A look at the South Los Angeles business demographic prompts one of two responses — surprise at what is actually being developed or shock at how little already exists. For USC graduates Santos Uy and Danny Kronfli, both 25, the latter prompted a second look at a forgotten neighborhood for their new joint venture, venetian-style wine bar Bacaro L.A.

With an average first year failure rate of nearly 25 percent, starting your own restaurant in Los Angeles can be a big gamble, one that statistics show is hugely dependent on your location in this sprawling city. With the USC draw and large-scale development soon to bring crowds, the downtown district seemed like a no-brainer for the entrepreneurs simple tapas and booze joint. However, as more and more businesses are discovering, the downtown illustrated on the side of every luxury loft development has yet to arrive. The ritzy nine-to-fivers haven’t actually moved in, leaving the streets eerily vacant come rush hour and making it increasingly difficult for new businesses to find a niche, let alone pay off their bills.

"While in shadier areas, rent could be $2 a square foot, most decent locations downtown can be as high as $15 dollars a square foot," Uy says. Bacaro’s current location–nestled in an offshoot of the intersection of Hoover and Union only five minutes south of the Staples Center–costs them less than $1.50 a square foot and came with a pre-existing liquor license, a must in the LA restaurant rat race. "When you’re only paying $1,500 a month in rent costs, we could afford to start slow and really grow our business."

Slow growth is starting to pay off for the first-time entrepreneurs, who have begun to see a steady stream of customers most evenings. Opened in April 2008, Uy and Kronfli spent the summer rearranging their menu, a selection of small seasonal dishes like seared scallops and gourmet paninis priced at $7. Because of the low overhead, they could afford to take their time, seeking out what Uy calls "interesting and esoteric" wine distributors in the meantime. He set out to craft a wine list that wasn’t dumbed down to its often wine-ignorant collegiate clientele and opted rather to be an educator.

"If they don’t know anything about wine, I could sell them a glass from Basque Country or one from the Central Coast and they wouldn’t know the difference," Uy explains. "So we figured, why not choose some more esoteric wines and really teach them about why we picked them and why they like them when they do."

Uy’s confidence in his picks comes from a genuine love for those rare finds. While still a pre-med student at USC, he was a weekly attendee of Silver Lake Wine’s tastings for six solid months before ultimately landing a job there. After wine ultimately trumped medical school, he did a stint as a sommelier at L.A. favorite A.O.C. before teaming up with his childhood friend–now holding a degree in business management–to open their own bar.

"What makes me really happy is to see that we have wines here that have become really popular that if you asked 80 percent of sommeliers about, they wouldn’t have a clue," Uy says. "You can really learn something about wine, which even industry people may not know about, just by coming through and having a glass."

Uy has educated himself in the process, now well-versed in the way of the wine world. Smaller distributors have come in handy for a small business like Bacaro, as larger importers require high minimum shipping requirements of 12 cases or more, a waste of liquor for a place that seats barely 40. In cutting costs for a small business, it has proved advantageous to cut out the middle men and go straight to the producers, though sometimes he has found that impossible.

"You begin to learn different ways about the business, like how sometimes you have people who really monopolize an entire genre. There is a woman who really has control over a lot of types of Burgundy and it’s near impossible to talk directly to the producer without going through her," Uy says.

Though becoming a venue for wine education has certainly been a draw for students, Uy and Kronfli agree there are some downsides to depending heavily on a university for your sales. While there may be 30,000 hungry patrons in the USC area, most of them aren’t willing to spend as much as people with a steady income. The pair say an average check for students will most often be less than $20, compared to the $30 to $50 somebody employed might be inclined to spend.

"We’re obviously glad to have every type of customer in here, but if we can get packed every night, as we plan on doing, then it’s only natural we’d rather have the $30 to $50 customer," Uy says. "There’s no way to get around that other than marketing."

In addition to word of mouth, Kronfli and Uy send out frequent e-mails detailing new additions to the wine list, as well as their special events. Throughout election and football season, they’ve offered discounted food and wine in exchange for the use of their flat screen TV. They also host a once a month Beefsteak Sunday, where for $25 you get all-you-can-eat butter-soaked beef on a baguette with all the wine you can drink.

"The e-mails just really serve as a constant reminder for people to come out, that we exist and we’re here, and they really seem to give us a boost," says Kronfli, who also cites the community review site Yelp as one of their best marketing tools.

With a boom in business come the improvements — plans for a more efficient layout and more comfortable seating are in the works. In mid-October, the former chef from New York’s Michelin-rated Jean-George moved West and signed on to be the new man behind Bacaro’s menu. The pair also speak tentatively about opening up an all wine-focused version in Downtown someday, though that does come with facing the challenges they have successfully avoided.

With all the prospective development in the Downtown district, Kronfli and Uy look forward to other businesses taking the leap to South L.A. and allowing, as Uy puts it, "like business to help like business."

"I think up until now, people just weren’t really willing to take the risk in opening a business down here," Kronfli says. "For whatever reason, people are still afraid of the neighborhood and are just more inclined to build up in West Hollywood or Santa Monica or somewhere with more foot traffic. Nobody comes in here and says, ‘Oh, we were just walking by.’ The majority of our customers come here with the intent to come here."

But as the two are beginning to find out, that may not be such a bad thing.