Talent is Fueling the Growth of LA’s Tech Ecosystem

By Jim Jonassen
Founder, JJA Venture Search

As the Great Recession unfolded 10 years ago, the startup scene in Los Angeles was a minor outpost. Today it’s one of the world’s fastest growing startup ecosystems with technology and digital-first companies and jobs leading the way. And that has triggered a tectonic shift in the Southern California marketplace for tech and startup talent.

Last year alone, LA’s top 100 tech companies (19 of them launched within the last five years) increased headcount a stunning 24%. That’s about 10,000 jobs. Tech startups in LA raised about $5 billion last year, channeling an outsized chunk of those funds into bolstering their teams.

In LA, the War for Talent is Raging.
Rather than depleting LA’s talent reservoir, explosive growth has sparked a period of geometric growth in local talent that’s raising the bar for everyone. A candidate who corporate recruiters or executive headhunters would have considered an “A Player” (best-of-the-best candidates) a few years ago, might now be considered more like a B-. That’s happening for several reasons.

Venture Capital Flowing to LA
According to CB Insights, which tracks VC funding stats and trends globally, reported venture capital investments in Los Angeles have nearly quadrupled over the past five years and according to Venice-based, pre-seed fund, Amplify.LA, 17 new funds set up shop in Los Angeles in the last two years — doubling the number of local funds.

VC Funding in LA Graph

Startup Ecosystem Still in the Early Innings
Although the dollars are rising rapidly, creating a robust and sustainable venture capital ecosystem takes time, and LA’s is still developing. Job candidates have robust networks in the Bay Area and other more mature tech regions where investor/employer networks are still much broader, deeper and entrenched than in LA. In recent years however, investors are reporting that like in The Valley, they are backing local entrepreneurs they’ve worked with in their 2nd, 3rd or 4th startups. This diaspora creates a healthy “generational effect” where the graduating class spawns new startups and a virtuous cycle of company formation ensues. 376 local companies were funded in 2017 according to Amplify.LA!

From Risk-Taking Seed Investors to Exits and Upside
25 years ago, Bill Gross’s ideaLab started the age of incubation in Pasadena and now LA’s seed investors are evolving rapidly. Crosscut, Mucker, Amplify, Techstars, Tylt Labs and others are raising larger funds, writing bigger checks and moving beyond the classic incubation/acceleration with classes or cohorts of startups and looking more like later stage VCs. At the other end of the cycle, there were 80 exits in 2016 including beats. by dr. dre (Apple), Oculus (Facebook), DollarShaveClub (Unilever); Ring (Amazon) and several local IPOs including SNAP.

Growing our Own
LA also boasts 9 engineering schools, including those at CalTech, Harvey Mudd, UC Irvine, USC & UCLA and LA graduates more engineers than any other metro in the US Newly minted grads from SoCal’s deep roster of universities are finally sticking around. In years past, most of this young talent bought a one-way plane ticket out of LA the day after graduation.
Today they’re competing in startup pitch contests, interning at local venture accelerators and doing evening/weekend coding for local ventures while still in undergrad.

Bringing the Talent Back Home
Historically, Los Angeles was a tough sell for potential relocation candidates moving here from elsewhere for a career move in tech. One of their biggest beefs was that LA lacked enough of a “backstop” – a selection of other potential opportunities to fall back on if the job fell through or the individual simply didn’t succeed. In headhunter speak, there wasn’t enough “liquidity” on the buy (employer) side. That alone scotched countless prospective relocation hires.

LA is also experiencing a wave of repatriations. At JJA Venture Search, we’re seeing triple-digit annual growth in the number of people with prior or current ties to Los Angeles seeking to return. Some grew up or attended college here or maybe a spouse has family in the area. Others may simply have attended one of LA’s increasingly high-profile tech/startup conferences like E3 or the Montgomery Conference.

Over the last two years – and for the first time in all my years in LA – we are seeing a major influx of global tech and digital talent – individuals from everywhere who’ve made a decision to build their careers here. Those coming from high-cost locations such as the Bay Area and New York actually find living in Los Angeles remarkably affordable.

Bang for the Buck
Tech workers in LA trailed only Austin, TX among 13 different cities when “effective salaries” (adjusted for local cost of living) were compared to San Francisco as the baseline, with average compensation rising 6% adjusted for cost of living according to new data released recently by Hired, a job search marketplace, in their annual State of Global Salaries report.

Average tech Salary Map

Hizzoner, the Mayor of Los Angeles
Not since former VC, Dick Riordan was LA mayor, has there been such a Tech and Startup-friendly Mayor as we are currently enjoying with Mayor Eric Garcetti, a self-professed math geek and amateur coder. I am a proud member of the Mayor’s Technology Council and the City org chart includes C-Level Innovation, Data, Information and Technology Officers and Entrepreneurs in Residence a role created by the venture capital industry. On Garcetti’s watch, LA has been recognized for its open-data portal the renewal of tax breaks for Internet companies — five times lower than the rate offered to most other businesses.

And Don’t Forget the Weather…
The climate, the geography, the beach—now known as Silicon Beach, sports the largest concentration of Tech & Digital jobs centered in a triangle with Santa Monica, El Segundo and Culver City as its vertices. 329 days of sunshine and where Millennial talent treats the area like Manhattan–automobile ownership and a budget for gas and insurance are replaced by bike sharing, Uber, the LA Metro and now Bird scooters for cost-effective mobility. As entrepreneurship and new company formation migrates away from Silicon Valley throughout the USA and the world, there aren’t many better places to set up shop than in LA for quality of life!

Another good read related to this topic, Demystifying the Traits of the Next Great Tech Innovation Hubs @GrowWire.