After capital famine, new data shows LA businesses are looking to feast

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Post-recession LA tech company investment has reached new heights. Built In LA’s funding report showed that funding was 188 percent higher in 2014, than it was in 2013, totaling $3.041 billion.

 

With numbers like that it's easy to assume Los Angeles has long been a destination for investors. But the truth is startups in Los Angeles County are only now feasting after years of famine. Only recently has there been a flood of venture capital outside of the San Francisco-Bay area. With that change, the national and Los Angeles startup scenes are turning a corner and so too are their entrepreneur’s outlook on the future. 

 

Dun and Bradstreet Credibility Corp., a business intelligence data and credit report company, together with Pepperdine University's Graziadio School of Management, recently released its annual Private Capital Access Index(PCA), showing how small and medium business owner outlook is changing.  

 

“LA has always been a bastion of startup activity. But we have never had a good solid base of venture capital flowing in. That is now changing,” said Jeff Stibel, CEO of Dun and Bradstreet Credibility Corp. “What we’ve seen coming out of this recession is access to capital in LA has exploded.”

 

With the flow of capital and the better economic environment, the PCA index shows that entrepreneurs are optimistic about the future.  

 

While only 51 percent of small and medium sized businesses (SMB) in California said they made a profit last year, 80 percent expect to perform ‘substantially’ or ‘somewhat’ better in 2015, according to the PCA Index.

 

“What we are seeing is optimism play up not down,” said Stibel.

 

In fact, to grow their businesses 58 percent of Californian SMBs are raising capital to grow and expand their businesses, as opposed to just 44 percent nationally. That may indicate that Californian businesses are more bullish on their futures or that they are seeking financing later than the rest of the nation because the state’s economic growth was delayed.

 

Whatever the reason, SMBs still anticipate challenges. 63 percent of respondents in California said they expect it will be difficult to raise equity financing in the next six months. Ironically, those that need capital most often can’t get access to it.

 

“The older the business the less the need for capital in general and the greater availability of capital,” said Stibel. “The younger, the greater the hunger, but capital is less available.”

 

Yet, even a little bit of capital helps. And, increased numbers of seed and venture capital funds in California have clearly made raising money easier for small startups. More money means more startups. More startups mean more tech jobs.

 

“It’s nice to see some positive momentum for a change,” said Stibel.