Santa Cruz, the City Over the Hill, Works to Build Its Own Startup Culture

Part 1 in a three-part series.

If you’re visiting from the north, part of the delight of arriving in Santa Cruz—quite apart from its numerous attractions, both natural and man-made—is that you have survived the terrifying drive over the Santa Cruz Mountains on California State Route 17.

Engineers opened the narrow, sinuous, partial-access expressway in 1940 and they’ve been tinkering with it ever since, adding overpasses, center dividers, wider shoulders, and warning lights. Nothing has helped. As many as 200,000 vehicles careen around the Big Moody Curve and over Patchen Pass every day, often at insane speeds. Drivers spin out and crash with fatal regularity. It would cost at least $200 million to turn Highway 17 into a modern freeway with fewer curves, so it has never happened.

The treacherous road, and the 1,800-foot pass it traverses, constitute an enormous physical and psychological barrier. The drive from Intel headquarters in Santa Clara to downtown Santa Cruz is only 37 miles long, which means this sunny beach town is actually closer to the center of the Silicon Valley tech scene than either San Francisco or Berkeley. But no one ever speaks of Santa Cruz as part of the Bay Area. The same Sand Hill Road venture firms that regularly put millions into startups in San Francisco’s SoMa district are reluctant to invest in companies in Santa Cruz, which is only slightly farther away. And Santa Cruzans themselves talk about traveling “over the hill” as if it’s a trip to a different world.

Which it is, in many ways. While it’s close enough to exist in Silicon Valley’s shadow—serving as a bedroom community for thousands of people who commute to the Valley for work—it also has a unique and fiercely defended identity, and aspirations to stand alone as a business and technology hub. The dilemma for entrepreneurs and city leaders in Santa Cruz is that they would like to emulate Silicon Valley’s growth and success without giving up what’s special about their community—things like its culture of outdoor recreation and lefty individualism.

That will require major efforts on several fronts. To start, Santa Cruz needs to court more outside attention and investment, widen the pipeline of local students and professionals available to start or staff new companies, and give local entrepreneurs more reasons to work in town rather than going over the hill.

Santa Cruz's leafy downtown main street, Pacific Avenue, is home to numerous startups

Santa Cruz's leafy downtown main street, Pacific Avenue, is home to numerous startups.

There are efforts underway to address all of those needs, and Santa Cruz has a core of passionate businesspeople, political leaders, and technologists who want to see it develop its own economic and cultural gravity field, separate from Silicon Valley’s. “I think of it as ‘linked but distinct,’” says Jeremy Neuner, a former economic development manager for the city, who now runs NextSpace, a chain of coworking centers founded in Santa Cruz in 2008. “Rather than trying to live in the shadow of Silicon Valley, or pick up scraps from Silicon Valley, I think this is a strong enough community with enough smart, innovative people that we can create—and I think we are creating—our own brand.”

But there’s still a lot of work ahead. I’ve been spending some time in Santa Cruz lately, talking to people from City Hall, the downtown business community, the university, and the city’s small but growing startup scene. What I’m seeing is a city that’s taking thoughtful and meaningful steps to become a more attractive place to grow a technology-related business, but that still faces big systemic challenges—some imposed from outside, some of its own making.

Why should any of this matter to people who live or work outside Santa Cruz? Because cities and regions around the country, and around the world, confront similar challenges. Santa Cruz is a microcosm for a very important question: what are the ingredients of a vibrant high-tech ecosystem? Even big cities like Boston and San Diego must continually examine whether they’re doing everything they can to support businesspeople, including technology entrepreneurs, who are rightly seen as key contributors to regional economic growth.

Not incidentally, this is one of the issues Xconomy was conceived to explore. My Santa Cruz field trip was a departure from my usual focus on San Francisco and Silicon Valley, but it yielded a fascinating view of a community coping with the curse—and the gift—of its geography. “No matter what branding campaign we choose,” says local startup event organizer Margaret Rosas, “we can’t get rid of the hill.”

Santa Cruz Is a Choice 

Santa Cruz isn’t a cheap place to live—the average home goes for $627,000, according to Zillow—so most people who move there do so for a good reason. Unlike the string of faceless subdivisions along the 101 and 280 freeways in Silicon Valley, the city seems to attract people looking for a specific and idiosyncratic set of features, like a slower pace of life and proximity to surfing beaches.

“There are a lot of people who could be living or working almost anywhere in the country, but they choose to live here, for the quality of life and the access to recreational activities,” Neuner says. “It may not quite have the vibe and the hum and thrum of Silicon Valley, but that doesn’t mean that people here aren’t smart and educated.”

“You don’t end up in Santa Cruz by accident,” adds Rosas, who works as a community manager at a local business-intelligence startup called Looker. “It’s intentional. You intend to live in a place that has … Next Page »

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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