Southern California Startup Scene – Perspectives from Silicon Valley (Part 2)

April 16, 2014 at 9:55 am Leave a comment

With many similarities highlighted in Part 1, I now want to pivot to discuss some of the major differences between Silicon Valley and SoCal startup scenes. Size is an obvious difference. Think of SoCal as 30% of Silicon Valley. Not sure if that percentage will change over time, but it is a good rule of thumb on the relative size of SoCal versus Silicon Valley.

Multiple Communities Spread out over the Area
One major difference is the multiple geographic concentrations of startup communities. Rather than having a singular and broad area of Silicon Valley, there are multiple pockets of startup neighbors. SoCal startup scene can be generally divided into three major areas: LA (media and tech), SD (healthcare and tech), and OC (mix of LA and SD). There are smaller pockets of startups in Santa Barbara and Eastern Empire. But even within the greater LA market, there is no singular place labeled as THE startup hub. Rather, there are multiple innovation communities in Silicon Beach, downtown LA, and Pasadena.

Each SoCal Start-up Community is its own World
While each startup community is dense in itself (such as Silicon Beach epicenter), these startup neighborhoods are spread out. While getting around within each community is efficient, moving about between these communities will negatively impact your productivity. SoCal’s notorious traffic issue makes these inter-community trips to be an all day affairs. No wonder most startup entrepreneurs have adopted “live and work” concept, having their home near their office (sometimes in the same building).

Sector Focus within Each SoCal Start-up Community

Also, each community has its own identity rather than having diversity of industry types. Silicon Beach is the home of consumer and media (internet, software, and apps). Downtown LA is considered the home of greentech/cleantech and fashion. And Pasadena is known as the enterprise, B-to-B, IP heavy scientific and engineering home.

Different Access to Capital, Operating Cost and Industry Evolution in SoCal
I mentioned in Part 1 that the SoCal VC community is not as vibrant as Silicon Valley. The local VC firms are more specialized and smaller in size. As a result, most of the capital dollar sources are not from local but from elsewhere, predominantly from Silicon Valley VCs. This makes the frequently board meetings and interaction with VC firms to be less convenient. But at least they are in the same time zone in California. SoCal startups are more reliant on angel groups, incubators and accelerators to launch and develop their companies. When it comes to the cost of operating a startup, SoCal is somewhat lower when compared to Silicon Valley, but this advantage is offset by the traffic/commute cost in productivity. With some pockets of exceptions, most of the VCs who invest in SoCal also tend more toward consumer deals over enterprise deals when compared to Silicon Valley.

The other observation is that SoCal startups are not as globally connected as Silicon Valley, at least for now. Silicon Valley is unmatched in terms of the caliber of business connections into the rest of the world. But I think this will improve as SoCal continues to enhance its startup ecosystem reputation. Finally, SoCal currently lacks the track record of consistent big exit wins or new industry (or large tech corporation) presence as their HQ. Those startup success stories should accelerate the evolution new local industry formation to have long-term sustainability in terms of talent, capital and infrastructure.

SoCal Has a Different Vibe
The people difference is more of a subjective observation. I can’t prove this, but I definitely can feel the difference in attitude, priorities and culture. I will let each of you make your own assessment as to this difference, but you notice it when you visit both places. In terms of overall talent, SoCal seems to be more home grown than imported. Those who are homegrown in SoCal generally tend to stay or return because of the lifestyle preferences.

If you were deciding between the two regions as your startup spot, I would focus on your personal choice, not a professional choice. SoCal is a great choice if you have roots there or just have that personal preference of a different vibe over Silicon Valley. Both regions now have all the essential ingredients for startups to thrive.

Robert Lee is a Managing Director at The Brenner Group, one of Silicon Valley’s premier professional services firms. He has more than 25 years of leadership in venture capital, startups, strategy consulting, global operations and business development. Robert manages the firm’s overall corporate strategy and development.
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Southern California Startup Scene – Perspectives from Silicon Valley (Part 1) The Bubble Redux

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