Why LA is the Best Place to Base Your Startup

The City of Los Angeles

If California were an independent country, it would have the fifth largest economy in the world behind the US, China, Japan, and Germany (https://www.forbes.com/places/ca/#480fdb613fef). The state itself represents 15% of the U.S. economy. Specifically LA County, has many booming industries, including the entertainment industry, but the recent successes are due to one industry: Manufacturing. 

Especially where 12,500 establishments employ approximately 350,000 people, Los Angeles County is the ideal climate for a business to thrive. More than half of LA County residents speak a language other than English at home ranging from Spanish, Chinese, Tagalog, Korean, Armenian, Vietnamese, Farsi, Japanese, and Russian. The diverse amount of languages spoken in LA gives the unique location a competitive advantage compared to the same industries across the world. This unique range of diverse potential sprouts from the wide range of capital resources and  incentive programs, creative economy, leading 4-year colleges and universities (Caltech, UCLA, USC, etc.) that leads to 1.5 million college graduates. As a leader in higher education and research, LA County is home to 10.2  million individuals with a network of business executives from every country who cultivate ties and understand the culture. With 100 consulates in LA County, it is easy to conduct business with the plethora of domestic or foreign establishments based in LA. 

Not only is LA an ideal location for starting your business domestically, it is a great place to start an international business. With two of the largest sea ports in America (LA and Long Beach), the Alameda Corridor rail system and the U.S.’s third most active international cargo airport (LAX), the combined ports accounted for nearly two-thirds of the West Coast’s foreign import cargo and jointly constituted the third largest harbour in the world after Singapore and Hong Kong. 

LA County  is one of the most dynamic economies in the world due to its fast-paced growth rate, world-renown creative economy, and high-tech industries. From salsa to satellites, films to fashion, televisions to toys, and helicopters to hot tubs, LA has nearly 30,000 manufacturers in a wide range of industries. Los Angeles remains a relatively concentrated center of manufacturing across many product lines, including leather products, textiles, petroleum and coal products, furniture, computer and electronic products, printing and other miscellaneous manufacturing. 

In comparison to other major startup hubs (Silicon Valley, New York City, London), it is important to consider what characteristics are most important for startups and tech companies. According to the Los Angeles County Economic Development Corporation (laedc.org), “77% of all site investments today are based on location quality, not cost. And the #1 factor is availability of talent.” With a worker base of nearly 5 million people, LA County is plentiful with a diverse range of skilled workers with a wide range of skills. At 178,500 jobs, LA has more green jobs than other regions in the nation. 

LA County is undoubtedly one of the leading developments in emerging industries, providing a foundation for the next generation of knowledge workers. As a hub for investor dollars invested in tech and startups, the support network is increasing from both the public (city agencies and organizations) and private sectors (accelerators and incubators). LA is the largest manufacturing center in the U.S, not only because of its status as the nation’s most diverse and populous county, but also because of its title as the #1 manufacturing capital, employing more than 347,000 people which is more than any other country in the nation. The sky is the limit for the creative and innovative minds that thrive and subside in LA county. 

Sourcing Tips to Identify New Quality Suppliers in LA

Ok, you’ve drafted out your new business model and identified the ideal location for your organization to thrive. Now you need to decide what manufacturers and suppliers to reach out to with regards to your product. More often than not, when buyers begin the process of sourcing, either offshore, outsourcing, or onshore (See Offshoring vs. Outsourcing vs. Onshoring), they are usually tempted to focus solely on the best price. Low costs pose a potential risk in the long term, because saving those few extra cents may lead to a quality below the standard. It is important to consider more than just price when purchasing and collaborating with new suppliers and manufacturers. 

First and foremost, it is important to check for supplier quality certifications. Many buyers have minimal requirements, but suppliers tend to not always make it easy to view and verify certifications. Quality certifications rank as the top six of all factors that B2B buyers use to evaluate suppliers. Depending on your manufacturing requirements, you must determine the need for a multi-location supplier or single warehouse. Though shipping capabilities and associated costs will vary from locations the supplier has to offer, the price may be negotiable from a smaller business with a single location or string of multiple suppliers together to meet needs. 

Aside from quality certifications, buyers rated delivery performance, cost, quick turnaround time, financial stability, and industry experience as the top factors that matter when evaluating suppliers. Delivery performance is essential to industrial buyers. It is important to ask for lead time projections compared to on-time delivery rates. If for any reason, these cannot be provided, it is not a positive sign. 

When gauging financial stability, it is important to cross reference sources. Nearly half of all buyers have worked with a supplier that unexpectedly went out of business. It is important to review the product information and supplier’s inventory. This can be advantageous with regards to forming valuable partnerships, testing the amount of time and effort the supplier is willing to provide you and your business. Having visibility of the supplier’s inventory can be advantageous in indicating their commitment to you as a consumer as well as their ability to provide the necessary items for your needs. 

With regards to industry experience, it is imperative to identify suppliers that are willing to be flexible with payment requirements. As long term necessity and delivery timelines can dictate PO or Net 30 billing options, it is crucial to ask for what you need to run your business appropriately. Another facet of industry experience is that you contact references for testimonials. A single advocacy of approval from another business that the supplier is reputable can speak volumes about the supplier. While NDAs can cause difficulties in this area, a supplier should always have a ready list of happy customer reviews or testimonials. 

Although this is not an exhaustive list of protocols to review before onboarding a new supplier, it will be of added benefit to identify those that you can rely on. When choosing a supplier to partner with, you want a factory or supplier that answers all questions and guides you through the process. Marco Perry, the founder of strategy, design, and engineering firm, Pensa, advised when looking for a factory that not only has the tools you need, but also operates as a partner to make a great product. “More often than not, the factory is going to assist in many other aspects of production than just making and assembling parts,” said Perry, who has more than 20 years of experience as an inventor. The factory should already be producing goods or products similar to your own, ensuring that they understand your market and what it takes to be successful. Not only should the supplier have a reputable reputation, it is paramount to find a partner that you can trust. In this way, general-purpose factories are not as knowledgeable in the nuances and subtleties of what makes a product great.