If you want to start the next Facebook or Uber, where are you going to do it? The answer has traditionally been Silicon Valley. But in recent years, more tech companies are starting – and staying – in Los Angeles.
TrueCar Inc. — which went public last year and has grown to become a billion dollar-plus company and one of Santa Monica's largest employers — is one example. The company's headquarters are so close to the beach, founder and CEO Scott Painter can watch the waves crash while sitting in his corner office.
“This is a lifestyle play, and it turns out people who are traditionally thought of as liking cold, dark, quiet spaces like ocean views as much as everyone else,” said Painter.
Those people would be programmers, who Painter said are the key to TrueCar’s success, because the service uses complex algorithms to match auto buyers with dealers.
In order to keep growing, Painter needs to recruit the best and brightest talent, but so does every other tech company. So, he can dangle the standard stock options and free meals. But he can also offer something more unique: An ocean front view for his highest-performing employees.
“I think people are astonished to see we have an entire engineering room with a front row of the beach, and those seats are competed for," Painter said. "It is a meritocracy in terms of how you get seated."
Painter said the Bay Area is still home to the most advanced coders, but tech companies in Southern California benefit from being next to Hollywood, an industry that knows a lot about creating engaging content.
“You tend to find a lot more creativity here," Painter said. "You get a lot more focus on the customer experience as a priority versus just the sheer technology.”
Until recently, a lack of engineering talent
When people advised Painter to move TrueCar’s headquarters to Silicon Valley, he ignored them, which is also what Silicon Beach’s most famous CEO did, who’s all of 24 years old.
When Evan Spiegel dropped out of Stanford in 2012, he could not afford to stay in the Bay Area, so he moved in with his dad in the Pacific Palisades to focus on Snapchat full-time.
Spiegel told a roomful of tech executives in March that keeping his $15 billion company in Venice was a hard decision.
“Once we made the choice that we were an L.A. company and said this is our home, it was much easier,” he said.
Snapchat started in Venice at probably the perfect time: 2011. But a few years before that, it was difficult to get top engineers to move to Los Angeles, said Culver City-based venture capitalist Adam Lilling, founder and managing partner of Plus Capital.
“People thought it was career suicide," remembers Lilling. "Nobody, not one person, would move down no matter what the offer was. Even though they wanted to move to L.A., some people felt like they weren’t going to get another job if our company went away.”
Lilling says there’s now a critical mass of start-ups in L.A.: more than 1,000 companies, according to Represent L.A., which maps area tech companies. This gives engineers plenty of options if a company goes bust.
Los Angeles is affordable, at least compared to Silicon Valley
Lilling says Los Angeles is known as an affordable place to live, at least when you compare it to the Bay Area.
“I can get a great job in Los Angeles, said Lilling. "I can live by the beach. I can afford a house, and compared to San Francisco, I can afford a condo at least. There are people that would just rather live in L.A., and there have always been people that would rather live in L.A., but they just couldn’t if they were start-up Internet people.”
Silicon Valley is often criticized these days for making very cool apps that appeal to the young and wealthy people who make the apps, but that have little utility in the real world. Lilling says L.A.’s size and diversity provide a much better laboratory for start-ups to test new products.
“If you look at Los Angeles, you have the representative sampling of America, and sometimes the world," said Lilling. "So if you’re doing focus groups, and you’re starting to understand customer acquisition, and you’re starting in a market, Los Angeles has a lot of key benefits.”
The draw of Silicon Valley
Tech insiders told KPCC that while L.A. does have its advantages, it's not necessarily a better place to start a company, just a different place.
Even Santa Monica-loving TrueCar has a sizable office in San Francisco, for advanced research and development.
“Almost any new company of consequence has to be in San Francisco or Silicon Valley,” said David Sturtz, a Senior Vice-President at TrueTrade, a division of TrueCar.
Sturtz said he knows that sounds arrogant, but it’s the truth. He calls the Bay Area a rarefied, even magical, place – full of brilliant people who think they can change the world.
Sturtz spends 90 percent of his time in San Francisco, though he visits Santa Monica every few weeks, where he sat down with KPCC.
“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 epicenter of that," Sturtz said. "I don’t get anywhere near the same vibe that I get up there."
When asked if people in Silicon Valley look down upon companies in Silicon Beach, Sturtz replied with a laugh: "I’m not sure they know there are any companies here."