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The West Coast of the United States is a dynamic region with much to offer prospective investors. With a combined Gross State Product (GSP) of an estimated $3.1 trillion, the 12 western United States equal approximately 24% of the Gross Domestic Product (GDP) of the United States: a market place over 14 times the size of Israel.
The West Coast is also geographically large, encompassing an area over 127 times the size of Israel in square kilometers. Because of this massive size, both economically and geographically, the West Coast houses some of America's most innovative and important metropolitan centers. Los Angeles, Denver, Seattle, Portland, Las Vegas, San Francisco, San Jose, Palo Alto and Phoenix have all served as hubs for the majority of region's 84 Fortune 500 companies as well as thousands of small and medium businesses. Boasting a wide range of industries and fertile ground for investment, the West Coast has been the point of origin for many advancements in aero-space engineering, micro chip development, renewable energy, medical technology, green technology, entertainment, new media, agriculture, computer programming, transportation, and resource conservation.
Many Israeli companies have been met with great success in the business environment of the West Coast of America and, especially, California. The state alone comprises over 50% of the West’s population, wealth, and top companies as well as over 80% of the regions exports to Israel. As one of the 10 largest economies in the world by GDP, California, and by extension the West Coast, are prime markets for Israeli companies of all sizes. While there are several examples of this symbiotic relationship probably the most well-known centers on solar panels. When Israeli firm Luz was looking for a place to build the world's first commercial solar power plant they had two criteria: a sunny climate and a positive business atmosphere. They found both in the deserts of California.
The Western U.S.-- especially Silicon Valley, San Diego, San Francisco, and Los Angeles-- offers many sources for financing such as venture capital funds, private equity, investment banks, family offices and institutional investors. Many multi-national companies in the fields of communication, electronics, life sciences, security networks, environmental technology and consumer products have chosen the U.S. as their headquarters. The fact that Israel has gained international recognition as a leading center for business entrepreneurship and technological innovation may facilitate access to investors and multinational companies. Nevertheless, the competition for investor attention is heated and requires preparation and familiarity with the domestic business culture.
Start-up companies seeking to raise capital or to build partnerships with American institutions should keep in mind the following information:
- Some U.S. funds and financial institutions will not respond to requests from companies that have no business presence in the U.S.
- Many American investors may want to see, as a precondition, that Israeli funds have already invested in the Israeli company. American VC's with no business presence in Israel may be willing to invest in Israeli start- ups in collaboration with an Israeli VC.
- A company's stage of development, its technological feasibility and its potential for sales are central factors for fundraising and finding strategic partners. In some cases, American VCs may refrain from considering requests from companies that have not yet reached the revenue stage.
For these reasons, Israeli start-ups may also consider finding an "angel investor" who may be more willing to examine smaller requests for funding. There are many angel investors clubs on the West Coast such as the European American Angel Investors and many are listed with the Angel Investor Network.
Additional factors to keep in mind:
- Protection of intellectual property: Start-up companies may seek legal advice to make sure their intellectual property rights (IPR) are properly secured via a patent, copyright, or other legal devices. The lack of protection may discourage investment.
- Management: U.S. investors carefully examine a company's management team to ensure that a start-up is run by experienced directors.
- Marketing: Your company should have a Web site and presentation materials written in grammatically correct English. Also, your product packaging should meet U.S. expectations and specifications.
Companies should consider whether it would suit their goals more to raise money either through venture capital funds, whose aim is to go public or find a lucrative exit opportunity, or to keep the option of independent development by going with commercial banks, investment banks or private investors.
Establishing an office or operation in California or other locales in the Western U.S. might be an expensive undertaking, but is worth consideration. There are a number of places to turn for assistance. Law offices, accounting firms and business consultants can help you find a location and register your company. State economic development offices often offer grants and other benefits to foreign companies who establish a business presence in their area. Some of these benefits are geared to specific technology sectors.
The climate of the West Coast is diverse: frozen tundra, tropical forests, deserts, swamps, mountains, and plains populate the region. Because of the variety of landscapes, many states, and parts of states, have very different water needs. These needs range from water scarcity, water management, and industrial pollution to water security, treatment, efficiency, and water storage.
The largest water markets in the country are California, Idaho, Colorado, and Montana respectively; totaling 45% of all irrigation in the United States. Because western states are such heavy water users, water systems and companies throughout the West Coast have developed innovative approaches to deal with the unique water constraints of the region. While water issues are often ubiquitous, key issues tend to be regional. In regards to water needs, the most parallel region to Israel in the U.S. is the southwest. Its large deserts make drought common place and require high degrees of water efficiency and management. However, many communities, farms and businesses are still left with limited alternative supplies.
California is currently the most water intensive state in the country. Large areas of farm land and major cities regularly tax California’s water supply. In an effort to remedy its water predicament, California erected the State Water Project nearly 50 years ago. The project still is the largest of its kind in the country and provides water for over 750,000 acres of farmland and 25 million people. However, California and many other states still face water shortage issues brought on by drought, increasing desertification, pollution and population expansion.
With a growing focus on increasing population and energy resource depletion, the West Coast is directing significant investment toward researching renewable energy possibilities. Main investments are oriented towards solutions that mitigate climate change, decrease scarcity of food, water and other commodities, and establish energy independence. Cleantech advancements stemming from the West Coast include: electric transportation, energy storage, solar power and the conversion of CO2 into alternative fuel.
The West Coast generates its electricity from a patchwork of renewable and non-renewable energy types. This is primarily the result of a strong environmental movement and supporting legislation in the majority of states in the region. California's Renewable Portfolio Standard (RPS) is one of the most ambitious renewable energy standards in the country and mandates that 33% of electricity in the state must be generated from renewable sources by 2020. As a result, California is first in the United States for non-hydroelectric renewable energy generation while still being one of the largest hydroelectric producers in the country. California has also invested heavily in solar and wind power while still importing more energy than any other state mainly from Oregon through the largest electricity transmission program in America.
There are a variety of sources and natural environments in the West Coast ideal for alternative energy generation. Geothermal, while utilized in Northern California, has notable untaped potential in Nevada and Oregon. Southern California, Arizona, Nevada and Utah are all prime environments for solar investments and have been very receptive to such projects. Wind power is used in nearly every state in the region and is heavily concentrated in California, Oregon and Washington. Opportunities exist for wave power along the regions with extensive coast line as well as biomass from the large forests and farmlands in states bordering the Pacific Ocean.
The Western U.S. has 6 out of the top 10 states for renewable energy capacity. These states include Washington, Idaho, California, Oregon, Montana, and Arizona. Washington, California and Oregon are also listed in the top five states for renewable energy in the United States by total megawatts generated from renewable energy. In terms of total power generation many states still rely on coal and natural gas while Oregon, Washington and Idaho are the only 3 states in the United States that employ renewable hydroelectric power as their primary source of electricity.
Telecommunications networks within the United States are relatively well maintained and wide spread. Around major population centers most citizens enjoy cell phone coverage, land lines, digital television and broadband internet access. The United States boasts 245.2 million internet users putting it at number 2 in the world. Approximately 56 million of those users are in the West Coast region. Due to the large amount of technology development companies in the region, demand for fiber optic line and connections is substantial and growing.
The majority of the region receives reliable cellular telephone coverage from one of 4 major providers: Verizon, AT&T, Sprint and T-Mobile. Located in Washington, T-mobile is the only one of these providers based in the West Coast. Approximately 72 million people have cell phones in the Western United States, or a little bit more. This number has outpaced the roughly 33 million people who use land based phone lines in the region. Cell phones and smart phones primarily operate on 2G and 3G networks and are quickly expanding to 4G networks with Sprint being the first major company to launch a 4G network. Additionally, technology firms such as Apple and Google are involved in software and hardware production for the US mobile market such as the Apple iPhone and iOS4 as well as the Google Android operating system. Accordingly, smart phones are growing in market share as newer network generations come online. The top three smart phones in the Western United States are the Black Berry, iPhone and Droid.
AT&T and Verizon Wireless have both made forays into the television and internet markets but struggle against telecommunications giants Time Warner Cable, Charter and Cox Cable which operate nationally, based outside of the West Coast region. Dish Network in Colorado and DirectTV Group in Southern California are the nation's top satellite television providers and operate nationally. Qwest Communications, based in Colorado, only provides telecommunications services to more inland states such as Colorado, Wyoming and Montana.
Major film and television studios continue to push the envelope by placing demands on the telecommunications networks in the West Coast. The major television studios such as CBS, ABC, NBC, FOX and CW are well along the way to switching their programing to high definition (HD) and placing many of their television programs online. All television stations in the united States broadcast in digital. This total increase for demand of larger and larger amounts of data at a greater speeds with more users per home has led to the growth of broadband access and wireless home networks for many consumers. The United States controls many domain host addresses such as .us, .com, .edu, .gov, .mil, .gov, and .net.
Sirius XM Radio Incorporated is the only major satellite radio company in the United States. Land based radio stations are often operated by larger conglomerates including, CBS Radio – Infinity Broadcasting, Live Nation, COX radio, Clear Channel and ABC radio to name a few. Stations broadcast in FM and AM as well as HD radio which, much like HD television, is still coming online.
Recently states have been encouraged to improve their telecommunications networks. In September 2010, Colorado received a $100 million grant from the federal government to upgrade its broadband access across the state and has partnered with IBM. The government body that primarily oversees telecommunications for the United States is the Federal Communications Commission (FCC). The FCC controls all access to all frequencies in the United States and, in September of 2010, released new frequencies for use with wireless internet capable of broadcasting for thousands of meters.
The US Department of Homeland Security (DHS) was established in 2002 by then President George W. Bush and is based in Washington D.C. This agency oversees over 30 smaller agencies which handle everything from natural disasters to terrorist attacks for the entire United States. Agencies such as the Federal Bureau of Investigation (FBI), Central Intelligence Agency (CIA), local police departments, state and city emergency management groups and local fire departments generally operate outside of the direct control of DHS. However, these agencies often work together to address serious threats and disasters.
Homeland security encompasses a number of areas that can be exploited by incoming companies ranging from security, medical, infrastructure, transportation, sanitation, energy, digital services and many more peripheral sectors.
One of the key areas for homeland security is ports of entry and transportation to population centers hosting the bulk of the region’s 66 million person population. The West Coast has several major cities with large seaports and airports. Los Angeles, Long Beach, San Diego, San Francisco, Salt Lake City, Seattle, Portland, Phoenix, Denver and Las Vegas all are prime targets for attacks. The Ports of Los Angeles and Long Beach respectively are the two largest ports in the United States by volume and rank 16th and 18th in the world in terms of shipping volume. Additional major seaports in the area also include Seattle, Oakland, San Francisco, Honolulu, Portland and Anchorage. Each one of these ports has a police force and security inspections teams.
Major Airports in the region include Los Angeles International Airport (LAX), Denver International Airport (DEN), McCarran International Airport in Las Vegas (LAS), Phoenix Sky Harbor International Airport (PHX), San Francisco International Airport (SFO), Seattle-Tacoma International Airport (SEA), Salt Lake City International Airport (SLC), San Diego International Airport (SAN) and Portland International Airport (PDX). Chief amongst these is LAX; it is the third busiest airport in the country, the busiest airport in the region and the sixth busiest airport in the world by passenger traffic with over 59 million passengers using the airport each year.
In addition to ports and major infrastructure security DHS also works with other government agencies to secure the cyber space of the United States including the Air Force, Department of Defense Cyber Command and the National Security Agency. The primary group run by the department of Homeland Security is the United States Computer Emergency Readiness Team (CERT) based in Washington D.C. However, many major security firms and corporations are based in the West Coast Region such as Boeing and Northrop Grumman often work on high security projects requiring a significant amount of digital security. Incoming companies may face competition from regional digital security giant Symantec based in Northern California.
The Department of Homeland Security also works with Border Patrol and the US Coast Guard to secure the extensive coast line of the West Coast as well as the nearly 700 mile long border region with Mexico, the approximately 900 mile long border with Canada and several thousand miles of coast line.
Various infrastructure elements also require security from terrorism and attack such as California’s 4 nuclear power plants, bridges, freeways, skyscrapers, water reservoirs and a wide variety of other infrastructure elements.
The federal government does contribute partially to homeland security operations in the Western United States directly. In August of 2010, nearly $70 million from federal grants were allocated to enhancing regional preparedness in Southern California via local law enforcement to protect its residents, economy and infrastructure.
The premiere players in information technology and media for the United States are located in two main areas: the Silicon Valley in Northern California and Los Angeles in Southern California.
The United States and, more specifically the West Coast, is a global leader in information technology and computing. Major corporations such as Hewlett-Packard, Apple, Cisco, Intel, Google, Oracle, Yahoo!, Sun Microsystems and Symantic all call Northern California home. All combined, these six Fortune 500 companies earned over 220 billion dollars in 2009 making them some of the top companies in the country for information technology. Emerging web-based companies like Facebook and eBay often choose Silicon Valley as their base of operations because of the competitive atmosphere and the readily available skilled work force. Northern California is also home to major players outside of the Fortune 500 including acclaimed animation studio Pixar which is a subsidiary of Walt Disney Studios. However, Northern California is not the only area where technology has found fertile ground. Heavy hitters such as Microsoft and Amazon are both located in the Washington while communications giant Qualcomm is based in San Diego.
What the northern part of the region is to technological innovation Los Angeles is to entertainment. Whether in film or television many of the world’s top entertainment companies have their roots in Los Angeles. The top six film studios in the U.S. are 20th Century Fox, Universal Pictures, Warner Brothers, Sony Pictures, Walt Disney Studios and Paramount. Each of these studios has main offices and sound stages in the Los Angeles area. Additionally, every one of the major national TV networks and most of the cable networks for the country are based in the Los Angeles area. ABC, FOX, CBS, NBC and the CW all have relationships with or are owned by film studios. Furthermore, they are all headquartered in the greater Los Angeles area. Tax incentives and technological advances have spread out the TV and film market, but the majority of U.S. physical production is still based in California. Rich in entertainment, history the region plays host to many talent agencies such as CAA, WME, UTA and ICM to facilitate the large demand for talent in the cities many entertainment companies.
Video games are booming on the West Coast. Major game developers Electronic Arts and Activision Blizzard are based in Los Angeles, where once a year the E3 Conference takes over LA to explore the next generation of gaming. In addition to these major studios many smaller studios have been able to achieve great success including Santa Monica Studios headquartered in Santa Monica, California.
Music is also a large contributor to the economy of the West Coast. History making companies such as Universal, Warner Music Group, Sony and EMI all have offices or headquarters in Los Angeles, San Francisco, Seattle and/or Portland. Apple has also made their mark on the music industry with iTunes, the world most popular online music store.
Because the West Coast is such a nexus for entertainment and technology it is essential to be fully immersed in these industries before entering them. Regulations imposed by government agencies can be difficult to navigate and can drastically effect the sales of music, films, gaming and television programs. The Federal Communications Commission generally oversees entertainment regulation but other organizations such as the Motion picture Association of America also play a significant role in approving new products.
With an estimated 70 million people and an average Gross State Product per Capita of approximately $47,000 the population in the Western United States is slightly wealthier on average than the population of the United States as a whole. The disposable income in the Western United States ranges from $42,000 (est) in Wyoming to $28,000 (est) in Utah. The West Coast Region is composed of many ethnic groups, income levels and buying habits. Because of its size and composition, it should be viewed as a group of smaller markets with different buying patterns and tastes rather than one large singular market. These attributes coupled with a large market size allow the Western United States to consume large amounts of goods and services and make it fertile ground for a diverse spectrum of products.
Since the U.S. is a highly competitive market where companies from all over the world compete for market share success is dependent on a number of traits including flexibility, ongoing commitment and high visibility. Once orders are received, regardless of their size, they must be shipped according to buyers' product specifications and delivery schedules.
American consumers are notoriously fickle and often have high expectations for their goods and services and are often reluctant to try new brands. Consumer goods have been rebounding ever since a significant dip due to the recession in December of 2008. Retail generally experiences a spike annually in November in December of each year due to Christmas Shopping. The most significant shopping day for Americans is the Friday following Thanksgiving dubbed Black Friday. Stores generally open early, close late and offer sales on this day to encourage spending on consumer goods.
Consumer products are sold in the U.S. through one or more of the following intermediaries:
Representatives: Representatives work on a commission basis, showing manufacturers' lines and products in their showroom(s), at trade shows, and during visits to retail clients. Representatives may specialize: some call on large-volume retailers, work with independent shops, or with manufacturers and re-labelers.
Importers: Importers buy for resale and act as a means of distribution. They do not work on commission: as distributors, they mark up the merchandise and absorb the cost of distribution from their mark- up.
Israel Buying Offices: Several major U.S. retail chains and mail order catalogs are represented by Israel-based buying offices. These offices provide an easy way to reach the market without a full-time presence. Orders transacted through these buying offices are for large "private-label" programs.
Brokers: People who work as brokers play an important part in bringing the products to the market place in the food sector. They function as an independent sales force which performs the essential sales function and related services including negotiating the best deal and promotion for the customer, following up on orders to ensure delivery of product, ensuring that the product is properly displayed, monitoring the sell- through, arranging for product demonstrations, etc. Brokers who work with retailers to help sell the product and services are retained by a commission fee.
Trade Shows provide excellent opportunities for networking and presenting products to buyers, importers, representatives. In fashion accessory and jewelry sectors independent retailers will often event place orders at these trade events. Mass market retailers, buyers for chain stores and department stores also visit these exhibitions to meet with suppliers, search for new products and spot new market trends.