Explaining Southern California's economy

EVENT: Venture Capital in Southern California: Catching Up and Going Beyond

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Just a blogger service announcement: tomorrow night, I'll be moderating a panel on venture capital in Southern California at KPCC's Crawford Family Forum. The title says it all: "Venture Capital in Southern California: Catching Up and Going Beyond."

The Southern California region is bumping along in fifth place nationally, where venture capital funding for new businesses is conerned. Texas enjoyed a surge in the third quarter of 2011 (according the PWC MoneyTree Report), otherwise we'd be in fourth place, behind the New York Metro area an New England. Silicon Valley, of course, has a very big lead.

The panel will be talking about how to close that gap and grow various types of startup investment in SoCal. 

Benjamin Kuo, who publishes socalTech, will be joining us, as will Nate Remond from Rustic Canyon Partners and Alex Maleki from Idealab's New Ventures Group


Watch out, Southern California! New York wants to do biotech, too

The guy in the video above is Fred Wilson, a venture capitalist and a partner at Union Square Ventures in New York. (He also a very active and disciplined blogger.) I've blogged about Fred and his thoughts a few times here at DeBordReport.

Watch the whole thing to get a sense of his views on engineering, startups, VC — and where New York might be headed in terms of developing a more diverse startup community.

One of the things that means is biotech.

Biotech is a startup industry that Southern Californian already does and does well. Biotech is our version of Silicon Valley and information technology. And that's good, because biotech could be the next big thing. I went down to Orange County earlier this week to find out how and dropped by a new biotech incubator, TechPortal Orange, at the UC Irvine Medical Center.


Green energy in California: Growth yes, scale...maybe never

On the Patt Morrison Show today, the problem of anemic Green energy job-creation in California was discussed. The numbers, according to the Brookings Institution, aren’t very good. In fact, the place called the clean economy an “enigma.” California is supposed to be the wellspring of Green job creation in the U.S., the vanguard of a new Green economy that will power us out of the recession and provide high-paying, 21st-century jobs...but it’s not really happening.

This from the L.A. Times:

Job training programs intended for the clean economy have...failed to generate big numbers. The Economic Development Department in California reports that $59 million in state, federal and private money dedicated to green jobs training and apprenticeship has led to only 719 job placements — the equivalent of an $82,000 subsidy for each one.

“The demand’s just not there to take this to scale,” said Fred Lucero, project manager at Richmond BUILD, which teaches students the basics of carpentry and electrical work in addition to specifically “green” trades like solar installation.

It would be great if Southern California could figure out some way to get the Green jobs-engine revving. Unemployment in the state is back to 12 percent -- the second highest in the nation, behind the great jobs destroying machine that is Nevada.

At NBCLA’s PropZero blog, Joe Matthews puts his finger on the problem: there’s investment capital flowing into the state -- but there isn’t enough of it to really move the needle:

California led North America with 67 percent of the total share of all venture investment in clean technology. And since North America accounted for 72 percent of global venture investment in the sector, California was unmistakably the world leader. [My emphasis]

Here's the underwhelming part: The total amount of investment globally was just over $2 billion, with California getting $980 million. That's a drop in the bucket for a state with a GDP of more than $1.5 trillion.

That doesn't mean clean technology isn't a growth business -- it appears to be. But it's not a big business, and it's not clear if it ever will be.

Growth is wonderful, and rapid growth is usually even better. But unless that growth is fully leveraged, it’s liable to have limited impact. This is really a function of demand. At the moment, the biggest challenge to the Green energy economy isn’t that people don’t want to invest in it, but rather that its competitors -- traditional energy sources such as coal, oil, and gas -- aren’t losing enough customers to encourge serious Green energy investment.

Why? Price, plain and simple. Oil is still relatively cheap, and coal is just about the cheapest and most abundant source of energy there is. So absent something like a national cap-and-trade scheme or a carbon tax -- both of which would make traditional energy more costly, in the service of curbing global warming -- that situation problably isn’t going to change.

It’s a drag on the scale of what Green energy can achieve. You build solar panels for a boutique buyers -- or for the federal and state government, which subsidize the nascent industry -- rather than for all the houses and buildings in the U.S. where they might make sense. That’s where we’re stuck right now, with the Really Big Money avoiding Green energy -- and failing to deliver the California jobs bonanza.

Photo: Flickr/Charles Cook