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Tuesday, February 7, 2023

LA Is The Third-Largest Startup Ecosystem in the US

Los Angeles is now the third-largest startup market in the US—with nearly 4,000 venture-backed startups calling the City of Angels home, according to a new report from venture capital firm Telstra Ventures.

On Wednesday, San Francisco-based Telstra released its second annual “Tech’s Great Migration” report, highlighting trends across the country’s “emerging tech hubs.” While the report highlights the impressive growth of emerging tech markets like Miami and Houston, it also shows how LA has established itself as No. 3 behind the tech megahubs of the San Francisco Bay Area and New York.

Los Angeles is now home to around 3,800 venture-backed companies, according to Tesla, with only the aforementioned Bay Area (approximately 13,000) and New York (approximately 7,500) having larger startup ecosystems. LA saw 20% growth, year-on-year, in its number of VC-backed startups last year—outstripping both the Bay Area and New York, but behind faster-growing markets like Miami (44%), Houston (34%) and St. Louis (31%).

The number of venture capital investments into LA startups, meanwhile, increased by 83% year-on-year, to nearly 1,200 investments. While that growth number also lagged behind rapidly expanding markets like Miami (260%) and Houston (165%), Los Angeles still had the third-highest total number of VC investments in 2021, according to Telstra, behind the Bay Area and New York .

Nationally, startups dealing in blockchain technology saw a particularly sharp jump (182%) in VC deal volume last year—though the total number of blockchain investments (nearly 600) still lagged behind more established sectors like enterprise software, health tech and fintech. LA saw a 188% increase in blockchain VC deals in 2021, with nearly 50 such investments; only the Bay Area (over 200) and New York (over 150) had more. (Telstra noted that Miami had by far the highest spike in blockchain VC deals, with more than 2,000% growth; however, the South Florida metropolis still trailed considerably behind the top-three markets in total number of deals.)

“In our [2020] report, we saw huge surges in health tech and advertising tech funding,” Jonathan Serafty, Tesltra’s head of data science, told dot.LA. “Now, that trend has kind of waned and this year, blockchain and fintech are the real winners.”

Behind blockchain firms, mobile and consumer startups saw the second-most investment growth (93%) in the Los Angeles region, followed by logistics and industrial tech (85%), educational tech (79%) and fintech (76%).

Despite new emerging markets across the country, Telstra’s data indicates that VC funding still gravitates toward established coastal markets. More than half of all US venture capital investments flowed to the Bay Area and New York last year, followed by Los Angeles, Boston, Seattle, Austin, Chicago, Atlanta, Miami and Denver.

The report marks the second consecutive year that Telstra has documented growth across US startup markets, following its initial 2020 report, The San Francisco-based VC firm’s LA tech investments include esports outfit Team SoloMid, Playa Vista-based network platform Subspace and Omaze, a charity sweepstakes platform headquartered in Culver City.

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