Smoky Hollow High
CREA’s Erik Stiebel market insight was featured in a Los Angeles Business Journal cover story.
To access the original article: https://labusinessjournal.com/featured/smoky-hollow-high/
In recent years, a number of companies, including Picogrid, Cambium and Valar Atomics, have set up business in the Smoky Hollow district of El Segundo.
This 120-acre area is bounded by Indiana Street and Sepulveda Boulevard to the east, downtown El Segundo to the west, the Chevron oil refinery (and El Segundo Boulevard) to the south, and residential neighborhoods to the north.
Those companies join others, such as Rainmaker Technology Corp. and Rangeview, as part of a growing “hard” tech – the manufacture of physical products – scene found in Smoky Hollow.
According to Commercial Real Estate Advisors’ Erik Stiebel, there are 32 hard tech companies in El Segundo, the largest number in that sector in Los Angeles County. The City of Los Angeles had the next highest number, with 19 hard tech companies, followed by 13 in Torrance and 12 in Long Beach.
Zane Mountcastle is the chief executive of Picogrid, a company that makes hardware and software for connecting unmanned systems, such as sensors, robotics, drones, radar systems and weather stations.
“Most of our work is with the U.S. military, although some of our work is outside that as well, serving other commercial customers,” Mountcastle said.
The company moved to Smoky Hollow from Hawthorne in February of last year.
“The whole area has become a hotbed for the hard tech world, whatever that means,” he said. “It is defense and energy and industrial and manufacturing.”
Mountcastle said that SpaceX’s presence, along with the broader aerospace community of Northrop Grumman Corp. and Boeing Co., makes El Segundo a wonderful place for such businesses, one in which you can find smaller spaces for endeavors, Mountcastle said.
“If you are a small company, you don’t need 40,000 square feet in a big warehouse in Gardena,” he added. “It’s become a hub for smaller companies that are in a similar stage of technology.”
To be able to walk over to some of the other startups has been a huge advantage, he continued.
“There is a whole tech community here,” Mountcastle said. “It’s been excellent to have this broader technology scene.”
El Segundo Mayor Drew Boyles said that 98% of the city’s revenues come from businesses. That is how a town of only 5 square miles is able to have its own police and fire departments and library, because it has a vibrant economic base around it, he said.
“It is a very tight-knit community, but it’s a very unique community, because it is surrounded by this huge economic base for the entire region,” Boyles added. “When we’re not focused on our residents’ concerns we’re working on how we make business as strong and vibrant and resilient as possible in El Segundo.”
Today, many of the companies in the area are being financed with venture capital funds.
That wasn’t the situation in the past, Boyles said.
“But now we’ve got the likes of Katherine Boyle, (a general partner) with Andreessen Horowitz, we have Sequoia Capital Founders Fund, we have all these companies investing in Smoky Hollow companies, which wasn’t the case 10 years ago,” Boyles said.
Andreessen Horowitz, which is based in Menlo Park, invested in Radiant Industries last year. Radiant is behind Kaleidos, a portable 1-megawatt nuclear reactor the size of a shipping container that can produce power for 20 years on one supply of fuel. The amount of the investment was not disclosed.
El Segundo startups attracted more than $306 million in venture capital investments from January of last year through the beginning of May, according to the city.
“With all this venture capital funding that’s come into town, now you are getting people coming into this nucleus of really talented, high-energy people working at all hours, and they are working on real cool, hard problems,” Boyles added.
Among those who have founded startups in the city is Soren Monroe-Anderson, who makes munition-equipped drones at his company, Neros Technologies, Boyles said.
“You have this young group of people who care about the country and who want to bring back manufacturing and bring back intellectual property and creativity and innovation and want to continue to win,” Boyles said.
“But it’s also being fueled by things like the Ukraine war. This same company, Neros, is actually creating drones that will be provided to warfighters in Ukraine,” he added. “It’s really cool to see; it’s really cool to see.”
Nate Monroe, senior product manager for Cambium, poses by a load frame test machine.
U.S. military is a big customer
Isaiah Taylor founded Valar Atomics in June of last year in Idaho with the mission of making energy cheaper by pulling oil and gas out of the air with nuclear fission.
But soon thereafter he moved to the Smoky Hollow district.
“Within L.A., I did not know about El Segundo before picking it,” said Taylor, the chief executive of Valar. “But I met Augustus (Doricko, chief executive of Rainmaker Technology Corp.) and I met Cam Schiller (chief executive of Rangeview). It was immediately clear that there was this crazy startup community here. We do bonfires on the beach all the time; our engineers all know each other.”
There is a lot of camaraderie between the companies in Smoky Hollow, because they all feel like they are pulling in the same direction, Taylor said.
“We are not competitive with each other, as we are in different industries,” Taylor added. “But you know, we’ll have our engineers run over to the Rainmaker lab and ask their chemists for advice on something.”
It was clear to him that Southern California’s storied aerospace history, combined with SpaceX in nearby Hawthorne taking that into the next generation, made for a real ecosystem in the region, Taylor continued, adding, “El Segundo is special subculture within that.”
Nate Monroe, senior product manager at Cambium, agrees.
“There is a whole ecosystem of startups here that entrepreneurs are moving to for the work that it provides in defense tech,” Monroe said.
Cambium creates materials and composites for defense applications.
“If you think of things that go really fast, like rockets or missiles, they get really hot, and so the types of resins and materials that we’re making can actually withstand that type of temperature,” Monroe said.
Taking advantage of talent pool
Cambium has been in El Segundo for about a year. The company, which was founded in 2019, operated in stealth mode during the pandemic.
“We’ve been in this building for about a year and we’ve already outgrown it, and so we are moving down the street,” Monroe said.
While Cambium has not shared information with any of the other startups in Smoky Hollow, Monroe did say there is a sharing of employees.
“The talent moves from company to company, so there is that part of it,” he said. “There is a talent pool here because you have the big companies like Northrop Grumman, RTX (formerly Raytheon Technologies Corp.), Boeing and SpaceX as well. You have that whole SpaceX effect of all the companies that came out of (that company) and now are starting up here in El Segundo. It is a good high-tech community.”
Barbara Voss, deputy city manager of El Segundo, said the city began to pay attention to what was coming next in aerospace.
It wanted to have the big defense contractors within its borders, but also found that the new companies coming in were partnering with the defense companies and the U.S. Space Force to grow their businesses.
“It creates jobs and builds the economy and diversifies it in a way that we have these small startups as well as the big defense contractors,” Voss said.
Mayor Pro Tem Chris Pimentel said that doing hard tech is labor intensive and is not four guys coming up with a line of code to figure out a better way to do one thing.
“They need to buy stuff, make stuff,” Pimentel said. “They need a foundry or a forge or molding equipment. We have a unique spot here in El Segundo, as we are zoned industrial in a lot of places where you can do those kinds of things where you cannot do it if you are four guys in an apartment.”
But on the other hand, the city was not letting just any business move in, he added.
The city would take exception to a company building munitions across from a school, for example, Pimentel said. It would then tell the company it wouldn’t be able to do its work in that location, but would help find an appropriate place to do it, as opposed to a straight “no,” can’t do it, call somebody else, he continued.
“We work for solutions for people and find the right spot for them,” Pimentel said.
Added Voss: “If the answer is no, we step forward and find out how to make it yes.”