Can Sacramento End Its Innovation Drought?

5/14/14Follow @wroush

The Sacramento-Davis Corridor: Seeding an Innovation Cluster

Xconomy presents a two-part series on efforts to transform the Sacramento region into a major new innovation cluster. Part 1, today, looks at changes in Sacramento that could make the city more hospitable for technology entrepreneurs. Part 2, coming May 15, focuses on nearby Davis—home to the University of California's leading agricultural campus—and its role as an innovation engine for the region.

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more reliable ways to translate its faculty’s science and engineering insights into commercial products. Off campus, too, business and government leaders in the city are working to make Davis a more hospitable place for entrepreneurs.

Because Davis and Sacramento are so economically interdependent—and because they’re so physically close, separated only by a causeway across the Yolo Bypass floodplain—it isn’t possible to understand the larger regional picture in Sacramento without looking at the story of Davis’s own emergence as a startup-friendly city. And that’s exactly what I’ll do in Part 2 of this story tomorrow. But for today, I’m going to stay focused on Sacramento, and look more closely at the forms that high-tech entrepreneurship is taking in various corners of the city.

The Midtown Renaissance

Sacramento’s historic center is a giant square nestled in a crook in the American River. The streets are laid out in an alphanumeric grid, running from A Street to X Street and from 1st Street to 30th Street, with the Capitol complex located more or less in the middle. The area east of 16th Street, with its tree-lined avenues, Victorian homes, and abundant upscale restaurants and bars, is known as Midtown.

If you trek to the corner of 17th and I Street in Midtown, you will see something interesting. On one corner is a 5,000-square-foot innovation lab called The Shop. It’s operated by VSP Global, the giant vision-care benefits plan headquartered in the Sacramento suburb of Rancho Cordova; on the day I walked by, its lobby was filled with fantastical sculptures made from corrugated cardboard. On the opposite corner is Hacker Lab, a 10,000-square-foot co-working space that opened in November 2012. This propinquity isn’t a complete accident: the three VSP employees behind The Shop started out renting a tiny one-room office at Hacker Lab.

Co-founder Eric Ullrich agreed to show me around the cavernous Hacker Lab building, which was probably an auto dealership in a former life, though no one is quite sure. There’s a glassed-in showroom in front and a huge garage out back. Startups and freelancers rent desk and office space in the front area, and the garage is now a makers’ playground full of donated equipment, with areas for metalworking, woodworking, textile work, electronics assembly, 3D printing, and the like. Upstairs, there’s a meeting area where some 40 classes, meetups, and hacker events are held each month.

Ullrich formerly worked for SARTA and helped to put together its VentureStart program, a kind of finishing school for startups getting ready to seek funding. Back in 2011, he was trying to get his own technology startup off the ground when he volunteered to help his friend Gina Lujan run a hackathon event. “It had such a big turnout, and it was so much fun, that we realized, ‘Okay, maybe solving the innovation ecosystem in the region and laying some groundwork for other types of businesses is more important’” than working on a startup, Ullrich says.

The Rubicon Brewing Company is a popular destination in Sacramento's Midtown neighborhood. Source: Eric Fredericks/Flickr.

The Rubicon Brewing Company is a popular destination in Sacramento’s Midtown neighborhood. Source: Eric Fredericks/Flickr.

The first Hacker Lab was a tiny, 800-square-foot space outside the downtown grid, but in the summer of 2012 Lujan, Ullrich, and co-founder Charles Blas found the I Street space and began the move. By February 2013, all of the offices were rented out, and today the business is “on the way to being 100 percent member-funded,” Ullrich says. It also takes in some money from corporate sponsors like Intel and VSP Global.

The big idea is to give early-stage companies a stepping stone on their way to commercial success—a place to work, a place to build prototypes, and a place to learn. It’s not a new idea, or a unique one; the Bay Area has scores of co-working centers and maker spaces. But it seems there was a special thirst for it in Midtown. In its first full year of business, Hacker Lab graduated 14 companies, Ullrich says. The startups have created 36 new jobs in Sacramento and have combined annual revenue of $2.6 million. Ullrich and his co-founders are already in discussions to open two more Hacker Lab locations, in Roseville and Davis.

Hacker Lab is just one of the co-working businesses popping up in the area. There’s also ThinkHouse Collective, at 18th and Q; Capsity, just south of the midtown grid; and The Urban Hive at 20th and H, which dates back to the very birth of the local co-working movement in 2009.

Urban Hive manager Brandon Weber formerly ran a real estate development firm out of the 7,000-square-foot space, but he says the recession killed all of the firm’s projects. “We had the property, we wanted to do something cool with it, and we had the space and flexibility to try something,” he says. Today all 125 membership slots inside the art-filled space are taken; its desks and offices are filled by Web designers, remote workers, small e-commerce firms, and non-profits. One member is an incubator called Public Innovation that supports civic programming efforts like the Sacramento Hashtag Project, designed to highlight activities around the city through social media.

In addition to managing the co-working business, Weber runs the TEDxSacramento series, which featured seven sold-out events last year, attracting crowds of up to 700 people. He’s a veteran networker, a big Sacramento partisan, and a foodie who asserts that the city’s restaurant scene is starting to rival that of San Francisco, Boston, Seattle, or Los Angeles. “I love to have friends from L.A. come up visit,” Weber says. “Everybody is shocked after a few days of hanging out here, at the art galleries and the food scene and the great little bars and brew pubs.”

Mind you, the changes are gradual—and the contrast between Sacramento and San Francisco is still dramatic. At certain times of day, Ullrich says, it’s still possible to walk over to J Street, the main commercial drag through Midtown, and see no one else on the sidewalks for blocks and blocks. “You go to a festival like Launch [in San Francisco] and the place is just packed with energy,” he says. “And you come back to Sacramento and it’s like a ghost town, honestly.”

But the density needed to put Sacramento into creative hyperdrive could come if people just get down to work, he says. “I really feel like we are in a renaissance area,” Ullrich says. “The whole Midtown is being revitalized. What’s Austin known for, or Portland? Having a bunch of people doing cool shit, in a fun place to live where you can find good work-life balance and diversity and culture. That’s what I would want to see here.”

Different Planets

There’s some disagreement in Sacramento about whether it’s a good thing, or a bad thing, that San Francisco is just a 90-minute drive away. Thanks to the relative convenience of jet travel today, “Traveling 70 miles is just as big a pain in the ass as traveling 700 miles,” says Rob White, chief innovation officer for the City of Davis. That means Silicon Valley venture investors often put Sacramento in the same mental category as places that are much farther away, like Salt Lake City, UT, or Bozeman, MT.

“There is this big perceptual wall that exists,” says Bob Adams, director of the Sustainable AgTech Innovation Center at the UC Davis Child Family Institute for Innovation and Entrepreneurship. It can be difficult just getting people in the Bay Area to drive to the Central Valley for startup events, he says. “It’s not very far, but you might as well be on different planets.”

Dushyant Pathak, associate vice chancellor at UC Davis, is a little more sanguine. He thinks Davis and Sacramento are actually in what astronomers would call the Goldilocks zone: not too close to Silicon Valley and not too distant. “The in-laws shouldn’t live right next door or … Next Page »

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

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  • Julia Mjehovich

    As a Sacramento native, it was SO great to see an in depth article like this shining a spotlight on the city we love. I moved to SF to go to college and stayed to work in tech. However, I moved home to Sacramento to work at the startup I’m currently at because I had faith in the region’s ability to prosper and for the quality of life issues mentioned. Sacramento is a fantastic city to live and work in and it’s wonderful to see it finally getting some of the attention it deserves, especially from such a well-respected journalist.

    • http://www.xconomy.com/san-francisco Wade Roush

      Thank you, Julia. I hope Sacramento can convince more of its native sons and daughters to move back!

  • mffitzgerald

    Joan Didion wrote that Sacramento was a Valley town, but the Valley is the real Valley, the Central Valley. As such, she wrote, it suffers the Valley fate, “which is to be paralyzed by a past no longer relevant.” She wrote that in the 1960s, of course, before people knew what Silicon Valley was. But your piece reminded me of her words. It is hard to change a place’s identity, and take people away from the allure of making it big in the place that really matters. As you indirectly document, Sacramento’s tech industry has the same problem as theatre entrepreneurs in the midwest: the best talent wants to be someplace else, for reasons that have nothing to do with quality of life.