August 22nd, 2003
the people of the Valley
Sent a message up the hill,
Asking for the buried treasure,
Tons of gold for which they'd kill.
Came an answer from the kingdom:
"With our brothers we will share,
All the secrets of our mountain,
All the riches buried there." - One Tin Soldier
(The Legend of Billy Jack)
is dumping on California these days. It was bad enough
that there was a televised debate between Gary Coleman
and a porn star, both of whom are running for governor
in the crazy recall election (I actually thought I saw a
reference to that match-up in a recent spam...). But now
in an interview in Business
Week , the king of the California start-up, the
subject of the New New Thing himself, Jim Clark, founder
of Netscape and Silicon Graphics says that he has given
up on California and that it is "an insanely
depressing place". Yikes. He's a real estate
developer in Florida now.
next? Vinod Khosla moving to Scottsdale and selling time
shares (He would predict the market to be in the
trillions within ten years on a dizzying amount of
infomercials)? Or Steve Jobs sells Apple to Gateway and
becomes a senior executive at Pepsi ("I do want to
sell sugar water for the rest of my life.")?
that California is still 1/8th of the American economy
and that Northern California is still home to almost ½
of the country's venture capital firms (if you count
ones that still operate at least one office there).
Something is rotting on the left coast and businesses
are moving out of the state.
we have all heard about the recall election and the
intense media scrutiny that would be far less intense if
it was Busamante vs. Reardon for governor. But there's
this guy, Ahhhnold, who is likely to win and most of the
good people of California are a little sheepish when you
call and needle them about their politics. Which is
refreshing for people from BC, the heretofore leader in
ridiculous politics and politicians. This circus is
nothing new for us, really. Call me when Ahhhnold gets
nabbed for drunk driving...
Silicon Valley is a veritable ghost town in the summer
of 2003 when you compare it to the summer of 1999. The
massive overbuild of office space has left landlords
with the ridiculous situation of offering negative rent.
That's right, you can pay -$2 a square foot in rent and
tack on the $10 in operating expenses (leaving your net
at $8 a square foot) for prime office space in the
Valley right now. You can shoot a cannon through a lot
of the industrial parks down there and not hit anyone.
Most people I have talked to say it is a pleasure to
drive the 101 now, given that it was a parking lot 10
hours a day in 2000. And yet some things haven't changed
much. Housing prices are STILL ridiculous compared to
anywhere else. Draeger's still sells ostrich salami at
$35/lb. And most of the residents in the tech community
are still very faithful to the California tech dream.
Even those struggling to find work believe.
the technology market collapsed and a few thousand
Valley start-up companies went along with it. Cisco laid
off its first employees ever in 2001. A whole bunch of
other companies followed suit. Venture firms gave more
money back to their investors (not profits, but actual
raised capital) in 2002 then they had raised to invest.
Enrollment at Stanford's business school shot up, which
is a definite change from the days when
"wet-behind-the-ears" students were leaving
early to start wedding dotcoms. But the Valley has
endured this twice before during its 45 year technology
history. And each time it has come back stronger and
bigger than the previous period.
1983-84, the Valley melted down after a long run
precipitated by the PC revolution and Apple in
particular. Many naysayers, a la Jim Clark, predicted
that it was back to apples and cherries for the miles of
orchards around San Jose. Then the defense contractors
started to light up the Valley again because of Mr.
Reagan's Star Wars initiatives and in the mid 80's,
Intel got out of memory and into microprocessors, a
flunked out salesman from Chicago started a database
software company called Oracle and a crazy couple from
Stanford scared away most venture capitalists in the day
as "unbackable". But in 1985, Don Valentine
said "I can find someone to run this thing"
and Cisco was off to the races.
in 1992, the new Democratic leadership in the White
House killed the defense business and the Valley slumped
badly again. But tech was still chugging along under the
radar, mostly. In the recovery from this bad recession,
Jim Clark started Netscape with Marc Andreesen and,
well, you know the rest of the story. Insane amounts of
wealth, yada, yada, yada.
will be back. There is absolutely no doubt. If
residential real estate markets are a somewhat liquid,
leading indicator of sentiment around the technology
business, then you start to understand why prices have
not plummeted. People are hanging around, confident that
the Valley will come back and not collapse completely.
brings me, rather late in the column, to the relevance
of California and its current state to BC and the
technology industry here. In the past 8 months, I have
seen struggling young tech companies here hire seasoned
executives from the Silicon Valley and become much more
focused, highly backable companies. Now is the time to
do this, not during the peak of the market. There are
very, very good, very, very experienced California
executives who will look at interesting opportunities
outside the Valley today. They may not re-locate here
however, which raises some difficult issues, especially
for a start-up. But the talent floating around is
impressive. Tom Ku, ex of BEA Systems and Sun
Microsystems, is leading a renovation of Axonwave
(formerly Gavagai) that has attracted some of the
excellent NCompass Labs people back from Microsoft. He
is but one example of this trend. How did the company
find Tom? Why, their VC, of course. Pangaea Ventures had
a contact that lead to him getting excited about the
big reason to pay attention to California right now is
because, despite the downturn and the depressed office
real estate market, it still costs way too much to
operate a start-up in the Valley. In a twist to the
aforementioned attracting of management talent to BC
based start-ups, why not attract California companies to
hire BC talent to build and manage their products? At
Greenstone, we successfully employed that model in a
couple of our companies and continue to make attempts to
match exceptional talent here with VCs and start-ups
there. Vancouver makes so much more sense than India or
Mexico for finding real start-up expertise, the kind of
talent you keep, not rent. The focus on research and the
credits that you can apply to the work being done is a
big eye-opener for California companies. We have a real
opportunity to further establish the link to California
now, before they get humming again and get their usual
top of the market xenophobia about anything "more
than a bike ride away". Greenstone has been working
for 4 years on this model, but a little push from
someone a little louder than us would be helpful.
final link to California that we need to establish
loudly… Their new governor, the lucky guy that will
lead them out of this funk (not necessarily by anything
he does directly, but because the cycle is trending up
all by itself), has a summer house on Kalamalka Lake
outside of Vernon. We should make sure that when
Ahhhnold visits, he leaves with a better impression of
our capabilities and not just of our natural beauty.
Let's make BC his second home, shall we?
What Do You Think? Talk
Back To Brent Holliday
Something Ventured is a bi-weekly column designed
to supplement the T-Net British Columbia web site with
some timely, relevant and possibly irreverent insight
into the industry. I hope to share some of the
perspective and trends that I see in my role as a VC.
The column is always followed by feedback (if its
positive or constructive. I'll keep the flames to
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