Seeding a New Generation of Startups in Santa Cruz

7/31/13Follow @wroush

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online help desk software that’s now based in San Francisco. Another NextSpace member company, PrivacyChoice, was acquired in March by Amsterdam-based antivirus firm AVG.

NextSpace itself has grown enormously. Despite competition from Cruzioworks, it’s at its full 225-member capacity in Santa Cruz, and has another 1,000 members at the seven other locations it has opened over the last five years (three in San Francisco, one in San Jose, one in Berkeley, and two in the Los Angeles area). “The thing we have sort of become the poster child for lately is that you can start a business successfully in Santa Cruz and scale it outside of the community,” says Neuner, who, with Coonerty, recently co-wrote a book on freelancing called The Rise of the Naked Economy: How to Benefit from the Changing Workplace. A “fair number” of NextSpace member companies are profiled in the book, Neuner says.

A Chicken-and-Egg Problem

NextSpace’s expansion and the PrivacyChoice acquisition are signs that Santa Cruzans have the entrepreneurial and engineering chops to build great companies. Another five or 10 success stories like those would truly supercharge the local startup scene. But the community would still have to solve Fogelsong’s third problem: increasing the supply of skilled workers.

Bonnie Lipscomb, the city’s current economic development manager, says she goes on weekly “retention visits” to local employers in an effort to learn about their business challenges. The most common complaint, she says, is about the employment crunch. “What they say they need help with is access to the talent pool and making sure there are enough people living in Santa Cruz who can physically be there,” Lipscomb says. “They would love to have the talent here in Santa Cruz rather than having to seek it from outside communities.”

At bottom, there are only three ways to increase the supply of workers so that more tech companies can thrive in Santa Cruz. One is to convince some of the 20,000 to 30,000 people who commute over the hill to stay. Another is to persuade more professionals to move to the city. But both of those are chicken-and-egg problems, since most people can’t relocate or change where they work without a job offer from an existing local company. The third way is to entice more graduates of Santa Cruz’s high schools, colleges, and universities to stay in the city and pursue their careers locally.

Coming tomorrow in Part 3: A detailed look at efforts to guide more UC Santa Cruz students into the Santa Cruz startup scene, and a survey of other challenges, including the city’s image problem in the outside world. Says attorney Jason Book: “There is an unfortunate perception out there in the marketplace that we are all a bunch of pot-smoking flakes.”

Wade Roush is Chief Correspondent and Editor At Large at Xconomy. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. 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.