Startups look for the hookups

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Like a number of ex-Google employees, Ethan Anderson chose San Mateo to launch his startup company, Redbeacon, in 2008.
Anderson and two other former Google whiz kids decided to run their award-winning website from downtown San Mateo because of its proximity to The City and San Jose, its access to major freeways and Caltrain, and its relatively cheap office space, among other draws.

“There are so many great and cheap restaurants downtown,” Anderson said. “No one at a startup has the time to cook.”

However, for all the reasons that many startups want to locate in San Mateo — the city’s businesses pulled in $333 million in venture capital investments last year, $71 million more than San Jose — there are plenty of other reasons why their growth means they cannot stay for long.

“The most obvious thing is higher-speed Internet,” Anderson said. “The Internet is superslow here. When you have four or five or six people trying to use a connection, it slows to a crawl. It’s an old downtown.”

Internet infrastructure in the city may be one of the top concerns among emerging startups, but the wish list is long. Some want larger office space. Others want more nightlife downtown, or better parking options. A few businesses want more racks on streets for employees riding bikes to work.

One energy company in San Mateo wants local colleges to offer courses that will prepare students to join its work force, said Linda Asbury, president and CEO of the San Mateo Chamber of Commerce.

“Isn’t it our responsibility to contact these companies and ask, ‘Why are you here, what would keep you here and what would get you involved in our community?’” Asbury said.

And the stakes are high, she said. The benefits of starting a business in San Mateo are becoming well-known among Internet entrepreneurs, particularly as the city located along Interstate 280 and highways 101 and 92 offers cheaper rents than others, such as San Francisco and Palo Alto.

YouTube, now based in San Bruno, started in San Mateo. Since 2004, San Mateo became home to a flurry of new businesses, including Salesforce.com, Digital Chocolate, Success Factors and Snap Logic.

Many of the city’s companies are run by former Google workers who launched a startup that ended up getting purchased by, well, Google, Anderson said.

The young companies with small work forces have largely done business in San Mateo under the radar. But business and government leaders are concerned that not tending to their needs could send them packing.

The city needs to “keep the pulse on what the issues and concerns are [among entrepreneurs] so we can employ practices to retain businesses in San Mateo,” City Manager Susan Loftus said.

To do so, business and government leaders in San Mateo have formed the Economic Development Growth Enterprise, an initiative seeking to deliver upon the various desires of growing Internet companies. That initiative recently received an infusion of $75,000 from the city, with a promise for $50,000 more should the private sector match that sum.

Another plan is to modernize and urbanize the way people live in San Mateo. That includes building up rather than out. It means stacking residences and businesses alongside the city’s vital transportation corridors for greater convenience.

“There’s a misconception that everybody wants to have a house that has a front yard and a fence,” said Asbury, adding that some people want quick access to transit and work without having to drive.

Some of those developments are already in motion, most notably the Bay Meadows project. Plans for the former racetrack include 1,171 residential units, 715,000 square feet of office space and 93,000 square feet of retail space, and it would connect to the Hillsdale Caltrain station.

And why not throw in a few bike racks downtown?

“It can also be something very simple,” Asbury said.

 

Need for Net speed prevalent

The top complaint among startup businesses in San Mateo is the city’s slow Internet connection speeds, but it remains unclear who will pay to install a more viable broadband infrastructure to keep businesses in town.

“I don’t think the role of the city is necessarily to be the provider of that service, but more to facilitate that and to ensure the business needs are met,” City Manager Susan Loftus said.

Cities nationwide are scrambling to build fiber optic networks in order to keep their economies viable.

President Barack Obama earmarked $7.2 billion of American Recovery and Reinvestment Act funds to expand broadband access nationwide.

There’s a DSL connection in San Mateo, but local entrepreneurs say the connection speeds for downtown businesses are around 1.5 megabytes per second, which would seem slow even in one’s home.

An initial focus of an economic initiative between the city and business leaders is to secure access to swift broadband services throughout the region so Internet startups don’t leave when they need to add employees.

Fast internet in San Mateo — a bastion for Silicon Valley startups — should be a given, said Linda Asbury, president and CEO of the San Mateo Chamber of Commerce.

 

 

With arms wide open

Tech companies that have emerged in San Mateo:

NameFounded
Redbeacon.com2008
Salesforce.com2007
Snap Logic2006
Gazillion Entertainment2005
SuccessFactors2005
FixYa 2005
Digital Chocolate2004
SugarSync2004
NetSuite2000
Keynote Systems1999

Source: San Mateo Chamber of Commerce

 

Backing businesses

Venture capital dollars per city in 2009:

San Francisco: $1,013,000
Sunnyvale: $663,000
Mountain View: $574,000
Redwood City: $545,000
Fremont: $528,000
Palo Alto: $514,000
Santa Clara: $372,000
San Mateo: $333,000
San Carlos: $291,000
Menlo Park: $266,000
San Jose: $262,000
South City: $245,000

Source: PricewaterhouseCoopers

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