East Bay Innovation Engines Moving Economy Forward

By Hacienda Network Staff Writer

Local Strengths Surpass Current National Trends

How's the Tri-Valley holding up under current economic conditions? According to two local experts, it's in good shape. Yes, there is some current weakness, but the underlying strengths that have made the region such a hotbed of prosperity and innovation will continue to fuel the engines of growth long-term.

Bruce Kern, executive director of the East Bay Economic Development Alliance, and Toby Brink, President and CEO of the Tri-Valley Business Council, are keenly sensitive to the fact that business growth doesn't happen by accident. Often what goes on inside a company is an extension or consequence of the external environment. The organizations these two men run are committed to making sure that external conditions are favorable and welcoming. The work entails identifying the critical ingredients for business success and developing action plans to address any local shortcomings. It's an ongoing effort, and both agencies are involved with a mix of initiatives to propel the regional economy forward.

Supporting the Innovations

As a sign of its commitment to fresh thinking, Kern uses a different vocabulary to describe how the East Bay Economic Development Alliance tackles its official task of promoting local investment and job growth. "We are a generator of information, a convener, bringing people together to help businesses achieve a competitive workplace," he explains. Instead of the cut-throat competition of old, however, today's projects are collaborations that unfold within a vast network of interdependencies, what Kern refers to as the "whole supply chain of people, from universities to national labs, that furnishes the seed corn" for inventive ideas that turn into job- and profit-generating new products and services. With activities on so many fronts, from trade missions to worker retraining to the region's quality of life, East Bay EDA has several irons in the fire.

Appropriate, as the organization was originally founded in 1990 to promote investment and job growth in Alameda County. In 1996 it added Contra Costa County to its sphere of influence, becoming EDAB, the Economic Development Alliance for Business. Ten years later, there was another name change, to the East Bay EDA , which "better reflects the bi-county mission of the organization," according to the web site.

Kern is quick to point out that recent economic figures hardly tell the full story of what's happening in the area. The fundamentals remain strong, and he's optimistic that any "near-term market balance issues" will correct themselves, just as they did following the tech bubble of 2000. "Our job," he remarks, "is to mitigate them as much as we can."

His strong sense of confidence in the "extremely innovative, globally connected" East Bay community makes it easy to believe. Out-of-the-box thinking is "in the water here," he postulates, and the region's lively mix of cultures contributes to the overall climate of adaptability and willingness to change. "Bringing different ideas together is one of the fundamental elements for innovation. It creates incredible resources," he enthuses.

The big news in East Bay economic development concerns the emerging Green Sector, as exemplified by the recent opening of two major learning and research engines, the new Ohlone College Newark Center for Health Sciences and Technology and the Joint BioEnergy Institute (JBEI) in Emeryville.

Ohlone's Newark Center will prepare the region's workforce for the occupations of tomorrow - jobs like growing crystals for the companies making photovoltaic (PV) energy systems. The campus lays claim to a host of cutting-edge sustainability practices: insulation made of shredded blue jeans, a solar energy cogeneration system that supplies close to half the building's energy needs. As the first semester of classes got underway on January 28, the facility was on track for LEED Platinum certification from the U.S. Green Building Council.

The other "win" is JBEI, a $135 million U.S. Department of Energy (DOE) Bioenergy Research Center with the mission "to speed the development of renewable biofuels, liquid fuels derived from the solar energy stored in plant biomass." Its new facility, in an existing and very advanced lab complex in Emeryville, will be operated by a six-institution partnership led by Lawrence Berkeley National Laboratory. Sandia National Laboratories, Lawrence Livermore National Laboratory, the University of California campuses of Berkeley and Davis, and the Carnegie Institution for Science are the other partners.

These research investments are turning the East Bay into a center for alternative energy and emerging green technology, Kern says. "Clean energy is evolving into whole new set of innovations. We're seeing an array of companies coming here. We're competing for manufacturing the electric car. New business and venture investment are dramatically increasing, spurred on by both public and private money. It all creates an extremely dynamic and evolving economy."

The organization is also convening to respond to the wave of housing foreclosures and their impact on financial markets. Kern reports that a significant number of families in the area are experiencing foreclosure. East Bay EDA is working with the state and other entities to find resources and programs that can keep residents in their homes, "the number one objective," he says. Because so much growth is predicated on housing and financing, local leaders have pulled together through the agency to develop programs helping the displaced workers transition into other fields. As many as 15,000 jobs may have been lost, he confides. "We are using advocacy and convening to mitigate the very serious, significant impacts of the housing and subprime markets," he continues. "Our challenge is to help the workforce employed in sectors that are undergoing reductions shift into emerging occupations."

Capitalizing on Our Assets

The Tri-Valley Business Council (TVBC) focuses on a smaller area, closer to home-Danville, Dublin, Livermore, Pleasanton, and San Ramon. The organization was established in 1994 to represent the private sector in regional issues that impact the local economic vitality or the quality of life.

Toby Brink, formerly the executive at the San Ramon Chamber of Commerce, became President and CEO of the agency in September 2006. One of the first things he wants you to know is that although mortgage loan defaults have had a ripple effect across certain industries, the impact on commercial real estate, especially in the Tri-Valley, has been minimal. "Commercial brokers are telling me they haven't seen a significant slowdown," he reveals. That's partly in response to the recent occupancy shift from large companies taking up tens of thousands of square feet at a time to smaller, leaner enterprises moving into 1,000 square foot, subdivided offices. Many of these smaller entities will turn into "gazelles," businesses that grow at a disproportionately faster rate than others in their class. One of them could become the next Oracle. "The more there are, the more likely one of them will hit a home run," he muses.

Brink is very bullish on the region's competitive index, citing first the statistic that 43 percent of Tri-Valley residents have a bachelors degree or higher, compared to the California average of 27 percent and the U.S. average of 24 percent; and a patent filing rate per 100,000 residents that's five times higher here than in similar areas of the country. Like Kern, he assures us that "all the components are here for a highly competitive, innovation-based economy-an educated workforce, venture capital, a major research institution, a high quality of life, and consistently first-rate infrastructure, schools, and amenities.

A strong relationship with Lawrence Livermore Lab keeps the innovation tap flowing. New programs afoot are aimed at strengthening these ties through improved public-private partnerships. For example, founding scientists who leave the lab to join the companies formed to commercialize their technology can face an uncertain career path. Following the invention presents the best chance for success, but the known failure rate for start-ups is still in the 70 to 80 percent range. This risk can be pretty discouraging for scientists with a secure job in the lab, so one action item is a regulation change that lets them return to their old positions.

"That allows these talented thinkers to be part of the team until they have contributed their expertise, and then they can go back to develop new technology," Brink enthuses. The implications are "huge." "It means that the best and brightest minds will actually go out and ensure that these technologies are taken to the max."

Capital is another equation in the innovation formula. Beyond the early funding sources of friends and family and angel investors lie the venture capitalists. The challenge is that most of the VCs are on Sand Hill Road over on the Peninsula, and even today they tend to focus on business in their own backyard. Looking at where the VC money went in the first two quarters of 2007, Brink reports that $93 million was directed toward the Tri-Valley, "a grain of sand on the beach" compared to what flowed into the VCs' own neighborhoods of Menlo Park and Palo Alto. "We need to increase the influx of venture capitalists into the Tri-Valley. If we can't have our own geographic cluster, at minimum we need a forum to get the VCs over the hill to visit."

If there's an opportunity where we're not "fully capitalizing on our assets" - and Brink is quick to point out that this is not a failing, but rather the result of the relative youth of the Tri-Valley economy - it is in establishing a sense of cohesion. "Companies tell us there's no 'there' in the Tri-Valley," he says. Many of the innovators and/or cashed-out Silicon Valley or San Francisco-based executives now want to work closer to home and family in places like Pleasanton, he relates. The problem they run into is that the service providers they usually do business with, attorneys and accountants and so forth, don't have much of a presence in the area. So instead the new businesses locate where they have established relationships.

To counteract this trend, "We need to build a better fly trap and capture that business before it leaves the area," Brink explains. The solution: next-generation versions of the incubator and the "match.com"-type web site, without any of their drawbacks.

"We are very close to the beta version of a virtual incubator," Brink announces, likening the new program to the three legs of a stool. First there's a web site with a self-assessment section, broken down into the key areas a growing company needs to focus on-legal, HR, corporate governance, accounting, business formation - that delivers an objective status report. The second leg entails mentoring, that "all-important human component," in which service providers offer invaluable professional guidance during a series of pro bono meetings with the budding company. The third leg is a more traditional resource guide, with links to other economic development outfits like S.C.O.R.E., the local chambers of commerce, and other resources in the public or private sector. Brink expects the self-assessment unit to go live later this year.

With champions like East Bay EDA and TVBC intent on keeping the innovation pump primed, Tri-Valley businesses and residents alike should feel comfortable that the area will remain a hub of vigorous economic activity. If you'd like more information about these organization and how their initiatives might be of benefit, you can contact Toby Brink at (925) 227-1824 or visit www.trivalley.org; and Bruce Kern at (510) 272-3874 or www.eastbayeda.org.

Photo: From left: Toby Brink, president and CEO of the Tri-Valley Business Council; the new East Bay Economic Development Alliance web site; and East Bay EDA executive director Bruce Kern.

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