Benjamin Kuo’s Blog

The latest report from the NVCA has ranked the Los Angeles area as among the top areas for 10 year growth in venture investments, citing the change from 1997 to 2007 in terms of companies and dollars invested in the area. That growth–which only includes Los Angeles, and does not include Orange County or San Diego–is just a small part of the upsurge in startup activity in Southern California that I’ve personally observed over the last 10 years (socalTECH — in its hand-copied email form — started in 1998).

Interestingly, what appears to have happened — or is happening — here, is that we are going beyond what I think of as simple “critical mass” of self-sustaining startup activity and funding. Critical mass — which we’ve had for some number of years — is having enough entrepreneurs, anchor high tech companies, universities, capital, and service providers to create a healthy environment for startups. That can be achieved anywhere you have a set of anchor industries and companies — typically, larger and well established companies which attract and spin off engineering, marketing, and executive talent — and enough interested capital providers and the like to create new companies now and then. The key here is that most of the activity is generated by people in the community, moving from existing companies in the area. I’d argue this has been achieved in many “high tech” centers nationally.

However, going beyond that “critical mass” is what is only known as the “Silicon Valley” magic. That is, you are not just creating a few related new companies, spawing out new firms related to your existing industries; you’re now at the point where people relocate and seek your region out to start new companies. This is where people — with no family ties or company ties to your area — seek to relocate and start up their company where you are because it’s the “place to be.”

In technology, in the past this has always been Silicon Valley — which is packed with engineers and MBAs and others who have picked themselves up and moved to Silicon Valley, just to be “there.” Los Angeles — or more specifically, Hollywood — has always been “the place” for entertainment.  It’s the same with New York — think Madison Avenue, or Wall Street, or Broadway. Or, if you’re in Private Equity, Greenwich, Connecticut.

In the last six months or so, I’ve run increasingly into entrepeneurs who have specifically moved into the Los Angeles area to start up their companies. Often, it’s because of the convergence of technology, the Internet, and entertainment; in some cases, it’s the strong consumer orientation and online strength here. I’ve even heard of people who have relocated here because they want to be close partners with MySpace, and several because of the game studio presence here. It “feels” — very unscientifically — like we’re going beyond critical mass and becoming a destination where entrepreneurs go to fund and grow their companies.

This entry was posted on Tuesday, March 11th, 2008 at 10:32 am and is filed under Entrepreneurship, Startups, Venture Capital. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.