THE BLOG
09/06/2012 01:25 pm ET Updated Nov 06, 2012

A Solution to the L.A. Unemployment Crisis

Los Angeles is a glamorous and high profile locale to many, yet it's developed a bit of a bad reputation for those on the job market. In fact, last month unemployment in L.A. and Long Beach was posted at 13.1 percent, higher than both the national and statewide averages. It's understandable, then, that many new entrepreneurs looking to build a successful business may shy away from the L.A. scene and instead turn to locations with a more secure economy.

Bad reputation aside, I've learned firsthand that it is very possible for startups to find success in L.A. We have some of the best educational institutions in the country, which provides us with a very skilled talent base. Though many see the high unemployment as a hindrance and the sign of a weak economy, there can be some good found in it as well. With high unemployment, there is more talent available in the area actively looking for work. I personally have found that one of the biggest advantages of my company, Ciplex, being located in L.A. is that whenever we are rapidly hiring, anytime we need new talent it's there. And it's there on a mass scale. This situation is very different from being in Silicon Valley, where everyone is competing for one person.

Though it's certainly possible to grow a successful business and lessen unemployment in L.A., more needs to be done to improve the current outlook. I recently spoke with L.A.'s deputy mayor, Matt Karatz, and StartEngine's Howard Marks on this issue, and here's what I found out.

L.A.'s Problem and How We Begin to Fix It
One might wonder why L.A. is having such an unemployment crisis when it's such a "cool" place to be. Though Karatz has only been in his position as deputy mayor of L.A. for about 15 months, he's already realized that L.A. has placed a decade's worth of barriers on businesses that only hinders their ability to prosper.

For one, the entitlement process for building an office and creating new jobs at present can be very difficult to get through, especially when comparing it to other cities. Also, the tax structure in L.A. is far more onerous than in many surrounding cities. Thus, many businesses opt to establish themselves outside of L.A. in order to avoid that hassle.

However, Karatz and Mayor Antonio R. Villaraigosa are currently working to solve these issues. Though these aren't things that can be transformed quickly, they are working to revamp how the city handles entitlements by consolidating certain departments and processes in order to make it easier for people to accomplish this task. In addition, the tax structure is being reformed, which will make L.A. a much more attractive location to start a business and bring jobs to.

To make L.A. even more attractive to businesses, Karatz referenced Bloomberg's success with New York City. One of the great things Bloomberg has done for NYC is promote the industry unbelievably well so people want to be a part of it. And that's what Karatz and his team are looking to do for L.A..

Accelerators Contribute to the Solution
Government officials aren't the only ones trying to solve L.A.'s unemployment crisis. Accelerators are also doing their part. StartEngine has been an L.A.-focused accelerator since January 2012 and currently has 35 startups in its portfolio. Marks said each startup averages about 20 hires during its first three years. This means that within three years they will have created a total of 700 additional jobs in L.A. And these aren't just any kind of jobs, these jobs pay upwards of $80K with benefits and stock options. And if the startups are sold or go public, there will be even more employment opportunities.

The best part is, there are dozens of other accelerators in L.A. modeled similarly to StartEngine. Thus, the employment opportunities are truly becoming endless here.

Making Progress
Repairing a system that has seen decades of damage won't be done overnight or by any one individual, but progress is being made. Recently, the 25 companies represented at the Mayor's Council on Innovation and Industry met and each company announced how many job openings they have. Collectively, they are looking to fill 500 positions.

With community leaders who are clearly very receptive to change and doing whatever it takes to ensure that L.A. overcomes the unemployment crisis, the possibilities for L.A. businesses will continue to grow. In L.A. there is a level of talent and opportunity that can't be found anywhere else in the world. And it's only getting stronger.