Articles of Interest

Silicon Beach Can Weather Dot-Com Slowdown, Execs Say
San Jose Mercury News
Monday, March 5, 2001
by Ken McLaughlin

SOLID-BASE COMPANIES ON LAID-BACK SIDE OF HILL ATTRACTING WORKERS LAID OFF IN THE BAY AREA

The high-tech implosion has hit Silicon Beach, but many Santa Cruz tech executives think they can take advantage of the heavier carnage in Silicon Valley and San Francisco to ultimately boost the industry in their part of the world.

``The dot-com bomb dropped on the Bay Area, but at least until now we've been hit less hard,'' said Steven Beedle, chairman of the Santa Cruz Technology Alliance. ``We're getting mostly the fallout.''

As programmers and other dot-com employees are laid off in droves from failing or defunct firms in San Francisco's Media Gulch and the Santa Clara Valley, companies on the laid-back side of the hill have stepped up efforts to woo them with come-ons of cool 'tudes, saner commutes, great sand and surf -- and more of a ``balanced life.''

Technology executives say Santa Cruz County, unlike San Francisco and Silicon Valley, had few of the kind of dot-coms whose main business seemed to be to drain cash from venture capitalists.

Unlike the ``dog food dot-coms,'' as Santa Cruz author Paulina Borsook has dubbed them, most of the Web-related businesses in Santa Cruz are ``for real'' -- Internet service providers and well-grounded companies that help other high- and low-tech firms with Web strategies and computer needs, local tech execs say.

Santa Cruz County has seen few company closings and a relatively tiny number of layoffs since the dot-com dismantling began last spring.

One reason is that coastal companies found it harder to find venture capital to fund dot-coms with marginal business plans.

``The VC community in Silicon Valley is one of the tightest clubs in the world,'' said Beedle, CEO of Santa Cruz's ZNA Communications, a high-tech market development firm. ``They haven't had to travel far, until now, to find entrepreneurs with good ideas. Their bias has been that Silicon Valley is the center of the technology universe. But now the universe has expanded to include the Cyber Coast.''

In the past year, numerous dot-coms in San Francisco -- fromPets.com to More.com. to Eve.com and Productopia.com -- have died. That has also been the case in Silicon Valley, where the casualties have included Miadora.com, Chipshot.com and Kibu.com.

The only known dot-com flameout in Santa Cruz has been Cardsmith.com, a company funded by Dutch investors that let people send printed postcards from the Web. The business was run out of a Santa Cruz home.

As the high-tech job market in general softens, many tech execs hope that more Santa Cruzans will take a harder look at finding jobs closer to home.

``Not fighting the Silicon Valley rat race or Highway 17 -- that's what it's all about,'' said Robert Cobez, a high-tech management consultant who four years ago moved his company from Los Gatos to Santa Cruz. ``I never really liked the ocean because I don't swim. I drown.

``But now my wife and I have friends who take us sailing. And Santa Cruz is the kind of place where you can still walk down the street or wharf and run into tons of people you know.''

According to the 7-year-old technology alliance, the number of tech businesses in the county has skyrocketed from about 35 in the early '80s to more than 500 today -- and about 50 more than a year ago.

High tech has even surpassed tourism as the county's second-largest job generator, says a new Cabrillo College study that used more sophisticated techniques in finding the industries people actually work in -- rather than classifying jobs as ``secretarial,'' ``managerial,'' etc.

Here's the job breakdown: agriculture and food processing, 18,026; tourism, 3,600; high-tech manufacturing, 5,052; and software, 2,719 for a high-tech total of 7,771.

And the state Employment Development Department projects high-tech growth by 2004 will far exceed Silicon Valley's. The need for database administrators will grow by about 75 percent and for general computer and data processing jobs by 55 percent, said Raymond McDonald, an EDD labor market consultant.

Many of the folks displaying their wares -- both hard and soft -- at the recent Santa Cruz Technology Symposium and Exhibition seemed more hopeful about the New New Economy than the old red-hot one.

``I kind of like the shakeout of the bad companies and bad ideas,'' said Arlin Bleclic of SCITX, CEO of the Santa Cruz Internet and Telecom Exchange. ``That way we're doing business with companies that we know we'll be around for a while. You can only have so many winners.''

SCITX hasn't let the dot-com meltdown stop its plans to build a huge data center, a ``server farm,'' in Santa Cruz's old Wrigley Gum building, shuttered a few years ago.

Two weeks ago, the firm rented 30,000 square feet of space to make it easier for local businesses to service their computers and data bases without driving over the hill. It hopes to open the farm -- which will also provide faster Internet connections -- in June.

``We hope to attract some high tech to Santa Cruz that would otherwise go over to the valley'' because of the current shortage of database space on the coast, Bleclic said.

The irony of the Santa Cruz technology industry being more ``conservative'' in a town known for its dreadlocked bongo players and spaced-out New Agers has not been lost on tech leaders.

``High tech is way less flaky over here,'' Beedle said with laugh.

In the beginning, most of the high tech in Santa Cruz was big business -- hardware manufacturers like Seagate Technology and Texas Instruments and big software businesses like Borland and the Santa Cruz Operation.

But most of the boom has come from the burgeoning number of smaller companies, with 10 to 100 employees. ISPs like Cruzio.com and Got.net and Sasquatch Computer. Web strategy companies like the Igneous Group. E-commerce service companies like Tartan Technology. Dozens of E-cottage industries employing one to five employees.

Al Shugart, the maverick founder of Seagate Technology in Scotts Valley, said when he founded Seagate in 1979 he was told he was nuts to locate on the Santa Cruz side of the mountain. But, he said, he's never had trouble attracting talent.

Still, Santa Cruz industry leaders admit they still have an image problem -- that techies on their side of the hill are more interested in surfing and strolling on the beach than working hard to pump out a product on time.

Bunk, said Greg Caras, chief executive officer of the 10-year-old Igneous Group, located near the Santa Cruz yacht harbor. ``We have a real solid team -- a lot of hard workers who'll stay here til 2 in the morning if they need to finish a project.''

But like many bosses on the Cyber Coast, Caras encourages his workers to have a life, too. ``I don't like to see people come in on weekends,'' he said.

Igneous Web developer Brian Chernicky and engineer Corey Smith usually do their surfing in the morning and head to work around 10 a.m.

``But once I'm here, I'm here,'' said Chernicky, a graduate of the University of California-Santa Cruz. ``It would have to be the best waves of the century for me to take a half-day off.''

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