When Snapchat parent company Snap went public in a $3.4 billion IPO offering in March, it proved yet again what a growing number of venture capitalists have been betting on for months: Los Angeles, the land of Hollywood movie stars and sunkissed beaches, had become a launching pad for start-ups after decades of being a poor relation to Silicon Valley.

People take pictures in front of the Snap headquarters on the strand at Venice Beach in Los Angeles. Patrick Fallon | Bloomberg | Getty Images

An enviable talent pool

The LA area's newfound popularity among venture capitalists is fueled in large part by an economy that has emerged from a three-decade transformation, driven in some measure by the decline of key industries, like aerospace manufacturing and finance, where employment is a result of mergers and relocations. The region, however, still graduates more than 20,000 engineers each year from such highly regarded universities as the California Institute of Technology, UCLA and the University of Southern California, says Chris Rico, director of innovation for the Los Angeles County Economic Development Corp. That's helped create new businesses, he says, such as billionaire entrepreneur Elon Musk's SpaceX space transport company and his plan to transport people through the high-speed Hyperloop system of tubes. "There is a lot of cutting-edge technology going on in LA," says billionaire surgeon and entrepreneur Patrick Soon-Shiong, who has invested more than $400 million in high-tech and health projects and companies through his nonprofit NantHealth Foundation. "With UCLA, USC, CalTech, the Jet Propulsion Lab, the talent here is amazing."

A champion for LA's entrepreneurs: Patrick Soon-Shiong, billionaire surgeon and founder of NantHealth Foundation Ringo Chiu

His NantHealth, which went public last year in a $96 billion IPO, sells software and medical records to hospitals and plans to soon commercially sell software that analyzes a patient's DNA to determine the best treatment for critical illnesses.

Strategic location

LA is also home to the Los Angeles and Long Beach ports, two of the 10 largest in the United States, giving it a huge advantage to companies moving products to consumers, says Rico. And there is always Hollywood, which is scrambling to devise new ways to deliver its content as consumers increasingly are using Netflix or Amazon and bypassing TV and movie theaters. One result has been an explosion of tech companies making virtual reality technology and content. In 2014, Facebook bought VR game company and goggle maker Oculus for $2 billion in cash and stock. Walt Disney, Fox's BSkyB British satellite company and other media companies have invested $100.2 million in VR camera maker and film studio Jaunt.

There is a lot of cutting-edge technology going on in LA. With UCLA, USC, CalTech, the Jet Propulsion Lab, the talent here is amazing. Patrick Soon-Shiong billionaire surgeon and entrepreneur

Hollywood power players have also helped finance new technologies. Music executive Jimmy Iovine and rapper Andre Young (aka Dr. Dre) gave $70 million last year to set up an undergraduate curriculum at USC to encourage a new crop of innovators. Last year a trio of undergraduates won a $10,000 prize to help them develop a new augmented reality headset.

Mayor of Los Angeles Eric Garcetti as he sits, hands in the air, behind the wheel in a self-driving, autonomous car at a car show in California. Gary Leonard | Corbis | Getty Images

LA Mayor Eric Garcetti has made encouragement of entrepreneurs a key plank of his administration's platform since his 2013 election, which has helped companies get started. One of his first moves was to make more than 1,100 of the city's data sets open to the public, allowing start-ups to move more quickly through the maze of bureaucracy that stifle many of them. He also established the Entrepreneurs in Residence program to connect entrepreneurs with city business leaders. "LA is cementing its own path and creating its own destiny," says Garcetti. "This city has a rich legacy of industries like entertainment and aerospace, and now we're seeing our tech sector take off. That's because we made it easier for tech companies to open and expand in LA."

Building a start-up ecosystem