The city of Berkeley has, in recent years, been working to make the community a better place for technological innovation via efforts to fight “brain drain,” make it easier to find office space, and create connections among its more than 300 startups to strengthen the “fabric of the innovation ecosystem,” city staff told council members during a special session last week.
The city is among the top technological and intellectual centers in the country, due to its proximity to institutions such as the University of California at Berkeley and the Lawrence Berkeley National Laboratory. But it has struggled to keep creatives based within the city limits due to the pull of Silicon Valley, limited room for businesses to grow, an antiquated business permitting process and a lack of connections among startups, said city staff last Tuesday night. Some have even described the atmosphere, previously, as “toxic.”
When those companies and entrepreneurs leave the city, they take with them valuable jobs, taxes, opportunities and resources that could otherwise be a boon to Berkeley. Keeping those jobs is especially important, in part, due to “multiplier” effects, said staff. That is, for every job created in the high-tech sector, more than four jobs are then created in other sectors, according to a December 2012 report cited by staff last week. By comparison, new manufacturing jobs are associated with the creation of less than two other positions.
The city’s Office of Economic Development, run by director Michael Caplan, shared with the Berkeley City Council on Tuesday night many of the ways he and members of his staff, including Jennifer Cogley, have been trying to address those problems, reportedly with positive results. He also noted various growth opportunities the city should try to harness going forward. (An overview of his presentation is available here.)
Council members expressed excitement about the opportunities, and encouraged continuing efforts toward improvement, particularly in the realms of helping startups remain in Berkeley by streamlining the permitting process; increasing high-speed and larger-scale data connectivity; and perhaps reworking some of the city’s zoning definitions, or their interpretation and application, to break down existing barriers.
According to data presented last week, there are more than 300 startups in Berkeley, with concentrations in bioscience, Cleantech, big data and enterprise software. At least 80 of those companies are concentrated in the downtown area near to the UC Berkeley campus.
The East Bay is “well positioned” to host these endeavors due to its world-class research institutions, high numbers of college graduates and also its ability to attract venture capital to fund new enterprises. According to Caplan’s report, Alameda County was among the top 10 counties in the nation to attract venture capital across a wide range of industries. The county is also among the top in the nation in terms of patent production per capita. High numbers of PhD recipients, and millions — perhaps billions — of research dollars are among other local benefits.
All these forces give Berkeley an edge, which the city has been trying to harness using the framework of an “innovation ecosystem,” said staff.
“The phrase ‘Innovation Ecosystem’ refers to the environment in which interactions between various actors and institutions spawn successful company formation,” according to Caplan’s report. “The elements of a healthy ecosystem typically include educational and research organizations, corporate research institutes, business schools, a skilled labor force, experienced entrepreneurs, sources of capital, engaged economic development and business assistance organizations, and supportive policy makers. Berkeley is well endowed with all of these and staff has been working to support improved interaction and alignment among the various elements.”
Some of the initiatives that have come from the Office of Economic Development, or have been supported by it, include the creation in 2010 of the Berkeley Startup Cluster; the development of new events and networking opportunities for local startups; the opening in 2011 of the Berkeley SkyDeck Accelerator; and the creation of a new website, LocateinBerkeley.com, that helps local businesses find appropriate commercial spaces.
The city’s Office of Economic Development has taken on or aided in these efforts in collaboration with the Downtown Berkeley Association, the Berkeley Chamber of Commerce and UC Berkeley. (Read more about each of them here.) Deepening those partnerships will continue to play an important role moving forward, staff said.
Learning more about Berkeley startups
Last fall, Economic Development staff surveyed nearly 500 people who work for approximately 350 Berkeley startups to learn more about the community. They found that most — 120 — of the companies were focused on software development, with significant numbers also in the biosciences (14%), Cleantech (13%), professional services (15%), consumer products (8%) and electronics or devices (7%).
Most of those businesses, nearly 50%, are concentrated downtown, with many also in West Berkeley due to an increasing amount of office space available there.
The survey also found that 73% of respondents said they had a “fully deployed” product or service of some kind, as opposed to something still in development.
Most of the startups noted they had been able to launch with relatively low amounts of funding, staff wrote. About 43% raised $100,000 or less; another 18% raised $500,000 to $1 million; and roughly a quarter had raised more than $1 million. For most (61%), “bootstrapping” had been the main avenue for fundraising, with another 45% relying on “Angel” investors. Only four — all of which were software companies that are located downtown — had received some type of venture capital.
The survey found favorable attitudes toward Berkeley from many respondents, but also noted concerns about the city’s ability to support growth over time.
“While the majority of respondents would ‘recommend Berkeley as a location,’ many used the comments field in response to this question,” according to Caplan’s report. “Comments included concerns about being able to recruit competent staff, access to sufficient office space, quality of life issues on Downtown’s streets, and Berkeley regulations and taxes as compared to neighboring cities.”
Areas for growth noted by Caplan include raising Berkeley’s profile as a good place for these businesses to grow; deepening the collaboration between the city and the local startup community; more meet-up and pitch events; and the creation of better commercial office space around the city.
Business licensing improvements in the works
Of key interest to council members was also the improvement of the city’s business licensing process. In recent years, the city has taken steps to streamline parts of that process, but it continues to pose barriers to local entrepreneurs. The city is beginning a transition to online permitting for some types of activity — renewals and license payments — but that effort is still in the nascent stages.
Last Tuesday, Caplan noted that “the permit issue” was among the biggest complaints raised by local startups, and said moving toward some of that online functionality will be a step in the right direction.
City Manager Christine Daniel told members of the City Council that, earlier this month, she had charged the Office of Economic Development with taking a close look at exactly how permitting works in Berkeley to see how the system can be improved. Staff plan to talk to customers and find out the obstacles with the aim of making the process more-user friendly.
That effort is still in the very early stages.
“This is obviously a significant undertaking and at this stage we are still trying to figure out the scope of the project and the best way to proceed,” Caplan said via email last week. He said staff would be meeting in the near future to hash out more of the details.
Mayor Tom Bates said that, though a variety of challenges remain, he is excited to see how Economic Development staff have been tackling the issue from a range of angles.
“It’s not one system. It’s the whole system. It’s all of these pieces coming together,” Bates said. “We’ve got a lot more work to do and we want to do it, to continue to grow, be vibrant, have meet-ups. But we also want to recognize that we’ve made great strides and it’s thanks to this department.”
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