Hollywood Has Embraced the High-Tech Scene

The regional geography of venture capital in Southern California.

Image
Vacclav/Shutterstock

Los Angeles is much more associated with Hollywood and celebrity culture than start-ups, venture capital and high-tech industry. But that seems to be changing.

Over the past few weeks, I've been looking at the changing geography of venture capital investment and start-up activity in American metros and cities, using zip code level data for 2011 made available to me by Dow Jones. Today I turn to Southern California, the region stretching from L.A. through Orange County and down to San Diego. 

L.A. and San Diego both number among the nation's leading centers for venture capital, just behind places like the Bay Area, New York and Boston. And across the Southern California region, venture capital and start-up activity has been undergoing the same urban shift I've charted in the Bay Area (from Silicon Valley to San Francisco) and across the East Coast, from New York to Boston and D.C.

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The map above by Zara Matheson of the Martin Prosperity Institute charts the pattern of venture capital investment across the L.A. metro and down the coast into Orange County.
 

L.A. may be a sprawling, car-oriented metropolis, but its venture capital investment reflects an urban shift. The city itself attracted $472 million in venture capital investment, nearly 20 percent of the region's total. Relatively dense Santa Monica -- particularly the urban core, with a walk score of 95 -- was close behind, with over $400 million in venture investment, or 16.3 percent of the regional total.

The table below shows the top ten  zip codes for venture capital investment in Greater L.A., including Orange County, in 2011.

Top Ten Zip Codes for Venture Capital Investment in Los Angeles and Orange County
Rank Zip Code Neighborhood and Features City  Investment (millions)
1 92807 East Anaheim/Anaheim Hills Anaheim (OC) $531
2 90401 Downtown Santa Monica, including the pier Santa Monica $286
3 92618 Irvine Spectrum Center, Irvine Tech and Research Centers Irvine (OC) $154
4 91522 Warner Bros. Studios Burbank $128
5 90071 Downtown, Bunker Hill Los Angeles $125
6 90404 Midtown Santa Monica, Pico District Santa Monica $114
7 92673 Northern San Clemente San Clemente (OC) $113
8 90024 Westwood, UCLA Los Angeles $76
9 90028 Hollywood Los Angeles $71
10 92656 Suburban Aliso Viejo Aliso Viejo (OC) $70


The list is split between urban and suburban zip codes. The top-ranked zip code is relatively diffuse East Anaheim in northern Orange County, which attracted $531 million in venture investment. An office-park heavy area of Irvine, in zip code 92618, was the third most venture capital-rich zip code in 2011, with $154 million.

But several far more urban zips also rank high on the list. Two downtown Santa Monica zip codes -- 90401 and 90404, which include the iconic the Santa Monica Pier and the Pico District -- rank second and fourth, together attracting nearly $400 million in investment. Zip code 90071 in downtown L.A. and Bunker Hill ranks fifth, drawing in $125 million in venture capital funds. Zip codes in the Westwood area around UCLA (90024) and Hollywood (90028) were the eighth and ninth most productive districts, together accounting for another $140 million plus in venture capital.

The second map, also by Matheson, tracks venture capital investment in greater San Diego.

Like greater L.A., the region is heavily car oriented and sprawling. But the map above shows the considerable concentration of venture capital investment in and around La Jolla, near the University of California, San Diego, the Scripps Research Institute and the Salk Center as well as out in Torrey Pines and Sorrento Mesa. Cars and sprawl or not, predominantly urban zip codes account for nine in ten (91.8 percent) of every dollar of venture capital investment in San Diego.

The top zip codes for venture capital investment in the San Diego metro area are listed in the table below.

Top Ten Zip Codes for Venture Capital Investment in San Diego
Rank Zip Code Neighborhood and Features City  Investment (millions)
1 92121 Torrey Pines, Sorrento Mesa San Diego $440
2 92130 Carmel Valley San Diego $108
3 92123 Serra Mesa San Diego $85
4 92011 Southern Carlsbad Carlsbad $50
5 92101 Downtown -- Gaslamp Quarter, Harborview, Airport San Diego $49
6 92128 Rancho Bernardo San Diego $45
7 92037 La Jolla -- Salk Institute, Scripps Research Institute La Jolla $40
8 92075 Suburban Solana Beach Solana Beach $30
9 92127 Rancho Bernardo San Diego $23
10 92131 Scripps Ranch, Rancho Encantada San Diego $17


Much of the venture capital investment in San Diego is centered in the northern part of the city. The areas around Torrey Pines, the Carmel Valley, and Serra Mesa topped the list of zip codes by investment levels. One zip code -- 92121, which includes Torrey Pines and Sorrento Mesa and abuts the campus of the University of California, San Diego -- attracted four times as much investment as the second most productive zip code. Even in San Diego, more quintessentially urban districts have begun to see considerable venture investment. A major downtown zip code, which includes the Gaslamp Quarter, Harborview, and parts of Balboa Park, was the fifth leading zip code for venture investment in 2011.

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Across Southern California, stretching from L.A. to San Diego, the top jurisdictions for venture capital investment and startup activity were large and relatively dense cities. San Diego proper tops the list with more than $800 million in venture investment. Anaheim, a somewhat less dense suburb just south of L.A. in Orange County, is second with $531 million. L.A. is third with $472 million, and Santa Monica is fourth with $402 million. Irvine, with its more traditional "nerdistan" tech centers and office parks, is fifth, with $203 million in investment.

This urban shift becomes even clearer when we distinguish between predominantly urban and predominantly suburban zip codes across Southern California. In greater L.A. and Orange County, predominantly urban zip codes accounted for nearly 80 percent (78.9 percent) of venture capital investments, nearly $2 billion dollars. In greater San Diego, predominantly urban zips accounted for more than nine in every ten dollars (91.8 percent) of venture capital investment.

A decade ago, a grim Brookings report on the state of sprawl in Southern California noted that well-paying jobs in the high-tech sector had concentrated in "mature, high-amenity" suburbs like Irvine. But this has clearly begun to change.

Venture capitalist Mark Suster has highlighted this urban shift in startup activity and venture capital in greater Los Angeles. "In L.A., companies used to be concentrated near Pasadena or in the San Fernando Valley,” he wrote on his blog."These days it’s Santa Monica and Venice. Not exactly ‘urban’ in the way you think of SF or NY but certainly relative to the suburban communities of L.A. and at a minimum it’s where young people want to live/hang out."

As Suster noted, this zip code analysis shows how the relatively dense core of downtown Santa Monica has leapfrogged over the traditional tech centers in Irvine in its ability to attract venture capital investment. Even in the epicenter of sprawl, venture capital investment and startup activity no longer clusters in the nondescript office parks of suburban nerdistans.

Top Image: Vacclav / Shutterstock.com

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This is the tenth in a series of posts exploring the new geography of venture capital and high-tech start-ups, and the degree to which these start-up communities are shifting from their traditional locations in the suburbs to urban areas.

About the Author

  • Richard Florida is Co-founder and Editor at Large of CityLab.com and Senior Editor at The Atlantic. He is director of the Martin Prosperity Institute at the University of Toronto and Global Research Professor at NYU. More
    Florida is author of The Rise of the Creative ClassWho's Your City?, and The Great Reset. He's also the founder of the Creative Class Group, and a list of his current clients can be found here