Technology Blog

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Monday, May 23, 2016

Silicon Beach vs. Valley: The Stats

Posted by Matthew Chavez, CPA

Since Armanino merged with Los Angeles-based RBZ last August, I’ve spent a significant amount of time back and forth between Silicon Valley and Silicon Beach. There has been a lot of talk about the resurgence of that region’s tech scene. The topic has gotten national attention lately, and it’s not just media hype. Although it’s still dwarfed by the Bay Area, LA’s “Silicon Beach” has become a bona fide tech hotspot, with the funding statistics to prove it. (We’re accountants. We like statistics.)

In 2015, the Los Angeles/Long Beach/Santa Ana metropolitan area received $4.5 billion in venture capital investment, spread across 240 companies, according to the National Venture Capital Association. This put it in fifth place among 133 metro areas nationally, in terms of both dollars invested and the number of companies receiving investment.

By comparison, first place San Francisco/Oakland/Fremont had 797 companies attracting a total of $21 billion, while San Jose/Sunnyvale/Santa Clara ranked third in terms of dollars received ($6.2 billion) and fourth in terms of companies funded (321).

Where, Who and Why

Silicon Beach’s ground zero is Santa Monica, a city that first attracted a wave of tech startups way back in the late 1990s—and the location of one of our Southern CA offices. In the past few years, as the tech sector has boomed, the area’s informal boundaries have pushed south and east to include Venice, Playa Vista and Marina del Rey, as well as parts of El Segundo, East Santa Monica and Culver City.

Today, the region houses a diverse mix of tech companies working in areas such as gaming and entertainment, e-commerce, financial technology and social networking. Some of the big names are Venice-based Snapchat, Santa Monica gaming giant Activision Blizzard, and Apple acquisition Beats Electronics, based in Culver City. Google has an office building in Venice and also has a big presence in Playa Vista, where in late 2014 it spent $120 million to buy up 12 acres next to its YouTube production facility.

Startups have been drawn to Silicon Beach partly because it is a cheaper place to operate than Silicon Valley. It’s not as cheap as it was a few years ago, however, and like the Bay Area, the cost of office space (and housing) has surged along with demand. Office rent in greater Los Angeles rose more than 15% from Q4 2013 to Q4 2015, according to Bloomberg/CBRE Research.

Because of LA’s huge entertainment industry, the area also has a deep bench of digital creative talent. The laid-back atmosphere, sunshine and proximity to the ocean are attractive, as well. In an August 2015 NPR interview about Silicon Beach, Scott Painter, founder of Nasdaq-listed automotive data firm TrueCar, said he based his company in Santa Monica partly as “a lifestyle play.” Painter is not the only fan of that lifestyle. Silicon Beach Surfers, a four-year-old surfing/networking club for the tech and startup crowd, has more than 500 members and over three times that many applicants, according to a March 2016 Fortune magazine profile.

The Silicon Beach boom has even caught the attention of screenwriters, although on a smaller scale than HBO’s Silicon Valley. The new Netflix series Flaked, starring Will Arnett, is set in Venice and features tech-fueled gentrification as one of its main plot themes.

As of now, San Francisco remains the biggest tech hub in the nation. Nonetheless, Silicon Beach is continuing to grow and many entrepreneurs are moving their businesses south to sunny SoCal. I’m interested to see what the future brings.

Matthew is an audit partner in our San Jose office working exclusively in the SEC and technology practice. Prior to joining Armanino, Matthew was a senior manager at KPMG LLP – Silicon Valley in their Information, Communications & Entertainment audit practice. Matthew provides audit and accounting services to publicly-traded and venture capital funded private companies in the software, internet, electronics and semi-conductor segments. Matthew regularly advises companies on such matters as revenue recognition, equity accounting and business combinations; as well as consulting on SEC registration and Sarbanes-Oxley compliance.



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