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Los Angeles

Los Angeles has a remarkable startup scene that has recently experienced a series of major exits worth nine to ten figures each. LA startups — many of whom are centered around Santa Monica and Culver City — trend towards eCommerce, fashion, social and dating networks, and anything entertainment (from video to music to ticketing) but also have great potential in biotech and manufacturing. A legitimate challenge is the city’s constant talent fight with Silicon Valley to the north, which often steals engineers with its sky-high salaries. Some argue this talent risk is a result of undercapitalization for the city’s startups. The city also suffers atrocious traffic and increasing costs-of-living — distinct lifestyle disincentives. Still, the recent spate of massive startup exits is minting scores of new tech millionaires and potential investors. This, coupled with its adjacency to a Hollywood waking up to the potential of startups, suggests LA has a very bright future.

In This Market

These businesses offer industry expertise and are a source of startup talent and potential customers. They help fuel the local startup community.

Opportunities

  • The presence of entertainment industry means that content-related startups will perform well, as evidenced by the recent exit of Maker Studios Inc.
  • With thousands of students matriculating from universities such as Caltech, USC, and UCLA every year, talent is plentiful.
  • Mayor Garcetti has been very friendly towards the tech community by introducing a variety of startup-friendly legislation.
  • At 500 per 100,000 people, Los Angeles has the highest number of entrepreneurs per capita of any major US city.
  • The city is geared towards people with nontraditional jobs, which allows for a more flexible and creative work schedule that is ideal for startups.

Risk Factors

  • The city’s infamous traffic congestion problems makes it time consuming and frustrating to drive even short distances.
  • While seed funding is not difficult to obtain, oftentimes startups will have to leave the city if Silicon Valley VCs incentivize them to do so.
  • A rising cost-of-living means it is becoming more expensive to scale, unless entrepreneurs are willing to relocate more inland
  • The high taxes that Californians must pay means that there is an added cost on already cash strapped startups.
  • Startups are distributed among several pockets in the LA metropolitan area, unlike other ecosystems where clustering more readily aids in idea-sharing and creativity.
Methodology

Market Indicators

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