While known globally as the entertainment capital of the world, Los Angeles in recent years has developed into a thriving launch pad and ecosystem for startup companies across diverse sectors.
The area has historically been home to major companies like The Walt Disney Co. and Warner Bros Entertainment Co., but its network of incubator and accelerator programs, the expanding presence of venture capital firms along with other financiers and an intrinsically creative business community has fostered the creation of a strong startup culture.
Los Angeles has positioned itself as one of the most popular regions in the state for startups. California had the most startups of any state in 2013, according to research from Crunchbase.
Out of the 16,400 startups residing in California at the time, Los Angeles was home to about 4,000, compared to around 9,900 in San Francisco.
Major businesses that have emerged include Santa Monica-based entertainment and technology companies as Snap Inc. and Activision Blizzard Inc., consumer product startups Marina del Rey-based Dollar Shave Club Inc. and Playa Vista-based The Honest Co. Inc. as well as aerospace and engineering companies including the Hawthorne-based company known as SpaceX.
Starting off point
Local universities have played a role in increasing local entrepreneurship with programs to support innovative work coming out of their institutions and help founders take their ideas to market.
This includes UCLA’s Anderson Venture Accelerator, which has hosted 266 companies since 2018, and the California Institute of Technology’s long running Rothenberg Innovation Initiative. USC’s programs include the Lloyd Greif Center for Entrepreneurial Studies, which was founded more than 25 years ago and works with both company founders and students interested in entrepreneurship.
Brian Lee, co-founder and managing director of Westwood-based venture capital firm BAM Ventures, has a track record of launching startups that continue to thrive, such as Glendale-based LegalZoom.com Inc., El Segundo-based ShoeDazzle and
The Honest Co.
He said companies that started here two decades ago faced the challenge of needing to be profitable from their inception due to the limited availability of venture capital. However, subsequent success stories, like those of Sawtelle-based Riot Games Inc. and Snap, began to demonstrate that Los Angeles was a promising place for a business to succeed.
“I actually think Snap put L.A. on the map in a lot of ways,” Lee said. “Sure, you had some prior successes … but I think it was Snap that really put us on the map. It showed that you could actually build a media company here – a platform that at the time was unprofitable, but it was just growing like a weed – and that we had the financial backing (for others) to build something like Snap here in Los Angeles.”
Lee said a cycle began where those successful companies attracted larger swaths of talented workers and greater capital, inspiring more companies to begin in L.A. and additional venture capitalists to see the city as a powerful source of new investment opportunities.
“Now, I don’t think we’ll ever be Silicon Valley, and that’s because we do not have grandparents named Fairchild Semiconductor, and we don’t have aunts and uncles named eBay and Yahoo, so it’ll take some time to grow,” Lee said. “But I think some of the larger businesses … that have started here and grown in Los Angeles have attracted so much more talent and so much more capital in this city that it’s starting to become a mature ecosystem.”
Startup hubs
Areas that have emerged as prominent epicenters for startups include Santa Monica and Glendale.
Glendale’s business community is technology-heavy – it’s currently home to more than 1,500 tech businesses, up 15% from 2016 – which has benefited from city-sponsored resources such as its Tech on Tap network events and annual Glendale Tech Week.
Santa Monica’s focus is broader: according to Downtown Santa Monica Inc., about 3,200 creative and tech businesses are headquartered there, including esports organization M80 and creative firm Trafik, as well as about 2,600 wellness and health companies, such as Goop and HeadSpace.
The presence of “unicorns” – or privately-owned companies with a valuation of at least $1 billion – in Los Angeles has continued to grow, as well as the number of venture capital-backed startups across such industries as biotechnology, consumer products, aerospace and software. West Adams-based retailer Skims recently achieved unicorn status, as well as Westchester-based blockchain facilitator Blockdaemon Inc.
Broader focus
While the city was once dominated by entertainment companies, the thriving network of startups in Los Angeles is becoming more than a local phenomenon and has developed into a significant shift in the city’s business landscape.
The intersection of entertainment, design and technology, coupled with substantial resources for growing businesses and continuously increasing funding opportunities, has attracted new industries to set up and remain here.
“Let’s be honest. It started with Hollywood back in the day, and that drew even more creativity to our city,” Lee said. “It’s just so deeply rooted in Los Angeles, and I think being an entrepreneur is a little bit of everything: you need that creativity, you need that drive and you need to be brave to go try something and not be scared to fail, to go out there and make your mark. I think Los Angeles really breeds that culture into a lot of companies.”
