Silicon Beach: LA tech hub expects more unicorns to join Snapchat, DogVacay and other celebrity-invested start-ups

Close-knit community of techies and start-ups on Los Angeles’ sun-kissed beaches aren’t competing with Facebook and Google when it comes to recruitment, enjoy reasonable commercial prices

PUBLISHED : Thursday, 31 March, 2016, 2:35pm
UPDATED : Thursday, 31 March, 2016, 2:42pm

Better known for its palm trees and celebrities, Los Angeles is also emerging as a tech hub, with its so-called Silicon Beach area offering a sun-kissed alternative to Silicon Valley.

In recent years tech companies large and small, including Facebook, Google and Snapchat, have opened offices in Santa Monica, Venice or Marina del Rey - better known for shirtless surfers then web geeks.

They are joined by hundreds of cutting-edge start-ups and tech incubators like GumGum that are gobbling up space along Southern California’s Pacific coast.

At DogVacay in Santa Monica, a sort of Airbnb for pets that impressed actor Will Smith so much that he invested in it, co-founder Aaron Hirschhorn says he has never looked back on his decision to set up shop downstream from San Francisco.

“Here I am a bigger fish in a smaller pond,” said the 37-year-old, as about a dozen pooches owned or being cared for by employees lounged on cushions or strutted about in the sprawling open office space.

“I’m not competing with Facebook or Google to recruit engineers. It’s a very close-knit community of techies and the networking is great.”

Skyrocketing commercial prices in the San Francisco area, historically considered the centre of gravity for tech companies, is a key reason many start-ups have been relocating to Los Angeles.

“It is so expensive for a company to expand in San Francisco,” said Michael Schneider, 35, founder of Service, an outsourced customer service centre that seeks to resolve disputes between customers and businesses.

“You have to raise at least 50 per cent more for the same thing,” he added, while acknowledging that San Francisco was unlikely to lose its title as “the tech epicentre of the world.”

Another draw to the Los Angeles area for techies is the quality of life, said Schneider, whose start-up - his fifth since high school - has raised US$3 million since he founded it nine months ago.

“You have the weather, a change of pace and you get away from a very endogenous environment in the Bay Area [of San Francisco] where everybody only talks about tech,” he said.

The tech boom in Los Angeles has been fed by a number of local success stories in the last five years, including Snapchat, now valued at US$16 billion, the streaming service Hulu, valued at US$10 billion, or the dating app Tinder (US$3 billion).

Even Hollywood celebrities are taking notice of Silicon Beach’s growing allure and riding the wave of success.

Model and actress Jessica Alba in 2011 co-founded Honest Company, one of LA’s hottest start-ups that makes non-toxic and eco-friendly products.

The actor Ashton Kutcher has invested in some of the world’s most buzzed about start-ups.

Among the hottest today is Dollar Shave Club, in Santa Monica, which sells razors and other grooming products, or Scopely, a mobile-game network company that has seen 600 per cent growth over the last 10 months.

“Los Angeles has always been a trend-setting city and it’s important if you’re building consumer-oriented mobile companies,” said Michael Jones, a venture capitalist and founder of the incubator Science, in Santa Monica.

But Jones, who recently started Wishbone, a trends app geared toward teenagers, said San Francisco - at least for now - remains the nerve centre for tech investors.

“Can we have 10 companies over US$1 billion here? I think it’s possible,” he said.

“I’m not sure though that we can do 50.”

Nonetheless, he expects Los Angeles will continue to give San Francisco a run for its money.

“I think the LA scene can grow extremely big,” he said.