Forget Silicon Valley, tech start-ups head to the beach

Start-ups find they don’t have to go ‘up north’ to prosper in California

Cheaper rent, proximity to shore, entrepreneurs find Silicon Beach — an area from Venice to Santa Monica — an attractive place to be.

PLAYA DEL REY, Calif. — You can excuse Brett O’Brien for feeling giddy.

His start-up Viddy, launched in early 2011, created a smartphone app that allows people to capture, enhance and share video and already has 40 million registered users. He’s raised more than $38 million in funding. And more would-be investors are circling, wondering if Viddy could be the next Instagram, the photo app that earlier this year sold to Facebook for $1 billion.

But Viddy isn’t based in the technology hotbeds of Silicon Valley and San Francisco. “It would have been a lot more challenging to create a business like this up there,” O’Brien says. Instead, Silicon Beach, a roughly 3-mile stretch of sand from

Venice to Santa Monica, is home to Viddy and a host of other young tech companies with an entertainment, celebrity or mobile edge.

After years of the San Francisco Bay Area dominating the tech start-up scene, with huge smashes such as Facebook, Google and Twitter, entrepreneurs are finding they can go elsewhere to grow and prosper. One of those places is the city of dreams itself, where thousands still flock every year to seek fame and fortune, and where young pioneers such as Charles Chaplin, Walt Disney and the Warner brothers (Jack and Sam) used the technology of visuals and, later, sound to create the motion-picture industry.

Cheaper rents than the Bay Area, better weather and proximity to the beach (most of the start-ups are within two blocks of the ocean) make Silicon Beach an attractive place to be.

More than 500 tech start-ups have sprouted in sprawling Los Angeles and its environs, according to members of the L.A. tech scene who have compiled the list online as RepresentLA.com. But most of the action is at the beach.

“There’s a creative energy to Venice,” says James Citron, CEO of Venice-based Mogreet, a mobile entertainment marketing company. “A better quality of life. You can go surfing in the morning, code by day . . . and the weather’s better than Palo Alto.”

Some of the early buzz-getters in the burgeoning Silicon Beach movement include Viddy, Mogreet, new retailmeets-celebrity sites BeachMint (Ashley and Mary-Kate Olsen, Jessica Simpson) and ShoeDazzle (Kim Kardashian) and e-card pioneer JibJab. There’s also eHow parent Demand Media, streaming video site Hulu, car-shopping site TrueCar and one dominant player from Silicon Valley: Google.

There aren’t any Silicon Beach startups that have hit the really big time yet, such as San Francisco-based Instagram, where staffers became instant millionaires. “But there will be,” Citron says.

Veteran investor Timothy Draper says venture-capital firms are taking notice of Silicon Beach. “The Hollywood creativity has finally caught the technology wave,” says Draper, managing director of Draper Fisher Jurvetson, which invested in early start-ups such as video-chat company Skype and electric-vehicle maker Tesla Motors. “It takes awhile for the financial people to catch up with the entrepreneurs.”

“There’s been way more interest from up north about what’s happening here in the last 12 months,” agrees Michael Yanover, head of business development for Creative Artists Agency. “L.A. has been under the radar, and it’s finally elevating itself.”

Even Google has taken notice of Silicon Beach’s growing allure. The search giant recently took over the prominent Binoculars building, designed by famed architect Frank Gehry, in Venice.

“We’re helping the second-largest city in the United States become a veritable tech center,” Google says on its website, in trying to attract employees for sales and engineering positions.

Google touts its climbing wall, outdoor movie theater, rooftop deck with views of Venice Beach and a Michael Mina-trained chef. “Want 300 days of sun a year?” Google says. “Forget the Valley — pack your bags for Google L.A.”

But most start-ups in Silicon Beach are young and lean and can’t afford to provide Silicon Valley-like perks as trumpeted by Google, such as free food, pool tables and massages.

“If you create a great working environment, you don’t have to give away free things,” says Citron.

Because he can’t compete with Google on salary, Citron says, he offers job candidates more responsibility — letting prospective engineers know they’ll get to work on bigger projects.

O’Brien says local universities have taken notice of the expanding tech scene and started sending talent his way. He has hired engineers from Loyola Marymount University, CalTech, University of Southern California and UCLA, he says. “We’ve reached out to the schools.”

Ashish Soni, a professor at the University of Southern California School of Engineering, and the executive director of its Digital Innovation lab, says that in the past many of his graduates would have gone directly to Seattle or San Francisco, but now they’re staying put, getting hired by local start-ups.

“Our vision for the school is to support the local ecosystem and our community, so this is fabulous,” he says. “The frequency of students staying in Los Angeles has definitely grown over the last two years.”

There are job opportunities at startups for non-engineers as well. Jen Sargent, founder of entertainment news site HitFix, says she can get folks to work for her at much lower rates than the “inflated” fees being offered in Silicon Valley and New York. “There’s so much creative talent here that’s dying to get their chance,” she says.

Strength in numbers

Venice Beach, home to a funky boardwalk with Rollerbladers, cyclists and body builders, has emerged as the center for many of the start-ups because the employees like being around like-minded people.

Nick Smoot just leased offices in Venice for his social-networking app for businesses, Here On Biz, based on all the activity in the area. “I want the people working for me to have the ability to network with other folks from the tech scene when they go out for coffee or lunch,” he says.

Mogreet is based in the heart of Venice, just a block away from neighbors Viddy and e-card powerhouse JibJab.

Scott Lahman has been working in the L.A. tech industry since 1994, when he started as an engineer at video game company Activision. Now he’s the cofounder of TextPlus, which makes a popular app for making free texts and phone calls on smartphones. He’s based in Marina del Rey, right down the street from Venice.

“The community is more vibrant than any time since I started here,” says Lahman, a New York native who says he knew things had changed when a cousin at Stanford University e-mailed him “looking for an introduction to an incubator here. That said a lot.”

There are at least five high-profile incubators in the area, including Launchpad, Amplify and MuckerLab. These firms invest in start-ups and help guide them to success.

TextPlus has grown to more than 100 employees in three years, thanks to the popularity of its app (35 million downloads and 1 billion messages sent weekly). At first, Lahman had to go up north to get funding — which primarily came from heavyweight Kleiner Perkins, the firm behind Google and others. “But now, they’re here all the time,” he says.

And with all the new companies sprouting, Lahman says, it is easier to find workers. “Clustering changes the equation,” he says. “So many companies brings more talented people here.”

Celebrity twists

For years, Los Angeles was home to video game designers and engineers and super-high-tech engineers who worked on aviation. Gaming companies Electronic Arts, Activision Blizzard and THQ are still huge employers. And despite the sluggish economy, defense contractor Northrop Grumman continues to have a major aerospace presence in the area.

Many of the new start-ups, such as Moonshark, are gaming-related but with a celebrity twist. It was founded by CAA, the Hollywood talent firm that represents such movie stars as Tom Hanks and George Clooney. Moonshark makes game apps for smartphones with voices from performers — including its first app, DancePad, a partnership with Jennifer Lopez.

“The natural resource of Los Angeles is celebrities,” says Bill Strauss, CEO of ShoeDazzle, an e-commerce firm that counts Kim Kardashian as an investor and spokeswoman. “We couldn’t have done it anywhere else.”

For Viddy, the access to celebrities helped it find a large audience quickly. Team members reached out to contacts working for the band Linkin Park and rapper Snoop Dogg, urging them to try Viddy and post short videos online using the app. That helped build awareness, and soon other celebs started joining in, including Justin Bieber and Bill Cosby.

“This would have been hard to accomplish if we were up north,” O’Brien says. “It validated what we created and led to other celebrities wanting to be involved. They have influence over consumers all over the world.”

Meanwhile, as much fun as the folks in Silicon Beach are having, JibJab CEO Gregg Spiridellis quibbles about the name.

“Why are we rebranding the best brand in the world?” he says. “Los Angeles is an amazing city with such a rich heritage of pioneers using technology to create art. Why can’t we just be Los Angeles? Silicon Beach sounds too hip.”