(Bloomberg) — Tim Berry was working as an engineer at Space Exploration Technologies Corp. earlier this year when he started looking for a new job. He found one less than a mile from his old employer’s front door.
Berry is in Hawthorne, California, a largely working-class city of 88,000 that’s about a 10-minute drive from the Los Angeles airport. He’s one of a small army of aerospace professionals who have descended on Hawthorne in recent years. Drawn by Elon Musk’s SpaceX, the most valuable startup in the US, many highly skilled engineers have stayed put because of the city’s cheap rent and burgeoning aerospace startup scene.
Berry’s new employer is Launcher, a company that helps get satellites into orbit at low cost. He says he wouldn’t have taken the job if it had involved traveling too much further. “I’m not a big fan of the East Coast or New York, sorry,” Berry says. Instead he kept his commute entirely intact. “I was super happy to actually be able to still work in Hawthorne.”
Local officials are pleased, if a bit surprised, by the city’s turn as a startup hub. “Hawthorne has a lot to offer,” says Councilman David Patterson. It’s close to the vibrant aerospace scene in Los Angeles, which houses many startups of its own, but it isn’t as cripplingly expensive. There was an effort a few years ago to create an accelerator in Hawthorne, Patterson says, but the idea never got beyond the discussion stage.
It turns out the city didn’t need one. For seven of the past 10 years, Musk’s companies, SpaceX and tunneling venture Boring Co., were the only startups in the city to attract venture capital. By 2020, startups in Hawthorne not owned by Musk brought in a respectable $105.2 million. And last year, those startups attracted $356.7 million, according to research firm PitchBook. The city is on pace to double that number this year.
Many cities have tried to create their own versions of Silicon Valley, some more successfully than others. Buzzy destinations like Austin, Texas—the recently adopted home of Musk—and Miami have attracted fleets of software developers during the pandemic’s remote work explosion. (San Francisco still lays claim to Twitter Inc., the Tesla Inc. billionaire’s latest plaything.) But Hawthorne is a different kind of boomtown. Startups in the city haven’t been buoyed by the ease of Zoom meetings so much as by the ready availability of actual physical space—that, and a surplus of the kinds of people who know how to use mills, lathes and 3D printers.
It’s a good time to be a hub for high-tech manufacturing. As stock markets stumble, less tangible inventions like cryptocurrencies have faced a reckoning. And many engineers and coders increasingly don’t want to only manipulate ones and zeros or sell targeted ads—they’re looking to create real objects. Just as the rise of software-based companies like Google and Facebook in the early 2000s led to a roughly two-decade era when software ventures became the dominant type of startup, the success of SpaceX and other hardware companies is helping change entrepreneurial ambitions. Venture capitalist Marc Andreessen summed up the industrial fervor with his 2020 cri de coeur, “It’s time to build.” In recent years, venture capitalist and engineering attention alike has gravitated toward physical inventions—especially airborne ones.
Of course, in Hawthorne, as with any success story, there’s an uncomfortable side, too. Familiar themes of gentrification and inequality gnaw at the edges, even as the city is poised for tremendous growth.
Named for novelist Nathaniel Hawthorne, the city holds an early claim to fame as the childhood home of the Beach Boys. It was also the sometime residence of Jim Thorpe, the first Native American to win an Olympic gold medal, and also to Marilyn Monroe (then Norma Jeane Baker). The greater Los Angeles area has a storied history of aeronautics innovation, and Hawthorne’s first taste of aerospace stardom came in 1939, when aviation pioneer Jack Northrop founded his company there. Musk’s SpaceX, as a scrappy startup, moved into former Northrop Corp. buildings in 2008.
SpaceX quickly became an established member of the space-industrial complex, with facilities across the country and a critical role in the celestial ambitions of the US. In 2016, a few engineers left the company but stayed in neighboring El Segundo, California, founding Second Order Effects, a consulting firm to help other startups as well as bigger companies. The creation of Second Order Effects helped spark the startup scene in the region, says Shaun Arora of MiLA Capital Advisors LLC, who has been backing firms in the area for years.
Arora says he’s seen an uptick in the number of startups in Hawthorne in the past few years. It helps, he says, that companies run by Musk tend to burn employees out, even while inspiring them. “SpaceX teaches people that hard work and optimism can make the impossible possible,” Arora says. At the same time, “many alums I speak with say that while the company purpose was compelling, they felt professionally under-appreciated.”
The talent pool of rocket-savvy engineers seeded by SpaceX was a major draw for Max Haot, the founder of Launcher, who decided to locate his company in Hawthorne after considering other places like Austin, New Orleans and Pasadena, California. Haot has hired at least 14 former SpaceX employees for his Hawthorne-based team of about 55 people.
Another perk: Hawthorne is cheap. Launcher’s 24,000-square-foot facility was “so much more affordable” than space in slightly fancier nearby towns like El Segundo, Haot says. Plus, while those neighboring cities may house big warehouses, landlords there are busy refurbishing them for higher-rent uses, more suitable for software-based companies. Haot looked at some warehouses that were once wired for 1,000 or 2,000 amps of electrical power, and which, after renovation, were only able to handle a few hundred amps. That’s fine for most businesses but not for the orbit startup, where engineers are working on electricity-intensive projects like figuring out how to power rockets and running multiple 3D printers at once.
Joel Ifill, founder of drone delivery company Dash Systems, is also taking advantage of Hawthorne’s low rents. He’s paying well below $2 a square foot. Ifill’s business operates just north of SpaceX, out of a hangar at Hawthorne Municipal Airport.
“Hangar space is usually some of the cheapest square footage you’ll find in major cities,” he says. In its cavernous digs, Dash has room for its Cessna 208B Grand Caravan turboprop plane, desks, a small engineering shop and an area with a carpet, a coffee table and a sofa, perfect for watching the steady stream of small aircraft taking off and landing. (That includes occasional sightings of Musk’s jet.)
Ifill doesn’t currently employ any SpaceX alumni, but he found plenty of other big companies in the area to choose from. Those include Lockheed Martin Corp., Boeing Co. and Northrop Grumman Corp., all with offices in El Segundo. “We have people from Tesla, Virgin Galactic, WET Design,” he says, referring to a water-engineering company based in Sun Valley, 30 miles north.
Some Hawthorne startups have little to do with rockets or satellites. Ring, the next-generation doorbell company now owned by Amazon.com Inc., is based in the city. So is Stellar Pizza, an automated pie company run by former SpaceX engineers.
Most, however, take a space tack. Another example is Venturi Astrolab Inc., based out of a former bus-bench factory just south of SpaceX. Venturi makes rovers that founder Jaret Matthews hopes will be selected for NASA’s future Artemis lunar missions.
“We’re building big robots,” Matthews says. “We need a lot of space to test them.” That includes indoors, as well as a covered area behind the building strewn with basalt to better simulate moon conditions. Besides himself, Matthews’s team includes several former SpaceX hands.
Downtown Hawthorne doesn’t yet look like a thriving business hub. Its main drag features car dealerships, rundown storefronts and a 24-hour laundromat. That’s where Luis Castaneda, a part-time handyman, was sitting on a recent afternoon. He has noticed more upscale workers in town, he says, and blames them for rising prices. The room he rents costs $700 a month, he says, compared to $400 for a similar room 10 years ago, when he first arrived in the city.
Alejandra Alarcon, 29, grew up in Hawthorne, in a house she, her mother, her brother and grandmother shared. Almost every house on the block had a similar demographic mix. Now, she says, newcomers’ households typically contain a couple with a dog and no children. She admits to mixed feelings about SpaceX, its offshoots and the ensuing prosperity for the city.
“SpaceX brings jobs to Hawthorne,” she says. “I’m not convinced SpaceX brings jobs to Hawthorne residents.” Alarcon commutes about seven miles north each day for her job at a university in the Westchester section of Los Angeles. She likes having a new brewpub or two in her Hawthorne neighborhood, but finds it disconcerting as well.
“When I walk into these spaces, I stop feeling like I’m in my hometown, because everyone looks so different to the people I grew up with,” she says. “Everyone I grew up with was working class.”
Alarcon was stunned to see a glitzy-looking, new apartment complex open last year. It’s on Crenshaw Boulevard, a seven-lane road two miles east of the town’s largely abandoned shopping mall.
Rents at the building, called the Millennium South Bay, run as much as $3,725 for a two-bedroom, an agent at the building’s office said—far higher than the $2,285 median in the city, according to Zillow. The new building’s website promises easy access to the beach and other local restaurants. But the most enticing amenity at the Millenium is, of course, the SpaceX headquarters—located just one block up the street.
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