Silicon Beach: Tech Entrepreneurs Flock Downstream To LA
ROBERT SIEGEL, HOST:
Silicon Valley is in the Bay Area near San Francisco and San Jose. It's where Google is and Facebook - America's headquarters for tech giants and startups. Well, now some of tech's hottest companies, like Snapchat and Tinder, are choosing to start and stay in Southern California. It's Silicon Beach, as Ben Bergman reports from member station KPCC.
BEN BERGMAN, BYLINE: The headquarters of TrueCar are so close to the beach you can see the waves crashing ashore from the corner office of CEO Scott Painter.
SCOTT PAINTER: We leverage everything about Santa Monica and the beach and sort of this is a lifestyle play. And it turns out people who are traditionally thought of as folks that like to be in cold, dark, quiet spaces love ocean view just as much as everybody else.
BERGMAN: Those people would be programmers, who, Painter says, are the key to TrueCar's success because the service uses complex algorithms to match auto buyers with dealers. So Painter can dangle the usual stock options and free meals, but he can also offer something more unique.
PAINTER: I think people are astonished to see that we have an entire engineering room with a front row of the beach, and those seats are competed for.
BERGMAN: Well, how do you decide who sits there?
PAINTER: You got to be good. It is a meritocracy in terms of how you get seated.
BERGMAN: When people told Painter to move TrueCar's headquarters to Silicon Valley, he ignored them. So did Snapchat's CEO Evan Spiegel, who's all of 25 years old. The Stanford dropout couldn't afford to stay in the Bay Area. Instead, he moved in with his dad in LA. Then he started a mobile messaging service that's now valued at $15 billion. Spiegel told a room full of executives recently it was a difficult decision to keep his company in Venice.
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EVAN SPIEGEL: Once we made the choice and we were, like, you know, we're an LA company - this is where we're going to be, this is our home - it was much easier.
BERGMAN: Snapchat started in 2011, which venture capitalist Adam Lilling says was the perfect time. Just a few years before that, he remembers, it was impossible to get top engineers to move to LA.
ADAM LILLING: People thought it was career suicide. Nobody - not one person - would move down - no matter what the offer was.
BERGMAN: LA startups raised more than $3 billion in 2014 - three times as much as the year before and more than seven times as much as 2010, according to Built in LA, which tracks the area's tech community. Lilling says LA has benefited from being a comparatively affordable place to live. The average home in San Francisco costs more than a million dollars - twice the median in LA.
LILLING: I know people that commute up to the Bay from Los Angeles because they prefer a lifestyle living in LA.
BERGMAN: Lilling says LA's size and diversity provide a much better laboratory for startups to test new products than Silicon Valley.
LILLING: If you look at Los Angeles, you have the representative sampling of America, or sometimes the world.
BERGMAN: Everyone we talked to for this story said while LA does have advantages, that doesn't make it a better place to start a company - just a different place. Even Santa Monica-worshiping TrueCar has a sizable R&D office in San Francisco. David Sturtz is a senior vice president there.
DAVID STURTZ: Almost any new company of consequence has to be in San Francisco or in Silicon Valley.
BERGMAN: Sturtz says he knows that sounds arrogant, but it's the truth. Sturtz visits Santa Monica every few weeks where we met recently.
STURTZ: I think we're going to look back many years from now at this being a real renaissance in technology and innovation. And San Francisco and Silicon Valley are really the epicenters of that. I don't get anywhere near the same vibe down here that I get up there.
BERGMAN: And so people up there, do you think they look down upon companies that are here a bit?
STURTZ: I'm not sure they know there are any companies down here (laughter).
BERGMAN: But that's an outdated notion, says venture capitalist Kara Nortman. She grew up in LA, but had always thought of it as just an entertainment town, so she chose to build her career in San Francisco, Seattle and New York. But then, for personal reasons, she moved back in 2007.
KARA NORTMAN: And in the beginning I did think about even considering commuting up and taking jobs in the Bay Area.
BERGMAN: But Nortman decided to stick around and she started three companies.
NORTMAN: You know, a wonderful thing has happened over the last seven years since I've been here which is, you know, you have sort of, I think, the key components coming together, which enables people to grow big, successful, scalable technology companies here. And it's a combination of, you know, leadership, talent and capital.
BERGMAN: Eight years later, Nortman is still in LA, and she's glad she stayed. For NPR News, I'm Ben Bergman in Los Angeles.
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