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Tech Coast

Entrepreneurs and Officials Seek to Ride Innovation Wave to Rival That of Silicon Valley


Like a teenager anxious to become an adult, Southern California's high-tech industry is impatient to join the big leagues.

With a substantial presence in computers, software, biotechnology, telecommunications, medical devices and new media, the Tech Coast is seeking a place in the limelight alongside Silicon Valley--let alone such regional technology hubs as Seattle, Boston, New York, Raleigh-Durham, N.C., and Austin, Texas.

To get there, local tech leaders say, companies from San Diego to Santa Barbara to the Inland Empire will have to pool their resources--and their clout--to form the kinds of business networks that helped their northern neighbor grow into a multibillion-dollar industrial center.

Two initiatives are already underway to gather the region's 19,000 dizzyingly varied technology companies under one very big tent. The idea is to facilitate essential community-building and attract the capital, skilled workers and respect needed to propel the Southland into tech's top tier.

After all, despite its success in nurturing small and medium-sized businesses, Southern California has yet to produce a home-grown role model for striking it big, as Silicon Valley did with Intel and Hewlett-Packard.

"There's not a single extraordinary example of a successful company, like Lotus [Development] or Digital Equipment Corp. in Boston or Dell or Compaq in Texas," said Bobby Kotick, chief executive of Activision, a Santa Monica-based video-game developer. "In Los Angeles, who's the big success?"

But doubts are surfacing over whether an area encompassing nearly 41,000 square miles and employing more than 400,000 technology workers can be unified under a single high-tech banner--or should be.

Companies throughout Southern California say this is already a good place to be in the technology business. Downsizing in the defense industry blessed the region with thousands of talented and available engineers, and local universities--including five UC campuses, USC, Caltech and Harvey Mudd College (the engineering school that is one of the renowned Claremont Colleges)--produce a steady stream of fresh talent. Once hired, tech workers here tend to stay put far longer than their counterparts in Silicon Valley, where job hopping is common.

For tech firms doing substantial business with Asia and Latin America, a Southland address is ideal, local executives say. Hollywood provides a boost to companies involved in developing Internet content, digital television and satellite broadcasting. Predominantly sunny weather and other salubrious factors add to the region's allure.

"We have everything we need here," said Mal Hollombe, vice president for sales and marketing at Monrovia-based IVS Inc., which produces interactive voice-navigation products for cars.

But that doesn't keep local tech leaders from wishing for more.

Start with money. Although Southland firms raised $956 million in venture capital last year, companies in Silicon Valley raised three times as much, according to the accounting firm Coopers & Lybrand. Technology executives lament that so-called "angel" capital for early-stage companies--that is, venture capital raised from wealthy individuals rather than institutional funds--is particularly difficult to come by in Southern California.

"The biggest single problem we have in the Southland is the absence of a well-structured capital system," said Matt Walton, vice president of marketing and strategy at Illusion, a Westlake Village firm that builds local-area wireless networks and simulation rides. "It's not just venture capital. It's also merchant banking and major investment-banking resources to provide the monetary raw materials to really fuel growth."

Illusion's senior-management team had to make eight trips to the East Coast in less than two months to drum up venture funding, Walton said. Having top executives away from the company three or four days a week for eight weeks put a severe strain on the company.

Recruiting talent from outside the region is also surprisingly difficult.

"The perception among workers is that if they go to Silicon Valley and that job doesn't work out, they have a choice of literally hundreds of other job opportunities," said Bob Cooper, executive director of the Ventura County Economic Development Collaborative. "But they don't see Southern California as being a hotbed of high-tech jobs. It's too much of a risk and they don't take it."

Much of the blame can be traced to outsiders' misperceptions of Southern California as a place where "everybody's a flake, no one gets anything done and everybody 'does lunch,' " said Jim Jonassen, a high-tech recruiter in Santa Monica and the founder of LAwNMoweR, the Los Angeles New Media Roundtable. "The reality is we're all so busy we don't have time to promote ourselves."

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