The Davis Dilemma: New Energy for Innovation, But Where to Grow?

5/15/14Follow @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, published on May 14, looked at changes in Sacramento that could make the city more hospitable for technology entrepreneurs. Part 2, today, focuses on nearby Davis—home to the University of California's leading agricultural campus—and its role as an innovation engine for the region.

Every economic development official in the country knows the story. In 1951, Frederick Terman, then the dean of engineering at Stanford University, decided to set aside 200 acres of Stanford-owned fruit orchards in Palo Alto for the new Stanford Industrial Park. The park was soon home to Varian Associates, Shockley Transistor, and Hewlett-Packard, as well as regional offices of General Electric, Eastman Kodak, Lockheed, and Xerox. Today, what’s called the Stanford Research Park has expanded to 700 acres and is home to more than 150 companies, including Vivek Ranadivé’s TIBCO and a variety of law firms and venture-capital firms. It was, in effect, the birthplace of Silicon Valley.

Meanwhile, the University of California, Davis, wasn’t chartered as an independent university until 1959. But if early officials there had been as prescient as Terman, the larger community of Davis, CA, might not be stuck in its current paradox: bursting with great technology ideas and surrounded by undeveloped land, but unable to grow.

UC Davis never managed to set aside much land for new businesses or new workers, and neither did the city government. In the 1970s and 1980s, a number of factors—a distaste for sprawl, reluctance to impinge on the prime agricultural land around the city, fear that city services would be overrun by the rapidly growing student body, and a certain dose of NIMBYism—combined to foster strict growth controls in Davis. They’re still in place today.

“Palo Alto has clearly recovered economically [from the Great Recession] because Terman laid down that industrial park 60 years ago,” says Rob White, chief innovation officer for the City of Davis. “Here, the university-town tension wasn’t resulting in collaborative outcomes. Town and gown in Davis has been an on-and-off love affair, mostly driven by who is in leadership at all levels.”

What that means, at the moment, is that Davis is losing high-tech employers as fast as it’s gaining them. I talked to one entrepreneur, Bret Kugelmass, who founded his unmanned aerial vehicle startup, Airphrame, in Davis because it was close to the farm fields where the company needed to test its prototypes. Kugelmass decided this spring to move the startup to Silicon Valley, in part because he couldn’t find industrial space in Davis to work on the startup’s aircraft, and in part because there weren’t enough other companies in town to talk to and work with. “You have access to the university, which is nice,” Kugelmass says. “But in order to get business done, that’s not all you need.”

Davis (outlined in white) is surrounded by prime agricultural land; a ballot measure passed in 2000 prevents the city from annexing it without the backing of a majority of voters. UC Davis owns more than 5,000 acres of land to the city's southwest. Google Map.

The City of Davis (outlined in white) is surrounded by prime agricultural land; a ballot measure passed in 2000 prevents the city from annexing any of it without the backing of a majority of voters. UC Davis, abutting the city on the southwest, owns more than 5,000 acres of land, but that, too, is protected. Source: Google Maps.

Then there’s Bayer CropScience. In 2012, the German agribusiness giant bought Davis-based AgraQuest, which makes pesticides from naturally occurring microorganisms, for $425 million. Nearly 100 researchers work at the company’s offices on the south side of town. But they’ll all be departing soon for West Sacramento, in search of more space for research facilities.

“While we would have loved to stay in Davis, we couldn’t find a large enough facility that we could get ready quickly,” says Denise Manker, the company’s director of agronomic development for biologics. “It’s always been a little bit difficult for us to expand our greenhouse or those kinds of things. Davis hasn’t been thinking along those lines. It would be helpful for them to keep companies like this here, but we are hiring at a rate such that we can’t wait for them to take two or three years to sort that out.” (Natural pesticide maker Marrone Bio Innovations, which is still growing fast in its post-IPO phase, plans to move into the space Bayer is vacating.)

If Davis can’t find ways to accommodate growing companies, it will never be much more than an incubator for businesses that eventually move elsewhere, city official White predicts. “What Davis lacks is move-up space for corporations that have shown success,” he says. “You can do a great job of telling everyone how much is going on in your town, but if you have no place for them to go…you aren’t going to have the growth you want.”

Ranking American Research Universities
Selected U.S. universities and their national rank as measured by outside research funding; dollars in millions; 2010 data from the Center for Measuring University Performance
1 Johns Hopkins University 1,997
2 University of Michigan, Ann Arbor 1,129
3 University of Washington, Seattle 995
4 Duke University 980
5 University of Wisconsin, Madison 940
6 University of California, San Diego 938
8 University of California, Los Angeles 900
9 Stanford University 810
10 University of Pittsburgh 806
11 University of Pennsylvania 794
12 Columbia University 771
13 University of Minnesota, Twin Cities 761
14 University of North Carolina, Chapel Hill 747
15 Ohio State University, Columbus 720
16 Washington University, St. Louis 694
17 Pennsylvania State University 675
18 University of California, Davis 669
19 Texas A&M University 667
20 University of California, Berkeley 660
21 Massachusetts Institute of Technology 646
28 Harvard University 561

Another problem holding back innovation in Davis, until recently, was the university bureaucracy, which made technology transfer—the process of licensing researchers’ discoveries for commercialization—slow and difficult. The university collects an enormous amount of public and private research funding—more than UC Berkeley, MIT, or Harvard—but has had comparatively little to show for it; in the 2000s, UC Davis managed to spin out only three to six companies per year. Compare that to Stanford, which has a student-founded accelerator, StartX, that by itself churns out 20 to 30 companies per year.

“Davis has historically been a pretty conservative, play-by-the-rules kind of place, and that doesn’t always sit well with entrepreneurs,” says Cleve Justis, executive director of UC Davis’s Child Family Institute for Innovation and Entrepreneurship, which offers training programs to would-be entrepreneurs on campus. “Rule breaking is something they enjoy doing.”

But today, the rules in Davis are gradually changing, both at the university and at city hall. The arrival of a new UC Davis chancellor five years ago sparked a series of changes designed to make it easier for inventors and entrepreneurs to work with the university on spinoffs. There’s a new array of programs to support entrepreneurs, both on campus and off. And the city government, by hiring White as its first-ever chief innovation officer, has begun to demonstrate to the local business community that it’s serious about making the changes needed to accommodate growth.

The stakes in these efforts are, in some eyes, quite high. “My personal bias is that Davis has to prosper for the region to prosper,” says David Morris, a former faculty member at the UC Davis School of Medicine and managing director of TechDavis, a local business association that’s underwriting half of White’s salary. Sacramento without a thriving Davis, Morris suggests, would be a little like Silicon Valley without Stanford, Manhattan without Brooklyn, or Boston without Cambridge.

“It can’t be like a donut, where Davis is a wasteland and the rest of the region prospers,” Morris says. “As Davis goes, so goes the region.”

Chancellor of Entrepreneurship

Sacramento was born as a supply base for gold-seekers, but Davis’s origins are a little more prosaic. It started off as Davisville, a Southern Pacific depot named after a local farmer. The town’s big break came in 1905. California’s new governor, a physician named George Pardee who won fame for stopping an outbreak of bubonic plague in San Francisco and then turned down Theodore Roosevelt’s offer of the vice-presidential slot on the 1904 Republican ticket, picked Davisville as the spot for a new state agricultural school. “University Farm” opened to students in 1909 as an extension of UC Berkeley. Fifty years later, it was spun off as an independent campus, the seventh in the University of California system.

Today Davis is a leafy, Midwestern-style city with 65,000 residents, not counting the 32,000 students at the university. (That makes it about one-eighth the size of Sacramento proper, which has 477,000 people.) The topography is completely flat, which makes it … Next Page »

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

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  • mffitzgerald

    I had no idea that MIT and Harvard were not in the top 20 universities in terms of outside research dollars pulled in.