Seeding a New Generation of Startups in Santa Cruz

7/31/13Follow @wroush

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entrepreneurs and other creative types give presentations of 20 images for 20 seconds each. The events take place at cultural hotspots like the Museum of Art & History, one block over from Pacific Avenue.

Unlike many Northern California cities, Santa Cruz has managed to find a place for startups on its main downtown drag, rather than relegating them to sterile office parks. Pacific Avenue is home not just to Verve Coffee Roasters but also to more than half a dozen startups, including ProductOps, a software development consultancy; Five 3 Genomics, a UC Santa Cruz spinout that provides genomic analysis services to researchers and biotech companies; remote sensing startup Gridata; Intuvo, which specializes in sales and marketing automation software for banks and other lenders; Philippe Kahn’s FullPower Technologies and its sister company MotionX; and NextSpace, Jeremy Neuner’s coworking facility (of which more below).

For nearly 20 years, Pacific Avenue was also the location of Cruzio Internet, the city’s largest independent Internet service provider. Today the company is a block away on Cedar Street, in a big building that once housed the Santa Cruz Sentinel, the city’s newspaper. After vandals cut the sole AT&T fiber optic line into Santa Cruz in April 2009, leaving much of the city without Internet and wireless service for more than 24 hours, Cruzio arranged for a new 10-gigabit fiber optic line from Silicon Valley to UC Santa Cruz to be extended into the downtown, terminating at its office.

Internet service provider Cruzio opened a coworking space, Cruzioworks, in the former Santa Cruz Sentinel building.

Internet service provider Cruzio opened a coworking space, Cruzioworks, in the former Santa Cruz Sentinel building.

As a result, the Cruzio building sports the city’s fastest Internet service, which is now available to scores of local entrepreneurs through the company’s coworking facility, Cruzioworks. “Cruzio was already a community hub when we were located on Pacific Avenue,” says Jahnai Eldridge, a recent UC Santa Cruz graduate who is the company’s business development manager. But stripped of its printing presses, the old Sentinel building offered even more room for the community. Cruzio co-founder Peggy Dolgenos led a major remodeling effort, and today Cruzioworks is home to 150 coworking members and about 30 rental suites and offices, nearly all of them occupied. Civinomics is one of the companies housed there, as is Makers Factory, which offers 3D printing services to local businesses and educational workshops for local students.

Cruzioworks’ large open-seating area is frequently used for community events like TechRaising. If you look at the high occupancy rates and event calendars at Silicon Valley coworking facilities like Plug and Play Tech Center or NestGSV, you’ll begin to understand how important affordable office space, community events, and proximity to other entrepreneurs can be to a young startup. “Had we not had a place like Cruzio, the business either would not have come to fruition, or we would have had to go over the hill,” Civinomics’ Singleton says.

The NextSpace Effect

But Cruzioworks wasn’t first on the coworking scene in Santa Cruz. That honor goes to NextSpace, which opened its doors in Pacific Avenue’s elegant old County Bank building in 2008. (The building’s guts were reduced to rubble in the 1989 Loma Prieta earthquake, then rebuilt as part of a huge downtown revitalization effort. That’s a story too long to tell here, but many Santa Cruzans credit former economic development manager Ceil Cirillo with putting Pacific Avenue, and the larger community, back on a path to prosperity after the quake.)

Neuner’s co-founders at NextSpace are Caleb Baskin, a local attorney who also co-founded a local community advocacy group called Santa Cruz Next, and Ryan Coonerty, who has twice served as Santa Cruz’s mayor, in 2007-2008 and again in 2011-2012. “The three of us had spent a lot of time talking about how to create a better economy, and how to make Santa Cruz hospitable for people in their 20s and 30s, not just their 60s and 70s,” Neuner says. “We discovered that there were a lot of people who were living here but working over in the Valley—so wouldn’t it be great if they didn’t have to drive over the hill?”

The basic idea at NextSpace, as at many other coworking operations popping up in the Bay Area at that time, was to provide a common space so that telecommuters or one- or two-person businesses wouldn’t have to work in isolation. But Neuner says there was always a bigger agenda: creating opportunities for “accelerated serendipity,” the introductions, collaborations, and new projects that seem to happen whenever you arrange a bunch of desks around a coffee maker.

This sort of cross-pollination is thought to help businesses grow faster, and Neuner says his happiest moments come when a company gets so big it has to move out of NextSpace. Five 3 Genomics did that recently, as did UserVoice, a maker of … Next Page »

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

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  • Alice Resnick

    What a pleasant surprise to see this series on Santa Cruz. My son just graduated from UC Santa Cruz with a degree in physics, and I know he’d love to be able to find a job on that side of the hill, a place he has come to love. A more robust business community would certainly help—but would it change the character of the place? Illustrating that UCSC is a heavyweight: Times Higher Education reports that UCSC ranks in the 99.9th percentile in research influence, and 11th overall among the 100 top universities in the world less than 50 years old.