California – Where The Sun Shines On Business

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californiaIf you were completely open to suggestion without any bias at all, where would you start a new business in the United States? What city and state represents the best chances for success for a startup company?

Unfortunately, there is no single great statistic that points to the possibility of success for a new pizza parlor in Omaha, Nebraska, compared to one opening up in Portland, Maine. And biases do, ultimately, matter quite a bit. There would be few who would recommend opening up a Hooters restaurant in Salt Lake City, and not much sense opening up a Hard Rock Cafe near a retirement community.

Some stores, like Starbucks, do well across a wide spectrum of demographics. Their stores do well in crowded cities, in college towns around the country and the Sun Belt, as well.

But take the average dollar bill in the average state and invest it in the average business and many signs point to California as the place to be. There is seed money there, sizable markets, and a variety of demographic opportunities for a new business. (In other words, you could try out a new product or business in a variety of environments.)

The state also has excellent business schools, trade schools and is ranked high in innovation and venture capital funds. All that and a cash register and what more do you need? (You need parking – that was a trick question.)

Why is California so frequently named as a business-friendly state? Here are some business-like answers:

Venture Capital

Venture capital is money invested in private companies looking to grow. These companies need funding to get a bright idea off the ground or to plan a public stock offering. A classic venture capital scenario involves a college professor who owns a patent, but does not have the money to develop the product. Often a small, high-tech company needs money to start production of a product in earnest. So, they pitch their ideas to venture capitalists for funding.

In broad strokes, venture capital is involves seed money, early stage growth, expansion or late stage growth.

And what state leads the way for venture capital? As you can imagine, with Silicon Valley representing an impressive pool of innovation in technology, California is well ahead of the rest of the pack in terms of venture capital.

The Golden State, according to the magazine Entrepreneur, saw $14 billion in venture capital investments in the United States in 2013, out of a total across the entire country of about $20 billion.

Astounding, right? The second place state, Massachusetts, saw $3.03 billion in venture capital for the same year, while New York saw $1.8 billion. Washington state came in fourth with $931.5 million and Texas was fifth with $924.1 million.

Silicon Valley, in fact, represents the lion’s share of the difference. How is this possible? Well, 31 percent of venture capital funds went to the development of software, while 15.6 percent went to biotechnology firms. The third largest grouping included industrial energy. These are, obviously, three industry sectors where California has a running head start compared to other states.

Business Schools

Just look at them! Yes, back east, there’s the Harvard School of Business, Wharton Business School at the University of Pennsylvania and the Johnson Graduate School of Management at Cornell.

But California – wow. There’s the U.C. Davis Graduate School of Management, the Paul Merage School of Business, the USC Marshall School of Business, UCLA Anderson School of Management, the Haas School of Business and the Stanford Graduate School of Business – all of them rated in the top 50 business colleges in the country.

That’s six out of the top 50 – more than its share. But you also need a wide variety of skilled labor and technical expertise to succeed in business.

When a business owner looks at a region for their start up, they frequently say they need skilled labor. What does that mean?

In today’s market, skilled labor means people who can communicate ideas using the medium of the day, which is to say the Internet.  Technical graphics and design is the modern euphonium for communication. Our businesses rely on quick messaging through Web pages, social media, and plain old-fashioned networking. A skilled workforce means computer-oriented technicians who can turn design and graphics into sales.

Customers

You also need customers and the state has many. California has 37.2 million residents, ranked No. 1 in the country followed by Texas with 25.1 million and New York with 19.3 million.

California might be said to have the widest mix of customers, as well. There are 14 million Hispanics and Latinos in California – the most of any state – with Los Angeles counting among the top cities. In addition 6.2 percent of the population is black and 13 percent are Asian, the second highest percentage behind Hawaii, where the percentage of Asians is 38.6 percent. The easiest way to travel around LA area is by metro. The Metro Trip Planner Los Angeles helps customers to set their destinations and quickly travel across the county when they need to sign contracts or to inquire for onsite details.

Innovation

And how do you rank innovation? Fast Company crunched the numbers and California ranked sixth in the country. That ranking includes coming in third in entrepreneurial activity and second in Angel List startups per million people. It was also ranked fifth in fundable investors per million residents.

Published by Kidal Delonix (750 Posts)

Kidal Delonix is a contributor to Mr. Hoffman's blog. The views and opinions are entirely his/her own and may not reflect Mr Hoffman's views.

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