Startup Forum: What does it take to make it in Berkeley?

The evening's second panel (from left to right): Qeyno Labs' Kalimah Priforce, MOG's David Hyman, June Taylor from The Still Room, Stupid Fun Club's Will Wright and moderator Lance Knobel. All photos: Nancy Rubin

What makes a city a magnet for startups? Why do entrepreneurs and financiers flock to the South Bay even though there are so few good places to eat there? Does Berkeley want to be Silicon Valley anyway? (You can guess the answer to that one.) Maybe Berkeley is just not hip enough to attract young talent? Does the city’s red tape makes it too cumbersome to be innovative? And, perhaps most significantly, is there just too much distrust of businesses as they thrive and grow? Perhaps Berkeley should focus on what it already does well: incubating startups then allowing them to fly to pastures new, be that San Francisco or Palo Alto.

All these questions were raised and debated at Berkeleyside’s Startup Berkeley Local Business Forum, last night in downtown Berkeley. An estimated 220 people gathered at the Freight & Salvage to listen and engage directly with two sets of panelists, and to discuss the issues among themselves both before and after the program.

[...View a Photo Gallery of the Startup Berkeley Forum, with photographs taken by Berkeleyside contributing photographer Nancy Rubin...]

For Judith Iglehart, a former executive of Keiretsu Forum and recently appointed Chief of Staff to Berkeley Mayor Tom Bates, the intellectual curiosity of Berkeley will always win out over the “warm happy glow of money” represented by Silicon Valley.

Participants at Startup Berkeley take their seats at the Freight & Salvage

Silicon Valley was just apricot orchards until Regis McKenna arrived, Iglehart said. [McKenna was  the marketing guru some say "created" the idea of Silicon Valley.]

“You were in a special place because they told you so. We can do that here,” she said. “There are ideas tumbling down the hill from the Lab and from UC Berkeley every single day.”

Iglehart also pointed out that although the lure of the Valley is often said to be the venture capitalists that congregate there, startups are 67,000 times more likely to be financed by angel investors than VCs and “Cal is jam-packed with angel groups”.

Rauly Butler from Mechanics Bank

As far as Rauly Butler, senior vice president of retail banking at Mechanics Bank is concerned, Berkeley is unparalleled as a location for businesses. Citing pioneering entrepreneur Alfred Peet as an example, he said: “There is no better place than Berkeley for collaboration — be it networking at the coffee shop, at a restaurant or when strolling down Solano Avenue.”

Andre Marquis, director of the Lester Center for Entrepreneurship at Haas Business School, was equally positive about the city’s sense of community, which, he said, was the key ingredient for a successful startup. Marquis, who launched three startups before taking up his post in academia, said he had seen a lot of progress in terms of Berkeley as locus for entrepreneurs since he was a student at Cal. “I feel a change,” he said. “Students come here to be part of the Bay Area.”

Members of the audience were quick to pierce the bubble of optimism, however. A current Cal student said it was difficult to see the attraction of staying in Berkeley when all his friends had moved to San Francisco or Silicon Valley.

Don Loeb echoed his view. “Young people want to be in San Francisco,” he said. He added that there is a lack of landmark companies in Berkeley, such as Google on the Peninsula or Zynga and Twitter in San Francisco. “Apart from Pixar, in Emeryville, we don’t have enough large companies to attract others,” he said.

Even Butler had to agree that San Francisco sounded “sexier” than Berkeley — and the consensus in the room was that a few more good bars would not go amiss here.

Kalimah Priforce, Qeyno Labs

However, speaking on the second panel, comprising four business owners in Berkeley, Kalimah Priforce, who moved from Brooklyn to Berkeley, said there was a lot to be said for Berkeley, not least its proximity to Oakland. The founder of Qeyno Labs, which creates a virtual career day for schools in underserved communities, said: “And there’s nothing like East Bay girls!”

Speaking seriously, Priforce pointed out that Berkeley startups had the opportunity of developing East Bay “native talent”, including hiring dynamic young people from East Oakland and boosting the local economy.

Both Will Wright, creator of The Sims and founder of Berkeley-based Stupid Fun Club, and June Taylor, founder of The Still Room on Fourth Street, outlined some of the hurdles they had encountered with city bureaucracy when setting up their businesses.

For Wright it was as basic as securing a business license for his startup which spans software development and light industry. “There was no zoning category for that and the city was not interested in solving the problem,” he said. It was a seamless, more transparent process in Walnut Creek and Emeryville in comparison, he said.

June Taylor, The Still Room

Taylor spoke of the difficulties of bearing fixed costs such as health processing and licenses for food-related artisanal “microbusinesses” such as hers. She also stressed the need for the city to recognize the asset it has in the plethora of small, passion-fueled food entrepreneurs who have set up shop here. “Berkeley must encourage and capitalize on this,” she said.

David Hyman, founder of streaming music service MOG, which is headquartered on Seventh Street, expressed concern about Berkeley’s “anti-capitalist bent”. Addressing the issue of zoning in west Berkeley, and the restrictions on what types of businesses can move into the light industrial spaces there, he asked why a company such as his should not be viewed as creative and “artisanal”. “If you make something out of ones and zeros you can’t get into one of those spaces,” he complained.

Hyman added that he has been turned down by engineers who didn’t want to come to Berkeley, but, once he has convinced employees to move, here they appreciate the city’s virtues. “You can get brilliant people here and you have them excited that they can ride their bikes to work.”

What was clear is that there’s a hunger for more gatherings where business owners and city officials, business students and budding entrepreneurs can come together and take these questions to the next level — formulating concrete steps to both bring and retain businesses right here in Berkeley.

Key take-aways from Startup Berkeley:

  • Berkeley needs better transit options: an equivalent to Emeryville’s Emery-Go-Round, for instance, and more options for Bay Bridge commuters.
  • What Berkeley does really well is social enterprise, and it could focus more on this.
  • Berkeley has proved it’s a good place to start a business. “It would be better poised if it embraced what we’ve got. Why not focus on initiation?” [Ayori Selassie, a co-founder of Pitch Mixer with Kalimah Priforce.]
  • Berkeley is a city with an aging population and gentrifying neighborhoods. This, and corresponding higher rents, doesn’t help it attract young people.
  • More work needs to be done to open up connections between the city and the university. “This is real talk: UC Berkeley and the public side of the city are not that connected.” [Kalimah Priforce]. Perhaps a rejuvenation of Telegraph Avenue could be part of a rapprochement?
  • Berkeley’s diversity is a huge bonus. Twenty percent of residents are foreign-born. “We can be diverse, but we don’t need to be dirty.” [John Caner, head of Downtown Berkeley Association which is implementing a big clean-up campaign.]

View a Photo Gallery of the Startup Berkeley Forum, with photographs taken by Berkeleyside contributing photographer Nancy Rubin.

Related:
Skydeck hopes to boost Berkeley-based tech startups [03.01.12]
Berkeley for startups: Perfect spot or brain drain in action?  [02.09.12]
Five steps to make Berkeley a high-tech Mecca [03.13.11]

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  • EricPanzer

    Alluded to by one commenter in particular, the notion that high rents and “gentrifying” neighborhoods are keeping young people away from Berkeley is simply preposterous. Young people are flocking to San Francisco in spite of high rents and are themselves often the vanguard of gentrification. What sends young people to Oakland rather than Berkeley is not the fact that it’s cheaper per se; rather, they get more bang for their buck and are closer to San Francisco, to boot. Downtown Oakland offers nightlife comparable to Downtown Berkeley, and Temescal surpasses both of those areas in terms of interesting retail. Berkeley could easily match or even exceed the appeal of San Francisco or Oakland if only it provided more excitement, better transportation, and increased employment opportunity. And if lowering rents is really what we’re interested in, how about aggressively pursuing more housing while we’re at it?

  • KMG000

    Thanks for summarizing the take-aways so clearly, Tracey.  So … who will put them into action?  Can Berkeleyside follow activity around these take-away points, and let the readers know about what’s happening so we can get involved?

  • The Sharkey

    Don’t forget that Oakland is much friendlier to startup businesses, which means there are constantly new restaurants/bars/galleries popping up and adding to the excitement and appeal of Oakland.

  • Bruce Love

    Regarding Taylor on “fixed costs”: 

    Perhaps something like the La Cocina model can be adapted and expanded for that.  That is, some “incubator” venture creates a licensed kitchen and (unlike La Cocina) can be a statutory licensee and employer on behalf of new ventures in exchange for something like debt or future revenue shares or equity, creating a smoother path for new ventures that are successful to take on those costs themselves after achieving profitability.   If such a platform were run by investors, successful pitches would get a temporary share of use of the kitchen and corporate employer (not entirely unlike the Skydeck model).

    Taking that even a step further:  There’s no obvious reason to limit this to ventures that start in the incubator/platform and then spin out and send money home.   Alternatively, ventures could be “one-shot” or “seasonal” — never “graduating” from the incubator but instead starting, turning a profit, and calling it a day to go move on to the next big thing.

    100 food start-ups within a few years only need, figuratively speaking, 10 stoves and 1 workers comp insurance policy, with a little coordination.  And not every temporary smash-hit product needs a new corporation to go with it.

    As a matter of public policy the state does impose those barriers to entry which are especially visible in food businesses.  One idea is to reduce the regulatory burden but that’s tricky without sacrificing public safety and public interests.   Another idea is for investors to privately amortize those costs among ventures using a “platform” of this sort.   I wonder if that second idea could balance out favorably.

  • Hatemanjr

    Food start ups? don’t  think Berkeley has more then enough food related business and needs more practical industries were you can employ more then a counter person and a baker?   It’s that narrow minded approach that has pigeon holed the city to next to zero opportunities in just aout every category unless you want to work at Fatslice or Amoeba Records.

  • Andrew

    Frankly, I’d like to see more manufacturing in Berkeley. Not large-scale manufacturing, but boutique manufacturing. Small, high quality design and production runs of just about anything. I’d be curious to learn how zoning and permitting impacts this kind of start up.

    Bikes, backpacks, audio equipment, parts, clothing, commercial ceramics, musical instruments… you name it.

    And I would agree that Berkeley needs to better acknowledge and promote the small food entrepreneurs that June Taylor mentions. There are a lot out there. Increase their visibility.

    I’d like to hear more about Berkeley’s perceived “anti-capitalist bent” mentioned by Hyman. It’s not clear to me why a city would not be interested in promoting business, which ultimately fuels everything else. I don’t want Berkeley to become a bedroom community.

    I would add that as one who works for an East Bay business that competes for designers it is very hard to compete against the appeal of San Francisco. There is just more there there and I’m not sure we can do much about that.

  • Dh

    Thank you for initiating this talk! It is so helpful for Berkeley to start seeing itself in a new way. Good work! Hope the City people were listening.

  • Bruce Love

    You left out Top Dog.   How could you?

    Seriously, though:

    The food industry around here is crowded, that’s true.  One side effect seems to be that there is a lot of churn in entrepreneurial experiments.   Some of those experiments grow into lasting businesses like The Still-Room,  the Cultured Pickle Shop, or Tofu Yu.   Every now and again some of these experiments grow huge (and typically eventually outgrow Berkeley) like, say, Scharffenberger Chocolate.    You can think of those start-ups, collectively, as a big experiment in discovering new markets.

    The financial barriers for a new food start-up are high between the amount it costs to set up a new kitchen and the fixed costs that Taylor talked about.   So the speculation is that an incubator kitchen of the sort I described might be able to lower those start-up costs, thus enabling more frequent experiments, thus speeding up the rate at which eventually successful companies are created/discovered.   There are lots of ways such an incubator might be able to pay for itself.

    The food entrepreneur world seems hungry for ways to lower entry costs.  Consider examples like the new proliferation of food trucks, La Cocina, pop-up restaurants, and so on.

    If it were successful, the incubator approach might also help create jobs that are ancillary to food prep in sales, marketing, warehousing, packaging, training, IT and web design, commercial art, logistics, farming etc.  That is, it can help to create more recirculation of money.  When they grow up to be exporters, these kinds of company wind up importing cash and raw ingredients, exporting finished goods and spreading around some money.   They’re good for the balance of trade.   They aren’t, commonly, huge direct employers — so that is a limitation.

    Another limitation of the idea is that sharing a kitchen and a statutory employing corporation is logistically hard.   It would take some real skill to run such an incubator in such a way that it didn’t get bogged down in transaction costs and strife.

  • Chris

    “Young people” don’t want to pay more for the superior schools and police services in Berkeley.

    PS – nightlife in downtown Oakland now thoroughly smashes anything happening in Berkeley.

  • http://www.facebook.com/people/Caitlin-McShane/100000194490085 Caitlin McShane

    Thinking about starting up a business in Berkeley? Need funding? Announcing the 2012 Start-Up Funding Challenge: http://www.opportunityfund.org/startup.

    Loans: $5,000 – $50,000 at 7.5% interest
    Grants: $2,000 and $5,000 prizes!

    Application deadline: April 15, 2012.

    More info: http://www.opportunityfund.org/startup.

    (P.S. Businesses anywhere in the Bay Area can apply, not just Berkeley. You can be anywhere from a few months out from opening up, to having been in operation for one year already.)

  • Christine D. Soto

    I just moved from SF’s Inner Richmond to Berkeley in December and after 2 months, there’s just something that has not quite yet clicked for me here.  It seems like entrepreneurship is encouraged and thrives in SF, while in my neighborhood (NE Berkeley, University & San Pablo), there’s a dearth of interesting retail but not for lack of space, as there are plenty of vacant storefronts on San Pablo and University!  I am so glad that city leaders and experienced business leaders are having this conversation, since I think Berkeley has a lot of potential to grow and become as walkable and interesting a city as SF, but with better weather ;)

  • Graham Freeman

    The take-aways from my own perspective:

    * Social enterprise:  My IT consulting firm, a worker-owned co-op which mostly chooses mission-driven clients, embodies this fairly well.  http://eupraxis.coop/

    * Initiation:  Although Eupraxis started with a rented PO box in San Francisco, our first (and so far only) actual office has always been here in Berkeley, as have most of our worker-owners.  This is mostly thanks to viable, beautiful office space becoming available an enjoyable 10-minute walk from home.

    * Gentrification:  My 2-year-old might have something cute to say about this.  That said, the prospect of buying a home here is still daunting.  Our family may end up in Oakland for this reason.

    -Graham

  • Graham Freeman

    Have you meandered down San Pablo toward Ashby?  I noticed several cool new shops when I walked that direction to Greenerprinter.com the other day.  The lighting stores, while not new, are pretty interesting.  The Ecology Center (also not new) is probably my fav.

  • Graham Freeman

    Also, the folks at the City’s Economic Development Office have been amazingly helpful since I first contacted them this week.  Motivated, effective, friendly – I really couldn’t ask for better.

  • Chrisjuricich

    Even I, at a wizened 50something will concur on that. Oakland has a MUCH better nightlife scene than Berkeley– and while restaurant chic may be equal, Oaktown has a lot more interesting bars and clubs–particularly for young folks.

    What bar do we have? Oh, yah. Albatross. Acme. Can’t think of another.

  • Chrisjuricich

    If you live near University/San Pablo, btw, you are in West Berkeley,not NE.

    I’ve myself fantasized about opening a restaurant, food truck etc here in Bekeley but plainly, having just closed out one one-man business of mine, I’m less motivated now to commit to 60 hour plus workweeks while I’m in my late 50s. Plus my initial inquiries intodoingbusiness in Berkeley showed just how much upfront $$ in fees and permits are required, how many hoops one has to leap through, and I’ve long since decided the only project related to cooking will be to renovate our kitchen.

    For the truly motivated, even Berkeley’s seeming Medusa tangle of laws and regulations could be negotiated.

  • http://www.priforce.me/ Kalimah Priforce

    A truly terrific event Lance and the Berkeleyside team put together.  Happy to have been a part of it!