Why Los Angeles

Los Angeles is not always the best place to build your company and it is not always the best place to manufacture. NEO Tech has 14 sites and not one for reasons including:

1. Underprepared brands want to be close to their factories so that they can bring products fully out of engineering in parallel to bringing them into manufacturing.
2. Low labor cost and mature supply chains still mater in certain niches.
3. Cost of living in LA is rough, taxes are high, and good people often times will see that and not move.

So why are both NEO Tech and Make in LA based in Los Angeles? It turns out that Los Angeles is an optimal place to fuel our network with top tier capital, talent, and partners.

As one of the top five most diverse cities[1] in the world, Los Angeles offers a microcosm of the global ecosystem offering entrepreneurs the unique ability understand and test with a variety of customer segments. In fact, 224 languages are spoken in Los Angeles County (Los Angeles Almanac, 2000 Census). Our Portfolio Companies benefit from this diversity in many ways, including validating many different customer segments within the county limits.

Los Angeles is a highly entrepreneurial city recognized for its ability to support technology companies. The area cultivates highly skilled talent from top area universities. Los Angeles graduates more PhDs than any other metropolitan city from premiere institutions such as California Institute of Technology (Caltech), UCLA, and USC.[2] Our Portfolio Companies seek to benefit from this highly skilled talent pool through the university systems and workforce development programs.

We build things in Los Angeles, and careers are part of that story. While in Silicon Valley people to tend leave jobs for an opportunity at a faster growing company, our workforce retention rates seem to be higher and our founders seem more relaxed about talent retention. Companies have been more stable and so executives tend to spend less mental energies trying to match pace with a neighboring company. And for companies like NEO Tech who are in capex intensive industries but are hyper lean, we tend to attract great engineering and manufacturing talent as our competition moves to places such as Texas, Georgia, Nevada, and China.

Los Angeles’ long history of manufacturing in transportation equipment, aviation, space, apparel, fabricated metal products, computers and electronics provides a foundation for hardware innovation. In spite of talks about the death of American Manufacturing, the city still offers manufacturing jobs — a quantity greater than any other US city.[3] More than 500,000 individuals are part of this highly skilled workforce, known for precision manufacturing in mature companies such as Boeing as well as in new companies such as SpaceX. We Angelinos are stubborn about meeting tolerances and while that sometimes doesn’t lend well for prototyping, it works great for mass production in high reliability areas. The infrastructure that supports mature enterprises has capacity to support hardware startups.

The City of Los Angeles is a proponent of innovation and provides open data portals and staff dedicated to entrepreneurship. Furthermore, 46% of all US port traffic moves through the Ports of Los Angeles and Long Beach, and the city helps local businesses simplify logistics and ease the flow of goods.[4] These and other business friendly efforts are driving more capital investments into Los Angeles.

Finally and most visibly, Los Angeles attracts world class creative and media talent due to the influence of Disney and Hollywood. The flourishing entertainment media often collides with technology startups in unusual ways which can lead to billion-dollar hardware exits such as Beats by Dr Dre. Many of our mentors and content providers are in the entertainment industry and have the ability to leverage the creative workforce for entrepreneurship.

Footnotes

[1]American Diversity: Cities where it works. May 22, 2015. Retrieved from

[2] NSF gives $3.75M to USC, UCLA & Caltech to help spin-off tech startups. August 28, 2014. http://www.builtinla.com/2014/08/27/nsf-gives-375m-usc-ucla-caltech-help-spin-tech-startups

[3] Where Are the Most U.S. Manufacturing Workers? Los Angeles. July 15, 2015. Retrieved from: http://blogs.wsj.com/economics/2015/07/15/where-are-the-most-u-s-manufacturing-workers-los-angeles/

[4] Record Long Beach Port Traffic Shows Strength in U.S. Demand. September 8, 2015. Retrieved from: http://www.bloomberg.com/news/articles/2015-09-08/record-long-beach-port-traffic-shows-strength-in-u-s-demand?