are looking for new ideas for investing that money – than just about anywhere else.

Elite institutions

In addition to relatively easy access to capital, Los Angeles also has one of the most elite groups of colleges and universities in the country. With traditionally top-notch schools like Caltech and UCLA, as well as USC with its flagship cinema and media programs, Los Angeles has become a destination for our country’s bright young minds to join like-minded entrepreneurs and make their mark on the economy.


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