The City of Angels is famous for its movie stars, its balmy climate and its sports teams. One of the most recognizable cities in the world, it draws visitors from around the world. With so many areas of success, it is only natural that making a move towards becoming a startup hub is the next frontier Los Angeles seeks to conquer.

Startup Hubs Around The World: Los Angeles

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Los Angeles is in close proximity to the number one startup hub in the world: Silicon Valley. In recent years, however, a rising number of entrepreneurs have chosen Los Angeles over its famous neighbor. To find out why, we’ll explore 1) the location, 2) the tax incentives, 3) legal incentives, 4) investors, 5) local resources, 6) specialization of the area, and 7) startups to watch.

LOCATION

Geographical Benefits

The city of Los Angeles (LA) is located in southern California and is the second highest populated city in the United States, trailing only New York City. Ethnically, it is one of the most diverse areas in the US, drawing residents from over 140 countries including the Philippines, Korea, and Mexico. The rich diversity of the city lends itself to becoming a startup hub that welcomes entrepreneurs from all over the world; no matter where the entrepreneur is from there will most likely be an established community in LA to make settling in easier.

This diverse city can also be a benefit for entrepreneurs who want to engage with customers (and potential customers) from around the world. Selecting a city that already has an established network and a thriving cultural interchange can help to springboard ideas into reality as a product is field tested within the marketplace.

A coastal city, LA offers residents the warmth of a subtropical climate. Mild winters and predominantly sunshine filled days attract visitors and residents. The ‘livability’ of LA offers much to draw entrepreneurs who are relocating. Geographically, Los Angeles is situated within easy reach of most major cities in the world. The convenience of living in a city that is already a thriving metropolis simply adds to the allure of the city for the entrepreneur.

Advantages to choosing the city

As one of the most populated cities in the US, LA has an extensive network of transportation options. An exhaustive network of freeways and roads connects the city to other major cities on the California coastline. However, the sheer magnitude of the number of people living in the city virtually guarantees that the roadways are in a constant state of gridlock. Interestingly enough, however, the average commuter on an LA freeway spends less time on the way to work than their counterparts in New York City or Chicago. Finding alternative means of transportation is essential for anyone who tries to navigate through the LA road system.

Fortunately, there are viable alternatives; mainly in the form of public transportation. Subways and rail cars crisscross the city, offering easy access to the major points of the city’s landscape. The third busiest commercial airport in the world (LAX) is another means of accessing the world outside Los Angeles. In addition there are other, smaller airports scattered nearby that provides additional opportunities for air travel. A port city, LA boasts one of the largest cruise ship centers in the world, along with an extremely busy container port. Entrepreneurs working in LA can take advantage of the close proximity to travel options and the available means to connect with investors who may be looking for a company to invest with.

Selecting Los Angeles as a startup city provides the entrepreneur with an established network of resources that many cities lack. Banking, legal resources, technology, affordable housing and living necessities are all readily available in the City of Angels – making it an easy choice when looking for a city to set up shop.

Welcome to LA: Your video guide to Los Angeles startup ecosystem

TAX INCENTIVES

One of the downfalls of the Los Angeles area as a startup hub is the lack of viable tax incentives. Recent mayor candidates proposed changes to add tax incentives as a way to discourage the ‘brain drain’ that seems to be happening after college graduation. Los Angeles is home to an extensive number of universities and colleges. Adding programs that would allow for students to remain in the city post-graduation would encourage workers to become innovators.

Studies have indicated that graduates of LA colleges and universities return to their original home after graduation. This brain drain could be eliminated by offering some form of incentive to the graduate to extend their stay and work. Applying their innovation and classy right The addition of well-educated innovators can increase the entrepreneurial spirit of the city, and help to encourage other college graduates to consider careers in innovation.

A lack of a tech corridor in the city is another area that should be easy to remedy. Adding city-owned properties allows for companies to be centrally located. This neighborhood feel to innovation hubs allow the entrepreneurs to encourage each other, to help each other as needed and provide support along the way.

The lack of a central innovation center, coupled with a low tax incentive program seems to be to areas where LA is weakest. The last several elections have brought out the candidates who have offered solutions to the city’s entrepreneurial problems. Finding the solutions may be bigger than one politician can work out, but gradual changes that can be implemented over time may be the best approach. Instead of trying to implement everything they’ve been doing at one time, adding small incremental changes will begin to snowball overtime.

Finding ways to add tax incentives, whether through specially designated hub zone areas or through tax credits for entrepreneurship, should be a major item on the city’s “To-Do” list.

LEGAL INCENTIVES

Similarly, the startup scene needs to have legal incentives to setup in the Los Angeles area. Navigating the legal requirements needed to establish a startup is not difficult. However, the tax and legal codes may sometimes be confusing. It is advisable, then, that the entrepreneur hires legal counsel that is proficient in startups. Ensuring that the proper paperwork has been filed will allow the entrepreneur to focus on running their company, without worrying about corporate filings and other details.

The process of establishing a company in LA is relatively streamlined, and can typically be handled by either a legal or accounting professional. Small business advisors can assist the entrepreneur with the necessary requirements as well.

INVESTORS

With a huge amount of talent and resources, it seems odd that there is a lack of funding available for entrepreneurs. Home to over 2,000 startups, Los Angeles is bursting with innovation, and very little venture capital. The entertainment industry is hesitant to invest its money into technology, and the mix of the music industry and technology often ends poorly (see: Napster and Bittorrent). Finding a way to increase the number of investors and venture capitalists who can see beyond the glitz of Tinsel Town and spot the tech hub must be one of LA’s top priorities.

The lack of local investors in startups can be addressed by increasing awareness of startups and their needs. The bigger hurdle is to convince investors to turn their attention to the tech world. According to one study, the average startup investment ranges from $25,000 to $30 million. In Los Angeles, however, the average investment is $4 million dollars.

LA is beginning to establish incubators and accelerators that offer support and resources to the fledgling startup players. With experienced innovators, the entrepreneurs are being coached and mentored by people who have working knowledge of the startup world. This offers great promise for the subsequent success of startups that are following in their footsteps. The global startup community is ever shrinking – investors are coming from around the world to be a part of the new work that is being done in Los Angeles. With the increased attention, entrepreneurs have the opportunity to make connections with investors and potential customers. There is already a high level of excitement in the city of Los Angeles – adding entrepreneurship simply enhances the already bustling city.

LOCAL RESOURCES

Los Angeles is often referred to as the ‘creative capital of the world’. Estimates claim that one out of every six residents work in some form of a creative industry. Whether that industry be film, or music, or sports, the cultural climate of LA is teeming with creativity. Home to the motion picture industry’s headquarters, Hollywood, LA is considered to be the motion picture epicenter of the world. With such a variety of creative activity, it is no wonder that experts claim LA to be one of the world’s favorite places to go.

One of the indicators of an entrepreneurial startup hub is the existence of a rich cultural life. There is a direct correlation between creative thought and entrepreneurship. In this regard, then, Los Angeles is a prime location for startups. With such a varied creative culture in the city, there is much to use as inspiration and motivation.

More museums per capita in the world are tucked in the streets of LA (841 of them) – offering visitors a chance to peruse art galleries, contemporary art and traditional art museums. The city has an extensive number of performing arts centers, the Los Angeles Music Center and other venues for enjoying your favorite form of relaxation.

Comparatively speaking, LA is an affordable place to live. With low housing costs and an established and reliable infrastructure, the city has a head start over other entrepreneurial hubs. However, encouraging tech developers to move to the film capital of the world may require more than a low rent.

Using the thriving movie industry as an enticement is another means of using local resources wisely. With the entertainment industry centered on the city of Los Angeles, that can be used to an advantage for the movie buff or digital media expert who loves to be in the middle of the excitement.

SPECIALIZATION

Surprisingly, in spite of the movie-focused intent of the city, media technology is not the main specialization of its startups. Mobile services and engineering are leading the way as the two primary specializations of the area. Following a close third is the entrepreneurial entertainment industry.

The entertainment industry in Los Angeles is thriving, and the entrepreneurial startup community is racing to catch up. Finding innovative ways to maximize entertainment and technology is a strategic advantage that entrepreneurs in LA have over other startup cities.

Services such as multi-channel networks are a prime example of this intersection. The next generation of cable networks, MCNs allow YouTube channels to increase content promotion, add monetization or manage the network.

Tech staffers in the LA area are highly skilled, in many ways, even more so than the techies of Silicon Valley. The LA entrepreneur has established skills as an engineer with a focus on communication, music, cinema and more. This combination allows the entrepreneur to develop solutions and connections to such industries as technology and gaming, fashion and video. By seeking new and innovative combinations, the LA startup market is always rich with new ideas and solutions.

The viable business climate of LA has successfully attracted technologies and other venture capital interests. With a reliable internet infrastructure, companies can depend on the internet to power media and technology needs. The entrepreneurial climate of LA is welcoming to startups at every level; some have begun and failed miserably.

This was the case with MySpace, one of LA’s most famous startups. MySpace’s takeover and rebirth as a leaner program gave techies experience in the entrepreneurial world, as well as a nest egg that they used to springboard into new companies. The entrepreneurs took their skills, along with their newfound wisdom on how to establish a successful company and springboarded them into a series of other, equally as successful companies. A few of their second time around success stories? Snapchat – an instant messaging service that fades messages away after a few seconds and Gradient X – it sold to a Singapore firm just a month after its beta launch.

STARTUPS TO WATCH

DogVacay: An online community for dog lovers and owners, it matches up owners with available pet sitters in the local area. With options for in-home or out of home care, it lets pet owners select exactly the amount of care they want for their beloved pet.

Tradesy: Using the mantra “Shop your Own Closet’, Tradesy capitalizes on the inherent packrat tendencies that many people have. Allowing users to trade items that they may have and no longer want or need, Tradesy helps keep items out of closets (and landfills).

Dollar Shave Club: An ‘awesome’ razor club, Dollar Shave Club delivers razors straight to the subscriber’s mailbox. With one handle and four razors each month, each kit delivers exactly what is needed.

Zefr: A startup that uses YouTube, Zefr offers legalized sports, TV, or movie clips for users to upload to their website. A powerful form of advertising that is just now being maximized to its full capabilities.

ChowNow: An online customer management platform for restaurants. Through online marketing and resources, ChowNow is a full service management plan and ordering platform for eating establishments.

With the variety of industries that already exist in LA, it makes sense that they would next turn their attention to entrepreneurial efforts. Harnessing the talent and energy that is used in the media platforms, they have the resources needed to become a powerhouse in the startup world in a short amount of time. Innovators have the opportunity to develop new forms of entertainment technology, as well as business tools that can have applications in a variety of fields. The eyes of the world are already on Los Angeles, giving the global community a front row seat for the innovations being developed there.

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