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Silicon Valley vs. Silicon Beach? Tech Start-Ups Flock to L.A.

Thursday, 5 Jul 2012 | 1:00 PM ET
Hauke Dressler | LOOK | Getty Images

Southern California has sun, surf... And now silicon.

"Silicon Beach", as it's being called, is attracting talent and funding for tech startups, entrepreneurs drawn to L.A.'s ability to brand and sell ideas...plus the weather.

"L.A. is such a hustler mentality," says Tony Adam, a former Paypal executive who's come to Silicon Beach to launch EventUp, a website that rents out locations for events. "Everyone wants to help each other."

"This is a place where people have come for years to make dreams happen, so why shouldn't they come here to make their technology dreams happen?" asks Michael Weir, a Silicon Valley transplant who is now Chief Marketing Officer for Sparqlight, an enterprise software startup in Santa Monica.

It sounds strange that the world's entertainment capital, and the second largest city in the country, would be seen as a "startup" in anything.

Los Angeles is home to tech companies like gaming giant Activision , but it lacks a huge tech magnet, like Apple and Google and others are to Silicon Valley, Amazon and Microsoft to Seattle, Groupon to Chicago.

So local tech incubators hope one of the startups here will be the next big thing. In just the last month, two Southern California tech companies, Savings.com and Gaikai, have each been acquired for hundreds of millions of dollars.

"In Silicon Valley, there's such a large population of entrepreneurs that are very seasoned, there's a really good support network there, and there's a large investor base that supports early stage businesses," says Mike Jones, former CEO of MySpace.

LA's Drive for Technology
CNBC's Jane Wells reports on tech "incubators" springing up in Los Angeles.

Jones now runs Science, a tech incubator which provides funding, expertise, and office space for startups. Science raised $10 million last November.

"To date we've launched six companies in the last seven months," Jones said.

He says that 80 percent of second round funding is now coming from Silicon Valley giants like Kleiner Perkins and Andreesen Horowitz.

But access to funding remains a challenge.

"I can't go around the corner here and raise money down the street," says Sparqlight's Michael Weir. "There's no place in Los Angeles like Sand Hill Road in Silicon Valley. You can go up there, there's 60 or 70 VC's, they're all within a square mile of each other."

One big boost to Silicon Beach's street cred is the arrival of Google, which has moved into the bohemian L.A. community if Venice. Google has put tech and sales teams inside 100,000 square feet of office space in the iconic Binocular building, designed by Frank Gehry. The search giant is reportedly leasing another 100,000 square feet nearby.

Facebook is expanding into a building a few miles south.

"You want to have world class companies in your area working," says Weir. "Google's going to attract talent, it's going to throw off talent."

The talent it throws off may then create other startups in Silicon Beach.

How do locals feel about the arrival of Google in a county with unemployment over 11 percent and falling home prices?

"From my standpoint, it's good because I own a house here, and it increases the demand for nice houses in the area," says resident Larry Klein.

Not everyone's gaga over Google.

"It's the end of an era," says "Big Will" Harris, a veteran of Gold's Gym.

Google is leasing the building the legendary gym is housed in, and the company has told CNBC it has no plans to kick the muscle men out.

Harris is skeptical.

"At the end of the day, it's corporate, it's the bottom line," he says. "You'd have to be silly not to know that this is not going to be here in two years."

Harris says Google's "corporate" presence will hurt Venice's freewheeling lifestyle.

Klein isn't so wistful. "I'm not one who ascribes to the sort of nostalgia of Venice as it used to be," he says, "because I've been here since it 'used to be', and it was rough."

email: tech@cnbc.com

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