When most people think of Los Angeles, they think of bright lights, big business, and glitz and glamor. They think of Hollywood, major sports franchises, and celebrity sightings — of busy commuters, sunny boardwalks, and beaches packed with beautiful people. In some ways, these are fair and accurate impressions of LA. But the “City of Angels” isn’t solely comprised of people who have already succeeded in big business or attained fame and success. It’s also a city that hosts its share of startups and small businesses — and one that might actually be poised for a bit of an innovation boom once COVID-19 is behind us.
Why is this the case? Ultimately it has to do with just a few key factors….
The first is that California inspires would-be business owners, and then makes it easy for them to set up their own companies. Despite the fact that it’s not as well known for startups as, say, its northern counterpart of San Francisco, Los Angeles is estimated to be home to nearly 250,000 businesses — many of which fall into the “small and medium-sized enterprise” category. This essentially means that wherever people go in LA, even during a pandemic, there are small business success stories. Few things can inspire a prospective startup founder quite like that.
On top of this inspiration factor, Los Angeles also makes for a relatively easy place in which one can get started once inspiration strikes. This is partly because of the state of California’s processes for new business registration, and partly because of the amount of funding available (which is our next main point). From a nuts and bolts perspective, starting a company in California — specifically an LLC, which is the most common structure for new businesses — is virtually a hassle-free process. Prospective startup founders who want to turn their ideas into real businesses that are recognized by the state and awarded employer tax status really only need to take care of a few documents that the government makes available online. In other words, you can start a business in LA in no time.
We mentioned the availability of funding as another reason that Los Angeles looks to be poised for a startup boom, and this point can’t be overstated. While San Francisco gets the bulk of the attention in California on this front — and justifiably so — the concentration of tech venture capital is centered on Los Angeles too. LA is part of a collection of six cities (along with San Francisco, San Jose, Boston, New York, and San Diego) that account for nearly 45% of total VC investment in the world. This means that there is almost literally no better place than LA in which to find funding for a business venture. This means that even if the pandemic hurts the VC scene, LA will still be better positioned to move forward than most places.
Everything above speaks to LA being an attractive environment for founders, to the point that the startup scene is likely to withstand the pandemic with relative ease. But on top of this general appeal, it’s also important to point out that some of the thriving, up-and-coming industries in and around Los Angeles happen to be among the few that have responded well to the pandemic.
Specifically, Los Angeles has seen thriving edtech startups assisting schools and educational institutions with the difficulties posed to them by the pandemic. Meanwhile, we’ve also seen the launch of a multimillion-dollar Los Angeles fund specifically set aside to help climate entrepreneurs, with renewable energy and clean living expected to be very busy sectors as we emerge from the pandemic.
With all of these points considered, on top of the pure size and culture of innovation that exists in LA, it’s almost hard not to see a startup boom on the horizon. It may take some time to materialize, and the pandemic remains unpredictable. But when we do emerge from coronavirus conditions, LA is likely to be leading the way in new business ventures.