Oakland ranks No. 11 on list of best cities for tech startups

Jack London Square is home to a growing number of solar energy companies. Photo by Theresa Adams.

Jack London Square is home to a growing number of solar energy companies. Photo by Theresa Adams.

San Francisco and San Jose may soon have a rival when it comes to tech startup headquarters.

Oakland ranked No. 11 on a list of the most attractive U.S. cities for tech startups, according to a recent survey from the National Venture Capital Association. San Francisco was ranked No. 1, with Silicon Valley’s San Jose coming in second.

The results were first published on CIO.com, a publication for technology leaders. Cities like Boston, Los Angeles, Boulder, CO and New York City also made the list.

Available space, low real estate prices, access to talent pools like U.C. Berkeley and an attractive urban vibe all draw new tech startups—outshining drawbacks like crime and a troubled school system that still challenge the city.

“Today, in San Francisco, if you’re a young startup, you literally have to worry: ‘Is there room for you to grow?’” said Joe Kennedy, Chief Executive Officer of Pandora, which just added 30,000 square feet to its Oakland operations. “You have young startups trying to bank for space in advance. Oakland still has a reasonable amount of capacity and companies can locate for a reasonable cost.”

In contrast to Silicon Valley’s general technology focus, several Oakland startups and venture capitalists said the city is becoming more of a sustainable and green tech hub.

“We’ve started to see the clustering of clean tech companies along [Highway] 880,” said Cynthia Ringo, one of the managing partners of DBL Investors, a venture capital firm that invests in several Oakland tech companies including Pandora and green packaging business Ecologic.

Ecologic managers said this way of thinking was an important part of their operations.

“The thinking is progressive,” said Jack Wei, director of marketing, describing many Oakland startup managers and their companies. “It’s so fast-paced, and it’s creative.”

The diversity of the city was another plus.

“If you think about the methodology of Silicon Valley, sometimes … the reality is that … the market starts on the east side of the Bay and goes from there across the rest of the country into the great masses of America,” said Danny Kennedy, president of Oakland-based Sungevity Inc., a solar electricity company. “You get your first test market by talking to local Oaklanders.”

He added, “I know there’s a lot of negative press around Oakland, and we need to deal with public safety issues and education, but there’s a lot of commitment to the place, too, and a lot of people that love it dearly. There’s a lot of pride in Oakland—that counts for something.”

To encourage business development, the city offers several tax incentives. Tech startups producing something involving sales can get up to a 50 percent tax break. Companies with at least 20 employees can qualify for a business tax incentive, in which all or part of their first year business tax to the city is refunded, said Sean Maher, spokesman for Mayor Jean Quan’s office. For certain industries like high tech, digital media or digital art, the city can waive the 20-employee requirement, he said.

“We’re encouraging those kinds of companies to come to Oakland,” Maher said. “We’re trying to break down that barrier for them and give them easier access.”

He added that Quan is trying to tackle public safety concerns through the new budget released last week, which allocates more to the Oakland Police Department’s training academy, enough funding for four academies in two years.

Hot spots for tech startups in Oakland include downtown Lake Merritt, the area around the Oakland International Airport and Jack London Square, which has become a hub for solar energy companies. Access to transportation, whether it’s BART, the airport or Highway 880, make these places desirable, said Nancy Pfund, one of the managing partners of DBL Investors. The East Bay is also home to a growing biotech industry, with hubs in Emeryville, Berkeley, Alameda and Richmond.

The growing reputation of Jack London Square as a solar startup central brought new startup Sunible Inc. to Harrison Street in Oakland. Sunible allows consumers to compare prices of solar energy providers in much the same way as Kayak.com lets travelers cross check airfares of different airlines, said Stephen Torres, CEO.

“We wanted to be part of this solar startup ecosystem,” he said. “We have all of the great access to all of the talent, without the extra price.”

Torres said one drawback might be that recruiting potential employees in San Francisco requires a location in that city.  But few startup CEOs mentioned drawbacks of having their headquarters in Oakland.

“Our employees would revolt if we moved out of our present location,” Joe Kennedy said. “They like the vibe of the neighborhood, they like what they’re able to do … they’re reasons not to just come here, but more strong reasons to stay.”

6 Comments

  1. local loudmouth

    They all sound so self absorbed, I smell trouble brewing.

    • Examine your prejudices.

      • local loudmouth

        “feeling, favorable or unfavorable, toward a person or thing, prior to, or not based on, actual experience.”
        -Gordon Allport

        Why not examine recent history? For example the Snot.Com boom of the 1990’s.

        Too bad Jerry Brown isn’t still the Mayor of Oakland, he had a real soft spot for carpetbaggers, especially real estate carpetbaggers.

  2. Ever notice that when local journalists are assigned to write an article about Oakland high tech, they always interview the same people at the same three or four companies? At least you added two new faces to the usual list.

    Instead of relying on anecdotes, what are the business license stats for tech start-ups here compared to Berkeley, Emeryville, and San Leandro?

    • The full survey is here. Looks like Oakland gets the leftovers from SF, because Oakland is cheaper than SF and SJ not because of our restaurants, diverstity, edginess etc.

      As for how much our City’s economic development PR team is succeeding, the head of the organization that did the survey thinks that Pandora is in SF.

      1. San Francisco, Calif.
      Number 1 on our list is the San Francisco Bay area. A number of big-time companies grew their roots here with the help of a vibrant startup community–Pandora and Craigslist, for example. “The City of San Fran has become a lot more attractive to the IT startups due to young people wanting to live in [such] a vibrant city. These days it costs less money to create an IT business with the accompanying infrastructure so you can afford to do it in the city and not have to schlep into the valley and be a part of a bigger operation,” says Heesen.

      No. of Deals: 495
      No. of Startups: 431
      Sum of Equity Invested (USD millions): 4,243.52

      11. Oakland:
      The NVCA attributes growth in this market to spillover from the San Jose and San Francisco areas. “The cost of living and creating a business is lower in Oakland than in San Jose and San Francisco. Things are just cheaper in the East Bay than opposed to the city or San Jose or Silicon Valley areas,” says Heesen.

      No. of Deals: 50
      No. of Startups: 40
      Sum of Equity Invested (USD millions): 398.68

      http://www.cio.com/slideshow/detail/86468

      if we had our act together, we should be getting a much higher percentage of tech startups than we currently do.

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