Building an Entrepreneurial Pipeline in Santa Cruz

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easy-going character. “I have been in Santa Cruz since the late seventies, and there has always been a resistance to growth and commercialization,” says Smith. “‘Carmelizing’ Santa Cruz is the term people use.” That’s a reference to nearby Carmel-by-the-Sea, CA, which is seen as having succumbed to vapid gentrification and rows of luxury shops and restaurants.

But the new generation of civic leaders in Santa Cruz, including people like Neuner, Bryant, and former mayor Ryan Coonerty, see the choice between development and local character as a false one. “Even if your issue is that we need more money for social services or to protect the environment, you aren’t going to get any of that unless you have businesses contributing to the tax base,” says Bryant. “I ran for office on a platform that all these things are linked.”

“There is this old-versus-new dichotomy that does pop its head up quite a bit, and it goes like this: if we do anything to promote the growth of business and a faster-paced society, then we will ruin everything that is great about Santa Cruz and turn it into the horrible wasteland that is Silicon Valley,” Neuner says. “I understand the caution. But what we, the younger generation of 20-, 30-, and 40-somethings are saying is yes, we recognize that Santa Cruz is a special place; no, we don’t want to ruin it; yes, we want to maintain the natural beauty of the town and the surrounding area, but you can do that while still creating a vibrant, robust, modern economy.”

A Budding Ecosystem

David Britton, the founder of the Makers Factory 3D printing operation and an advisor to many of the startups in the Cruzio building, says there has been a slow but noticeable pro-business transformation in Santa Cruz since he moved to the city in 1989.

David Britton, founder of MakersFactory, shows objects students have created using the company's 3D printing and laser cutting equipment.

Britton had previously co-founded Britton Lee, one of the first companies to offer relational database management software, and in an early legal skirmish with the city council, which he says wanted to bulldoze part of the street leading to his home, he acquired a reputation as “the SOB businessman out on West Cliff Drive.” But after he helped to spearhead a “shop local” campaign to boost local stores, and after a turnover in city council membership brought in leaders like Coonerty and Bryant, he says he’s now in better favor with the city. Makers Factory is seen as an important provider of after-school training and summer classes for local kids, and Britton was even invited to travel to San Luis Obispo, CA, and Boulder, CO, as part of two city-sponsored expeditions studying how those cities have worked to support local entrepreneurs.

Boulder, in particular, has “a whole ecosystem of entrepreneurship and technology,” Britton says. Like Santa Cruz, it’s got a left-wing element (and an even larger 420 event), but it’s been more successful so far at drawing students and faculty from the local university—the University of Colorado Boulder—into the entrepreneurial community, through programs like the TechStars startup accelerator. “I have been pushing technology ecosystems ever since I came to Cruzio, and we are at the point now where I think that will happen soon,” Britton says.

The Santa Cruz government’s commitment to promoting entrepreneurship is clear. In 2009, Santa Cruz won $5 million in federal stimulus funding to help finish the Tannery Arts Center, an 1870s-era industrial complex north of downtown that’s being rebuilt to serve as an arts and cultural center and a potential future home for companies like Five 3 Genomics and Makers Factory. In 2012 Santa Cruz was one of 12 cities picked by Code for America as locations for civic software development projects, and the result was Open Counter, an online portal where companies can get started on all the permits and licenses they need to do business in the city. And this year, according to Bonnie Lipscomb, the economic development director, the city plans to mount a competition that will award free coworking berths to four out-of-town startups in order to entice them to bring jobs to Santa Cruz—two at Cruzioworks and two at Nextspace. (The contest hasn’t been formally announced yet, but Lipscomb says interested companies can contact her office for details.)

Will it all be enough to make Santa Cruz into a self-sustaining startup hub? It’s hard to tell, but it’s probable that special programs like the Project for Innovation and Entrepreneurship will be needed indefinitely. At Santa Cruz’s small scale, everything takes more effort, and “that won’t be solved until we get some big wins here,” in Halliday’s words.

Silicon Valley is “this huge Petri dish of experiments going on, where all you need is a fraction of a percent of them to succeed,” says Smith. “The challenge with Santa Cruz is that the dish is smaller. You are going to have to go a longer time between successes. How do you improve that? You create the environment to support more experiments.”

And you also, perhaps, work harder to reinforce the budding narrative about the city’s attractions for certain kinds of entrepreneurs—those who care about their surroundings as much as they do about their software (and who see no reason to risk their lives driving over Highway 17 every day).

“The difference between Boulder and Santa Cruz in many ways is that Boulder knows how to tell their story,” says Lipscomb. “We have so many positive things going for us in Santa Cruz. We just need to do a better job of actually communicating them.”

Special thanks to Doug Klein for helping to arrange my initial round of interviews in Santa Cruz, and for shuttling me around town.

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Wade Roush is the producer and host of the podcast Soonish and a contributing editor at Xconomy. Follow @soonishpodcast

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  • Sandra Kaufman

    Excellent, excellent article, Wade. I wish you would also try and have it published in the Sentinel, if that is possible. Thanks for writing it.

  • Thomas Clements

    Great articles; I love your city. I am sure you will do well.

  • Robert Singleton

    The Project for Innovation and Entrepreneurship (PIE) hasn’t been active for over a year now from my understanding. We used to get interns from them (of varying degrees of quality), but no longer because we lost contact with them.

    I do think there is a lot of truth to Bonnie’s last statement, in that we do have a problem with telling our story. But I feel the problem is more closer to we have trouble telling our story to ourselves, that is most people in town don’t even know a tech scene exists.

    • Career Center

      Agreed! PIE has been inactive, but I heard is the replacement!

  • bespoked

    I have been enjoying your articles for some time now, so
    imagine my delight when I saw that you had chosen my home town as the focus for this article. I’d bet I’m not the only “local” whose understanding of their own area’s economy has been improved. Regarding the lack of anchor companies: another “headwind” we’re facing here is the high cost of living and
    accompanying tech salaries that are high relative to many other regions. This
    creates considerable pressure to move these jobs to those lower-salary regions.
    And if the decision makers themselves don’t live here, they might not be
    personally-motivated, or even able, to take the impacts of their decisions on
    the economic health of the area into account. All of this contributes to the
    lack of Google-style anchor companies, I suspect.

  • CS Prof

    “None of the professors are going to drop what they are doing and help you make a product.” Not true. I, and several of my colleagues in the School of Engineering, have been heavily involved in startups, though typically in Silicon Valley, not Santa Cruz. But there’s usually more talent and easier access to money in SV, based on our experiences trying to found a startup in SC several years ago.