The Number

Data from the Ewing Marion Kauffman Foundation show the Los Angeles metro market ranks fourth in the nation for number of startup companies. However, a Kauffman report released earlier last month found that on an index measuring “growth entrepreneurship,” L.A. ranked only 33rd out of the 40 largest U.S. cities. L.A.’s National Ranking for Number of Startups Why is the local economy good at starting companies but poor at growing them? Kauffman measures “growth entrepreneurship” by looking at revenue and job growth for companies during their first few years. Not all companies perform well in their early years, particularly Valley companies. Kenn Phillips, chief executive at Valley Economic Alliance in Sherman Oaks, said many of the entrepreneurs in the Valley are retired engineers with an idea for a new product. Since manufacturing often requires patents and substantial capital, these companies may not start growing – or even generating revenue – for years. “Often it’s a 10-year commitment,” Phillips said of manufacturing-related startups. “In the IT market, you can create an app and save the world over a weekend. … It takes a long time (for manufacturing companies) to get to market because these products are so technical.” Another trend Phillips has noticed is the growth of incubators and accelerators. California State University Northridge has a CleanTech Incubator, the Conejo Valley hosts several dedicated to biotech, and Valley Economic Alliance has one. These programs provide free or discounted space and other resources, but usually for two years or less. That’s fine for many young companies, especially tech-oriented ones – but not long enough for engineering startups. “Part of the problem is people are not helping these entrepreneurs enough,” Phillips said. “Engineers need dedicated space for a long time.” – Joel Russell