Boardroom Report

California Dreamin'

By Carl Ford, Partner, Crossfire Media  |  August 07, 2014

The term learning your ABCs has had a definite change in meaning over the years in IT. Where IT used to be, no one ever got fired for choosing IBM. But it turned into a Cisco (News - Alert) world as they emulated terminals and everything else to migrate to the Internet. The term ABC came to mean “Anyone But Cisco” in the late 1990s; however, it’s rare that Cisco faces much competition these days. And Cisco, like so many other companies, is a product of California. 

When friends tell me that the federal government had nothing to do with their companies’ growth, I wonder if they realize how much of the computer industry came out of the cold war and the need for precision. However histories rarely start at the origin but are snapshots in time, and in California’s case, the rise of venture capital investment started in the mid 1990s. Venture capital is an industry that California leads, and with the weather and the skilled labor force, the migration is pretty easy to understand.

California represents 20 percent of the U.S. economy, and California does put its money where its people are with more than $5 billion invested by Venture Capital last year, which is more than 50 percent the U.S. investment. In addition to California’s history of leadership, the general trend until a few years ago was for the many VCs to leave their locations and place their bets on Californian ventures. So not only was there little help for the state, but money was exiting in favor of California.

Many states are now trying to learn from California to bring jobs back to their regions. Some are doing better than others. A few states have made deals with major California firms that brought in server farms. Many times this featured tax incentives on the land and provided very little employment opportunity. While politicians can claim this is a win-win, I think the overall impact is minimal.

A better goal is to deliver on venture capital and to build up resources internally that set the stage for investment. However, this requires planning and long-term objectives. In New York City, the Economic Development Corporation had been part of former Mayor Bloomberg’s (News - Alert) effort to expand a high tech community. Running contests its eGov initiative, the city featured a variety of local companies. However, the correlation between the contest and venture capitalists was non-existent.

The signs of hope I see are when economic development teams work on delivering angel opportunities specifically to their state. In Chicago, we see Chicago Ventures and other homegrown organizations looking to enable the entrepreneurial spirit and deliver a talented team that is resident to the area. Likewise, we see in Washington D.C. the 1776 building up the same workforce and entrepreneurial framework.

While California will always dominate, by in large we are seeing progression in the level of investment in the other states, and that may indicate a growth in their ability to execute. A key ingredient for states to remember is to protect their existing base and not to get caught up in the hype. In New Jersey, the state would only want to hear about hot trend opportunities. So it got caught up in green tech, when monies for biotech probably would have been a better choice. 

The amazing thing about being in the M2M space is there is not an industry that I can think of that cannot benefit from better connectivity and more sensors to make better decisions. What this means is that M2M should be part of any venture evolution strategy. 

My hope is that monies will begin to flow beyond bright shiny objects and me-too solutions, and to systems that match the needs in the market place that can benefit from the rich technologies associated with M2M. 

Edited by Maurice Nagle

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