Recent declines in aerospace employment in Los Angeles County could be offset in coming years by growth at innovative startups as well as legacy aerospace firms.
That’s according to Shannon Sedgwick, economist with the Los Angeles Economic Development Corp., and Mike Quindazzi, co-chair of the SoCal Aerospace Council and a managing director at PricewaterhouseCoopers.
Their optimism comes after aerospace employment in Los Angeles County dropped by 3,000 jobs, or about 6 percent, to 51,000 between 2014 and 2016, according to a report released last week from the LAEDC.
“I’m frustrated by the data that’s out there – it’s old,” said Quindazzi, whose job as the co-chair of the SoCal Aerospace Council is to promote the region’s aerospace industry. “Some of the data out there is not accounting for all the ancillary companies and industries supporting aerospace and defense as well. I think, overall, the signs are pretty positive.”
Small satellite and rocket manufacturing companies in the region are examples of industries showing promising growth and innovation, he added.
The recent declines in aerospace employment in Los Angeles Country contrasted with positive signs of growth across the Southern California region. The larger region registered a net gain of 5,000 aerospace jobs, bringing the total number of job gains to 90,100 in 2016 from 2014, according to the report.
Most of Los Angeles County’s job losses were in aircraft manufacturing, which fell by 2,200. That was in part due to Boeing Co.’s closure of its Long Beach plant, which built the C-17 Globemaster III military cargo plane, and resulted in around 400 layoffs in 2015.
“The aerospace industry in Los Angeles County has been changing over time, we have been losing jobs in both instrumentation and aircraft related industries over the last decade,” said Sedgwick of LAEDC, in an emailed statement. “However, we have added over 5,800 jobs in guided missile, space vehicle and related industries since 2006, of which 1,500 were added over the last five years.”
Aerospace manufacturers such as Space Exploration Technologies Corp. of Hawthorne and Virgin Galactic in Long Beach have been on a hiring spree over the past several years.
“Clearly this is where our future in the industry lies,” Sedgwick said.
Doubling Down on L.A.
Early stage investment firm CrossCut Ventures announced last week that it had more than doubled the size of its funds under management and was doubling down on investing in startups in the L.A. region.
The Santa Monica-based venture capital firm disclosed that it had closed its fourth fund worth $125 million, bringing its total capital under management to $230 million.
“We are litmus for what is happening here,” said Brian Garrett, managing director with CrossCut. “We are all pretty excited about the relatively underserved ecosystem (of Los Angeles), compared to other ecosystems.”
A lot has changed since CrossCut was founded in 2008. The firm has invested in 70 different companies, including ad tech startup GumGum and e-commerce company Shoedazzle, now owned by TechStyle Fashion Group.
CrossCut aims to invest the majority of its funds in L.A. companies, especially firms which have products steeped in complicated technologies, such as software related to data science or enterprise processes.
“What we are trying to do as a fund now that we have more dollars under management is to be more thesis-motivated, rather than reactive,” said Garrett. “Our thesis is early concentrated ownership, getting the companies from seed to Series A, and not taking on a spray-and-pray philosophy of investing.”
California Zip
When European venture capital firms extend their presence into the United States they usually lease offices in the Silicon Valley area, or maybe New York.
Not early stage venture firm Nordic Eye of Denmark.
The Copenhagen-based investment fund, which has an office in Santa Monica, last week boasted that one of its early L.A. area investments, secure browser developer Weblife Balance Inc. of Hollywood, had sold to encrypted email provider Proofpoint for $66 million. The sale came a mere 11 months after the firm invested $3 million for a 30 percent stake in the startup, according to Nordic Eye. The exit was evidence of the firm’s L.A.-based investing strategy bearing fruit, said Richard Sussman, Nordic Eye’s managing partner in Santa Monica.
“There are more young people coming out of universities with high engineering degrees here than other parts of the country,” he said. “The valuations here and the cost of running are not as expensive as in New York or Silicon Valley.”
He added that the city offers another advantage for its European portfolio companies: a California zip code.
“We are allowing the European companies that we’ve invested in, that want a presence in the state, to work out of our offices,” said Sussman. “If you don’t have an address in California your valuations won’t be as high as they would be elsewhere. You have to have that mystique.”
Staff Reporter Garrett Reim can be reached at [email protected] or (323) 556-8332.
