Inside LA’s ongoing talent conundrum

By Michael Carney , written on July 4, 2013

From The News Desk

Los Angeles has plenty of entrepreneurs these days. And more venture capital than it’s had before. We’re home to Elon Musk – one of the greatest entrepreneurs of our time – and one of the most buzzed about up and coming companies in the consumer Web in Snapchat.

But there’s a big fear: As new ideas emerge is there enough talent to scale them? This may be the single biggest risk LA faces. Good money will always follow good talent.

Talent ostensibly comes from two sources: that which is educated at local universities and remains in the community post graduation, and that which is educated elsewhere and comes to a market to find work after graduating.

As has been discussed ad nauseum, LA is as well situated as any city in America in terms of the quantity and quality of technical talent that graduates from its universities – 2,900 engineers graduate locally each year, more than any other market. And there has recently been an increasing emphasis on keeping that talent within the ecosystem, rather than seeing it flee to other markets. Where LA is failing relative to its two largest competitors – San Francisco and New York – is in attracting outside talent to relocate to its sunny shores.

This trend was first brought to my attention by TenOneTen Ventures Managing Partner David Waxman, who had turned to LinkedIn as a source of data to investigate the state of LA’s technology recruiting prowess. Together, we compared the top three current cities for alumni of the nation’s top ten engineering universities, according to US News and World Report. The process was repeated for the Ivy League. We also noted the top non-university employer for alumni of these schools with the goal of understanding the impact that recruiting may have on the distribution of top talent.

(A few caveats before diving in. This data includes those who attended the below universities for either undergraduate or graduate studies. The data is also limited by the completeness and accuracy of LinkedIn’s data, which is subject to its users – as a result, I expect this data to be indicative of broader trends, but not flawless.)

Top Engineering School Alumni Distribution

Ivy League School Alumni Distribution

A couple trends emerge from this admittedly rudimentary analysis. First, let’s just get this out of the way, Google is a force of nature. But we’ll come back to recruiting a bit later. The most obvious takeaway is that LA is underrepresented on each of the above tables. As the nation’s second largest city, with more than 5 percent of the nation’s population in its greater metropolitan area (18 million people) and as a highly desirable place to live, one would expect better representation among alumni of these top universities.

LA ranks first as the destination for alumni of only one of the 16 “top universities” listed above: CalTech, which is which is located in its backyard. The city attracts a disproportionate amount of talent, relative to the rest of the nation from Northern California stalwarts Berkeley and Stanford (barely), at 10 percent and 6 percent respectively, and is proportionately represented for Harvard and Yale at 5 percent. But notably, LA doesn’t rank in the Top 3 destination cities for alumni of any non-California school. By contrast, SF and NYC respectively rank in the Top 3 for all but four and three of the 16 universities listed.

As LA looks to establish itself as a destination for top entrepreneurs to build companies, those currently in the community need to take a hard look at this data and address the shortcomings. Why aren’t we more attractive to smart outsiders looking to make a name for themselves?

There are no easy answers. One problem may be that Hollywood so overshadows the brand of LA that unless you want to make it in the movies, this isn’t the place you think of first. Clearly, another big takeaway is the role that large, anchor tenant technology companies with tens of thousands of employees play in being a tractor beam for talent. LA doesn’t have any of those.

Google in particular is a recruiting juggernaut, and plenty of people have already noted the impact that a big Google office had in solidifying the New York tech scene. To a lesser extent Microsoft, Amazon, Yahoo, IBM, etc. and even top Wall Street firms outclass most LA corporations in terms of recruiting.

LA has its own small, but growing Google office located in Venice Beach, but the majority of the company’s focus locally relates to YouTube and media creators. Like Silicon Alley in the late 1990s, LA may be another generation away from its first truly massive hits with staying power.

While the data isn’t perfect and it only shows the migration path of a sliver of the world’s tech talent, our research makes one thing clear: The opportunity cost of flips. While a $1 billion deal to buy Tumblr, Wave, or a generation ago Overture can do wonders for injecting cash into an ecosystem like New York, Israel, or Los Angeles it doesn’t have the same legacy effect as a company that goes long and builds something truly giant.