Broad Economic Base Creates Options, Cushions Drop.

RIGHT up until the recent gyrations of the stock market and the broad plummeting of valuations in the technology sector, when one thought of venture capital investment, it was reasonable to focus on Silicon Valley as the hotbed of activity.

Things change.

According to a recently released report from the Los Angeles Regional Technology Alliance, "greater Los Angeles now has the most diverse venture capital investments of any comparable region in the country."

However, LARTA's "Sand Dollar Report" cautions, there's still no core competency here - no "safe bet" for investors, who can point to a single tech sector and say, "L.A. does that better than anyone - or anywhere - else."

And don't count on Hollywood's global reputation to smooth over any investor hesitancy: "Entertainment is only 4 percent of output, in terms of product developed here," according to LARTA's CEO Rohit K. Shukla.

He added that he expected one technological breakthrough - secure video on demand - to start rolling out by summer, but added, "I'm not sure what that does for the whole base."

Lynda Keeler knows first hand of the gap between L.A.'s Hollywood-driven global perception and its on-the-ground investment realities. A former vice president and general manager for Sony's Columbia TriStar Interactive, she's now managing director for Redleaf Los Angeles, the local beachhead of the international Redleaf Group Inc., which provides services and capital for pre-seed and seed-stage technology companies.

Hollywood tech convergence

Keeler said the regional economy as a whole is in a state of flux that extends to the reasonably stable entertainment industry, now moving to digital in both shooting format and delivery. That shift will give rise to a host of companies, with specialties and products serving motion capture to post-production, she said.

While none of these technologies has to do with content, per se, Keeler noted, as far as investing or partnering in the hardware side of entertainment, "at Sony, we'd be almost skeptical of any company not based (in Los Angeles)."

Hollywood isn't the only one spinning out companies. Keeler cited the region's aerospace hub as a primarily public-funded sector that leaves expertise and new initiatives in its wake, with Hughes Electronics Corp.'s DirecTV as an example.

The list of technologies emerging regionally includes the design and manufacture of convergent devices (allowing users to move information easily from various platforms, wired or otherwise), optics and biotechnology - especially given the research being done at places like the USC and UCLA's teaching hospitals, as well as City of Hope.

Also counted among the new technologies that have a leg up in the region are the manufacture of even higher speed chips, video compression software and devices piggybacking on the coming video-on-demand systems.

Bridget Karlin, senior director at Redleaf's L.A. office, said the region still lags Silicon Valley in many respects. "They've build their own ecosystem in the Bay Area. We haven't built that in Southern California," she said.

By arguing for a broader regional definition - one that takes in San Diego - and adding wireless technologies to the list of emerging regional specialties, she said the area "can build its own ecosystem" of capital, entrepreneurs and tech transfer offices.

Blue-chip anchors

Frank Creer, manager at Zone Ventures, also likes the broader regional approach. He pointed to companies like Irvine-based broadband provider Broadcom Corp. and San Diego's wireless communication kingpin, Qualcomm Inc. as two blue chips that undergird "a hotbed for new start-up technologies."

"Wireless," he said, "is going to be a huge Southern California play at some time."

Dennis Miller, general partner at Constellation Ventures, concurred, citing "a well developed engineering and technology base" that may yet find common cause with the better-known Hollywood products. He asserted that "the dynamics of intellectual property and distribution" is a coming engine for growth, both with digital delivery and watermarking solutions. "L.A. has demonstrated some core competency," he said.