The American economy is, judging by most metrics, booming.
Americans are starting more businesses than ever, over 600,000 new businesses are launched every year.
There is a huge diversity in the types of businesses created and the industries that they touch on. In some places, such as the Bay Area, startups are even becoming a tad bit oversaturated. Nevertheless, businesses continue to spring up and ambitions are climbing from these young companies.
These new businesses are tackling all kinds of sectors and bringing innovation to spaces in dire need of change. The work of these fledgling companies is changing the landscape of the American economy as we know it.
Although not every startup is destined to make it all the way to seed and beyond, with as many as 20% failing in the first year, every single one of their individual stories is remarkable.
The amount of Venture capital – the critical lifeblood of startups available for these new businesses is quite staggering – figure. This means that there is no time more ripe than now for aspiring entrepreneurs to take risks and start a business.
U.S firms raised a record $132.1 billing in venture capital last year in 2018. In stride, 2019 saw valuations of startups climb higher than ever before and fundraising rounds followed suit in their growth.
This year started with deals decreasing in count while increasing in valuation. Which resulted in a net increase in the value of the deal market. Indeed, the majority of capital raised was funneled into a few very high-profile companies. It may not be surprising considering the high demand for such companies at a time when the aggregate valuation of “unicorn” companies was a record $582B in Quarter 1 of 2019.
The dip in the number of deals would not last however. Quarter 2 of 2019 saw an increase in the amount of deals going on. An estimated 8,800 venture deals occurred in this quarter, mostly due to an uptick in early-stage rounds. However, the size of the rounds in Quarter 2 saw a decrease when compared with those from Quarter 1.
Looking back at Quarter 3, we will find that the amount of venture capital deals struck was an all-time high! Quarter 2’s trend of early seed stage funding increasing pervaded in Quarter 3. It was also in part due to the ongoing development of non San Francisco Bay Area startup hubs. As these regions mature, the volume and accessibility of venture capital to young companies will surely increase.
Although the amount of funding available to these fledgling companies is at a historic high, barriers still exist for any company looking to grow through financing. One of them being the amount of capital available in the geographic area that they’re located.
When it comes to venture capital, geography matters. ⅓ of the venture capital available in the U.S can be found in the San Francisco Bay area.
Downsides of SF
Startups that begin in the SF Bay Area have great prospects at getting funding, with the capital available in the region being seemingly endless. However, although San Francisco has great capital saturation, the region also faces heavy saturation in less desirable components.
Monoculture of thought
Silicon Valley has an extensive history as a gathering place for innovators and great thinkers. However, the abundance of ridiculously successful tech companies and an accompanying tech culture has created a bubble that is becoming increasingly out of touch with the rest of the world.
Leading to the genesis of startups that look to solve problems that are endemic to Silicon Valley but not particularly pertinent to the rest of the country.
Lack of diversity
This issue contributes to the problem of monoculture of thought but is distinct from it. The region has not only historically been very homogenous in terms of race and gender, it has also done very little to mitigate these problems.
Certain large companies in the region have launched diversity initiatives but the issue of lack of diversity yet remains pervasive.
Expensive cost of living and operating
The immense success of the companies that call the San Francisco Bay Area have made the cost of living in the region incredibly exorbitant. Prices of just about everything in the region have skyrocketed and has made life difficult for residents and businesses alike.
Startups in the Bay Area face operating costs that are as much as 2 times as those located in other cities such as Austin or Los Angeles.
While Silicon Valley is struggling to deal with these critical points, other regions in the U.S are quickly developing as nurturing homes for startups. Cities like Austin, New York, Boston, and Los Angeles have been making impressive leaps towards solidifying themselves as startup titans.
The Boston Consulting Group and the Alliance for Southern California Innovation has identified these cities as cities to watch in the next few years because of the strength of their human/financial capital systems and related infrastructural components.
Los Angeles in particular is experiencing a wealth of exciting developments that point to a prosperous future for its startup community. Here are some of those exciting developments:
Thriving Startup Hubs
Regions like West LA, Downtown LA, and Pasadena are exploding with entrepreneurial activity. West LA, dubbed Silicon Beach, “is home to roughly 2,000 tech companies” making it a startup hub rivaling Silicon Valley. LA’s different regions are quickly developing at a breakneck speed with no signs of slowing down.
The future makeup of LA’s entrepreneurial space is going to be an impressive one.
Top Tier Startup Accelerators and Incubators
LA startups are supported by a wide variety of strong accelerators and incubators that specialize in all sorts of fields. The LA Cleantech Incubator, for instance, works with companies that function within the scope of eco-consciousness and transportation.
Other great LA accelerators and incubators include Amplify.LA, MuckerLabs, and TechStars. With such great programs supporting LA’s budding businesses, said businesses are only in position for success and more success.
Record Capital Raisings
Los Angeles is enjoying historic capital fundraising runs these past few years. While the rest of the country saw an overall decline in capital raised, Los Angeles enjoyed a record $6.4B in venture funding and average seed rounds increased by 10 percent year over year! The amount of capital is expected to only increase in the coming years as more and more venture capital firms( particularly from Silicon Valley) come and open offices in LA, attracted by the successes of LA produced startups.
New Initiatives by the City
Established entrepreneurs, corporations, and the city of Los A are working together on initiatives that look to bolster the LA startup community. Initiatives like “MAKE IT IN LA” look to close the gap between manufacturers and entrepreneurs so that businesses can more efficiently obtain and utilize resources available to them.
Other private organizations and companies have also produced initiatives of their own that serve the needs of the community with respect to entrepreneurship. Whether these initiatives are race, gender, or higher education oriented, they all function as boons to this city.
These developments are no accident in Los Angeles.
Why is it happening?
Pervasive Entrepreneurial Spirit
People in Los Angeles have an enduring passion for all things entrepreneurship. This passion is infectious and seeps it way into every corner of this sprawling region. It’s not a coincidence that one in five residents in Los Angeles is a business owner!
This city and it’s people are deeply invested in each other and this creates a culture of innovation and runaway success that draws millions of people to this city looking to do the same.
Immense Diversity
Los Angeles is among the most diverse cities in the country, with the most foreign born residents.
Los Angelenos come from more than 130 countries and speak more than 200 languages.
This incredible diversity is a huge factor in LA’s incredible success and will no doubt spur its continued success for a long time to come. Los Angeles’s future is incredibly bright and will be a treat to see come to fruition.
Great university systems
LA has some of the best universities in the world at an incredible density! LA is home to world renowned universities like UCLA, CalTech, and USC. This means that there is an ample amount of brain power available to businesses in this city.
The best and brightest from all over the world are coming to LA for their education and then staying to work in the city.
Excellent quality of life
People in LA enjoy a unique quality of life that is conducive to high levels of productivity and ingenuity.
It’s not surprising that business is easier when the temperature is above 70 degrees nearly all year round. And as one of the largest cities in the world, LA is popping off with great events and happenings.
Based in Los Angeles, M Accelerator is one such institution that offers those seeking an alternative to an MBA an excellent opportunity to do just that. M Accelerator’s primary offering is a Startup Program that will give you the tools and resources to develop your entrepreneurial skill set under the instruction of highly experienced mentors and advisors.
The program is an excellent course of option for people looking to increase their business acumen without committing to an MBA length program and paying an MBA level price.
Throughout the program, you will gain incredible, transformative experiences, skills and knowledge that will hone your passion for intrapreneurship. At the programs core is a regimen designed to instill solid business management skills and to teach innovative design tools.
In addition, you will learn how to effectively communicate your ideas to investors and stakeholders and move them forward. The program is filled with hands-on workshops in each weekly ‘sprint’, covering a variety of topics ranging from business communication to digital marketing, resource management, and much more.
All while in the company of a cohort of like minded individuals that will become a valuable part of your personal and professional network.
If you’re ready to challenge yourself in one of the premier business ecosystems in the world and find out what kind of growth is in store for you. Contact us at apply@maccelerator.la
