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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we have been able to mobilize that capital and give them an efficient access point for qualified startup companies.”

Velocity expects to spread its own $20 million fund across roughly 20 startups. The firm has plans to raise a “significantly larger” second fund that will allow Velocity to “not only invest in more companies, but also actively and aggressively participate in follow-on financing of our portfolio companies,” Crawford says.

Silicon Valley Career, Sacramento Lifestyle

Everyone in Sacramento has an interest in making their city sound more attractive. Even so, I was struck by how often my interviewees used the same phrase: “quality of life.”

Partly, this was a reference to Sacramento’s ideal location, in a sunny spot that’s within easy driving distance of the beaches of Marin County, the wine country of Napa Valley, and the ski mountains at Lake Tahoe. As Van Deventer, the SARTA board chairman, jokes, Sacramento is “in the middle of nowhere, but the center of everything.”

There’s also access to a prestigious art museum (the Crocker), numerous farmers markets, a new annual restaurant festival called Farm to Fork, boating and kayaking on Folsom Lake, and miles of biking and horseback riding trails. It all makes for a “work hard and play hard” culture in the region, says Crawford. “You can blend the three-hour bike ride with learning about the startup company that you want to know more about, so you go hard with regard to fitness, but you also get something accomplished on the business front.”

But I think the quality-of-life meme is also code for some other important features of life in Sacramento. One is the radically lower cost of housing. Home prices are on the rise again in Sacramento after a severe dip, but the median value of a home in the city is still only $237,000, compared to $909,000 in San Francisco and $985,000 in Sunnyvale. When Hacker Lab’s Ullrich told me that he pays only $400 per month for his share of the 4-bedroom Victorian that he rents with three other people in Midtown, I nearly cried.

Startup founders and investors gather at Velocity Venture Capital's new Entrepreneurs' Campus in Folsom; this photo was snapped by an aerial drone. Source: Velocity Venture Capital.

Startup founders and investors gather at Velocity Venture Capital’s new Entrepreneurs’ Campus in Folsom; this photo was snapped by an aerial drone. Source: Velocity Venture Capital.

The fact that Sacramento has relatively cheap housing could turn it into an important release valve for the overcrowded, overpriced Bay Area—and local companies know it. As you head east from the downtown on Highway 50, you’ll see a giant billboard that says “Silicon Valley Career, Sacramento Lifestyle.” It’s a recruiting ad for Act-On Software, a marketing automation startup with a large sales office in Roseville. The company, which competes with the likes of Marketo, Eloqua, and HubSpot, is formally headquartered in Beaverton, OR, but about 110 of its 250 employees are in the Sacramento area, chief marketing officer Atri Chatterjee told me.

The growth of the Roseville office was partly an accident of timing: the company picked up a number of Sacramento-based WebEx employees who wanted to move to a smaller, nimbler company after WebEx’s acquisition by Cisco. [Corrected 5/14/14: The former WebEx employees weren't "downsized" by Cisco, as a previous version of this sentence indicated.] But the location also turned out to be a recruiting tool. At Act-On, ambitious sales professionals of software developers can work at a fast-growing startup without having to cope with Silicon Valley traffic and mortgages, Chatterjee says. “We are able to build a Bay Area sales culture without the expense and cost and, frankly, the lower quality of life that those same employees would have if they were in the Bay Area,” he says.

It’s unlikely that Sacramento will ever develop the Bay Area’s pull as a magnet for young technology talent. On the other hand, nobody can stay 22 forever—and not everyone in Silicon Valley gets rich.

There’s a vision of Sacramento where the city isn’t a bedroom community for the Bay Area, but an alternative stage for a whole career; a place where people can enjoy Northern California living without having to be part of the 1 percent. “Pulling all-nighters becomes a little less sexy when you are 30-plus and you have a family and other things you are trying to balance,” Sanders says. “I think there is a tremendous opportunity for us to grab all of those students who moved to the Bay Area, have been there six or eight years, got a lot of great experience but didn’t make the big bucks, and are now starting to think about raising a family. Good luck buying a house in the Bay Area.”

Continue to Part 2, where we complete our look at innovation in the Sacramento area by venturing to Davis, and ask how the city and its university are solving the entrepreneurship challenge on an even more local level—and what that could mean for the region.

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.

  • Paschall (Moon/Pope/Triangle)

    Hahahahahahaha Ahahahaha and LOL.

    Sacramento’s problem is the people. The lamest laziest bozo bureaucrats in all of society. Just sit your fat stupid asses behind an old moldy desk, stop extorting the actual economy of the areas which actually constitute the greatness of California, then shoot yourselves. Maybe in the aftermath you might have a chance in hell to ever compare your tertiary swamp town to secondary cities like Oakland or Fresno or Long Beach.

    Boston or San Francisco. Hahahahahaahahahaahahahaahaha.

    The capital belongs atop a barge, and you dumb swamp people are spoiled rotten by extorting the work ethic and intelligence of the metropolitan areas which actually constitute this great state. The actual people and the actual public which actually produce something of value. Sacramento is a painfully tertiary market, the dirty backwater that actually wishes it could be more brackish as it looks up to second rate cities. I have seen too many people and organizations rot away under the egalitarian sociopathy and general retardation towards the bottom half of humanity which dominate the definition of public service propagated in Sacramento.

    I will make sure the world has an accurate description of your economy, people, culture, society, built environment, policies, politics, governance, administration, business savvy or lack thereof, and every other metric worth measuring to ensure the appropriate fear requisite to repel anyone with even the slightest amount of work ethic or intelligence from ever letting themselves become infected by Sacramento.

    A bunch of demented blue collar union retiree transplants from Alabama and Kansas and druggy disturbed mums combined with a bunch of used car salesmen and reinsurance salesmen and ignorant real estate salesmen of nasty crappy overpriced poorly framed cheap tilt-up junk. The whole place is designed to wash away. The 2006 USGS 1,000 year flood; that is Sacramento’s only hope of reinventing itself. ‘Out and out extortion’; no one will miss you.

    It has nothing to do with quantities and everything to do with qualities. Bozo psychopath bureaucrats who spend their life extorting the public for their own private personal gain then skulk back to their shanty like coward bastard squatters who do nothing but squander what is created by creators while creating nothing themselves.

    The unions have built a collection of the most uneducated, unqualified, unlicensed, uncertified, untrained, lazy, mismanaged, poor quality, unproductive, inefficient and overpaid labor pool in the history of all society. They are horrible people living in a horrible cheap crappy backwater swamp town. They all deserve the guillotine. Let us see the utility of their precious paper cash benefits at $40 an orange and $2,000 a barrel.

    How dare you associate this publication with anything remotely to do with economics. You would receive a D+ in the NORMAL SYSTEM for this crap. Your information is wrong, mostly because you simply borrowed it from the misinformation published by idiot bureaucrats. Sacramento workers are hired solely based on their penchant to coerce and extort the public, personal disregard for remedying the atrocities of their piss poor administration, and strong aversion to correcting the operations generating the negative externalities.

    P.S.

    Departments of Transportation, Public Safety, and the Judicial branch are excluded from aforementioned descriptions.

    Sacramento was never innovative. ‘Drought’ means prolonged absence indicating that the specified something was at one point present. Innovation has never existed since the conception of Nueva Helvetia. The tiniest bit that does exist in recent present history, inconsequential as it may be, is still nonetheless located in the foothills near Granite Bay and EDH and arising entirely from bay area transplants having absolutely NOTHING to do with Sacramento.

    To drive the point home, bureaucrats actually thrive on reverting back to old times. Like the Catholic Church, these people actually want to go back to the 1500′s. They use their dysfunction, ineptitude, sloth, and resulting poor performance to justify the extortion of more money in larger budgets with zero intent to fix the dysfunction with technology and every incentive to compound the dysfunction.

    Innovative… Ahahahahahahahahahaha. Like the Catholic church before it, in the age of enlightenment Sacramento chose darkness.

    One day, the 38 million people of California will be forced to stop ignoring how the 313,000 current State employees and 1.6 million retirees bilked us. And then we will be glad that your residences are public information stored on digital databases; your pension payments and salaries are public information stored and distributed on digital databases; and we already have copies of those databases.

    I am so proud of my father for being an Accountant in this swampy moldy disgusting tertiary backwater of idiot bureaucrats. I am so fucking proud of that big brilliant bear ensuring he and his clients never made any taxable money.

    Here is another brief glimpse into the degree of fragility of your retarded system of extortion protecting the retards of Sacramento. Of the over 22 million filers of personal income tax statements in California, 6,789 claimed $1 million or greater. Those 6,789 people accounted for 48% of all personal income taxes paid to the state. Personal Income Taxes account for 30% of the entire annual revenue of the state. I’ll leave you to do the math. My father’s accounting firm has a new potential client list.

    IHS αμδγ