The Early Days
Started a half century ago, Santa Barbara’s original tech scene was quiet by design: Places like Delco and General Research set up shop near the airport in Goleta, working on top-secret defense projects for the government. That industry still thrives in whispered ways, with companies like Raytheon, Santa Barbara Focalplane (a division of Lockheed Martin), and Tecolote employing hundreds in various research and development capacities.
UCSB’s computer science program simultaneously got serious, thanks largely to the work of Glen Culler, who fostered the first tests for what would become the Internet. “He was way ahead of his time,” said longtime UCSB professor Dick Kemmerer, who recalled more than two dozen small companies, usually with three-letter names such as ACC, spinning out of UCSB in the 1970s and 1980s. “There were booms caused by people,” said Kemmerer, citing other former professors such as Virgil Elings, who built a vast fortune on microscope technology.
By the early 1990s, John MacFarlane had arrived for postgraduate work at UCSB, only to leave and start Software.com, which built the early nuts and bolts of email. That merged with Phone.com to become Openwave in a 2001 deal valued at $6.4 billion, money that spread into various facets of Santa Barbara life and fertilized the start-up scene. There was also a wave of online advertising companies, such as Commission Junction (now called Conversant, but still headquartered in Santa Barbara) and the “Clicks” of ValueClick (acquired by Conversant in 2014) and DoubleClick (acquired by Google).
In 1997, UCSB professor Klaus Schauser — supposedly media shy and the only person to decline an interview for this issue — launched Expertcity as a means of connecting confused computer users with trained technicians. Schauser soon realized that the remote desktop interface he’d created, which became GoToMyPC, and the conference-call-like technology, which became GoToMeeting, were more valuable than the service itself. Expertcity “pivoted” its focus and was acquired by Citrix in 2003, reportedly for $225 million.
That began Citrix’s increasingly strong presence in Goleta, where more than 300 people are now employed by the Santa Clara–based, multinational company’s online division. Citrix’s belief in Santa Barbara’s potential was hammered home this year when it hosted one of its Startup Accelerator programs in town, incubating eight start-up companies. “The Innovator Program is a way to place a lot of small bets,” said Citrix Online CTO Bernd Christiansen (an Expercity alum) at the program’s finale inside the Deckers rotunda on September 16. “It’s not about Citrix. It’s about Santa Barbara cultivating an ecosystem to keep more people here.”
Second Generation Rises
Using their experience, reputations, and own newfound wealth, the leaders of these early companies all went on to start more businesses in Santa Barbara. Schauser scored another success when his AppFolio went public this June, raising $74 million; John MacFarlane runs Sonos, the digital audio company that’s taken over many buildings downtown and across the world; ValueClick’s Brian Coryat now runs Local Market Launch; and DoubleClick’s Kevin O’Connor started FindtheBest.com, which recently pivoted into a company called Graphiq. Other executives from these firms went on to start RightScale, LogicMonitor, Riptide IO, and other companies that are moving toward IPOs or other “liquidity” events.
Here’s a look at some of those second- and third-gen entrepreneurs.
Kevin O’Connor, Graphiq
After selling DoubleClick, Kevin O’Connor came to Santa Barbara to escape 80-hour work weeks in New York City. “I just wanted to raise my family in a great place,” he said. “I didn’t come here to do a tech company.”
But he was soon building a data-aggregation site called FindtheBest.com, which he just morphed into Graphiq, a company that puts the data into visualizations used mostly by media. Such a pivot is a move second-generation entrepreneurs like O’Connor aren’t afraid to make. “They have that experience and credibility if you’re going to raise outside money,” he said of folks like himself. “And they also have money so they can invest in their own companies and take more risk.”
He fends off notions that Santa Barbara is not a hard-working place, arguing that his employees do have more fun time because they don’t commute for hours each week. “My joke about this area is that we may have as much technology as Silicon Valley per capita — we just don’t have any capita,” he laughed. “But we’ve probably recruited more people from Silicon Valley than we’ve lost to Silicon Valley. It’s gonna kill it here. The companies that exist right now are doing extremely well.”
Brian Coryat, Local Market Launch
In a nondescript office building just behind The Press Room on Ortega Street, Brian Coryat oozes start-up optimism. As the successful visionary behind ValueClick, he’s a second-generation entrepreneur who’s back at it again with all the experience, wisdom, and, yes, money to make his next vision come to life. “The start-up experience is pretty radical,” said Coryat, who now runs Local Market Launch, which gives companies a way to manage their online presence, from Yelp reviews to regional white pages. “It’s a roller coaster, and you have to be comfortable with being uncomfortable.”
He came to town to work for Raytheon in 1991 and found many challenges in building his own company. “It was really hard to recruit anyone who knew anything with any kind of experience,” he said. “But it’s getting richer by the minute,” said Coryat, who laughs at the thought of first meeting Kevin O’Connor in suits on New York’s Madison Avenue — now they’re surfing buddies. “I ride my bike here and wear shorts,” he said. “There’s a lot of creativity, and people do work hard, although they may not work a grind.”
Woody Rollins, AppScale
Woody Rollins moved to Santa Barbara from Boston 11 years ago and was quickly impressed that Santa Barbara tech focused on “the hard stuff,” like cloud computing. He cofounded Eucalyptus Systems, which raised $5.5 million from Benchmark Capital in 2009 and sold to Hewlett-Packard in 2014.
“Santa Barbara as a community is very collaborative,” said Rollins, who now runs AppScale, which lets users manage data seamlessly across different cloud systems. “It’s different than Silicon Valley and different than Boston. People are willing to help, folks who have been successful and [are] happy to share their knowledge. That is very, very unique.”
As for challenges, Rollins said it can be hard to find mid-level executives in Santa Barbara and traveling for work can suck. “We have the most wonderful airport,” he said, “but it doesn’t always provide us with great connectivity.”
Steve Francis, LogicMonitor
Steve Francis moved to the United States with his wife 22 years ago, worked in IT at UCSB, and then joined Expertcity before it was sold to Citrix. In 2007, he started LogicMonitor, which allows companies to monitor their entire “technology stack” (from networks and servers to apps, companies storage, and cloud) through one portal.
“There is still a perception that Santa Barbara is a small town without much of a tech scene, but that’s just not true anymore,” said Francis. “Anyone working in tech in Santa Barbara has lots and lots of opportunity, from big companies like Yardi and QAD, as well as the little start-ups. There is an ecosystem.”
The small-town vibe can be helpful, too. “There’s a lot less job hopping,” he said. “Employees don’t tend to work for six months and then get a bigger offer.” That also goes for the reduced capital-raising opportunities. “If LogicMonitor had been in the Bay Area, we probably would have raised more funding in our life cycle up to this point,” he said. “But I don’t think that necessarily would have been a good thing.”
Ladies of Liquidity
In the world of start-ups, the eventual goal, especially after taking on investors, is a “liquidity” event in which equity and stock value is exchanged for cash. Most often, this means an initial public offering (IPO) on a stock exchange like NASDAQ, a k a “going public,” or being acquired by a bigger company.
For being a traditionally male-dominated tech sector, it’s intriguing that three of Santa Barbara’s most inspiring success stories involve women leaders.
Lynda Weiman, Lynda.com
In April 2015, Lynda Weiman and Bruce Heavin sold Lynda.com to LinkedIn for $1.5 billion, one of the biggest deals for a Santa Barbara company in years. “It will be such an amazing accelerant of our idea,” said Weiman of the instructional web video company, which moved from Ojai to Carpinteria in 2010. The deal “came out of left field,” said Weiman, who is no longer involved with the company but hopes having LinkedIn here will only make recruiting employees to Santa Barbara “more appealing.” She explained, “A lot of Silicon Valley companies hire out of UCSB. It would be wonderful to grab more of that brain trust and keep it here.”
Pam Lopker, QAD
When Pam Lopker graduated in mathematics from UCSB in the early 1970s, she took a job at a defense firm but had to quit when, as a female, she couldn’t go on the military ships. Instead, seeing her husband’s computer woes in running Deckers, the shoe company he cofounded, she started building software programs for global manufacturing companies. Today, QAD employs 1,600 people around the world, with 220 in Santa Barbara at their hilltop headquarters overlooking Summerland, and went public in 1997.
Lopker, who remains very involved in QAD, believes Santa Barbara can be a tough place to do business because of the high taxes and lack of space — once you get above a couple hundred people, other places make a lot more sense — and thinks that more could be done to foster tech growth regionally. Most of her Summerland employees live in Ventura County, actually, due to Santa Barbara’s expensive housing.
But she gives much credit to her alma mater. “The tech companies now in Santa Barbara are directly attributed to the growth of the engineering department at UCSB,” said Lopker.
Ali Bauerlein, Inogen
As an economics major at UCSB, Ali Bauerlein realized that her grandmother’s reliance on immobile, loud, cumbersome refillable oxygen tanks to survive was a problem that needed solving. So in 2001, as a sophomore, Bauerlein teamed with two friends and developed a much more portable solution that concentrates the ambient oxygen.
“None of us had the skills, but we had the problem,” she said of her team, which built a strong business around the new product, now protected by 27 patents, under the name Inogen. “It provides a lot more freedom and mobility for patients,” said Bauerlein. “They never have to worry about running out of oxygen again.”
The Goleta-based company went public in 2014, raising more than $75 million in an IPO, and now shows a market cap of more than $880[TK$770TK] million. And they’ve only tapped about 2 percent of the oxygen market so far, which they do through direct sales and marketing in TV infomercials, as well as in AARP magazine, Parade, and other publications. Last year, they did more than $112 million in sales.
Successful and Growing
There are a lot more companies working toward a liquidity event than those who have already arrived. Here’s a look at some.
Invoca looks like a place you want to work. The Chapala Street office building’s interior walls are vibrantly colored, boasting both the logos of serious clients, as well as company values like “Be Agile.” Bikes and scooters huddle near the lobby, Nerf guns are peppered amid standing desks, a rooftop patio has Wi-Fi and a barbecue, and a bar with a piano, foosball, darts, and draft beer awaits happy hour in the basement.
Formerly known as RingRevenue, Invoca sells software to companies that sell and market through the telephone. The company employs about 160 people in downtown Santa Barbara, has hired key folks away from Oracle, Microsoft, and Salesforce, and is reportedly inching toward a 2017 IPO, recently hiring a new CEO in preparation.
Financial ambitions aside, the company, much like Sonos down the street, is bringing to Santa Barbara that youthful, work-hard/play-hard culture that is so famous in Silicon Valley. “Collaboration is the culture that drives that,” said Invoca’s Scott Herriman. “On one hand, people want a quiet space to get work done, but the value of knowing what’s going on around you has been tremendous. Teamwork suffers from being segmented.”
Tooey Courtemanche, ProCore
Though he admittedly is a 47-year-old man with a 4-year-old’s nickname, Tooey — whose mom took to calling him that rather than Craig, Jr. — grew up in the construction industry but got into Silicon Valley tech by the mid-1990s. He “begrudgingly” moved to Santa Barbara in 1999 to please his wife and got frustrated trying to build a home here. “When Rincon was pumping, no one would show up to build the house,” Tooey Courtmaneche recalled. “It was driving me nuts.” So with an engineer, he developed a web-based solution called ProCore that is now the top project-management tool in the global construction industry, used by everyday homeowners, independent architects, multinational construction firms, and nuclear power plants.
ProCore has no trouble recruiting from Silicon Valley. “When we bring them down to our campus in Carpinteria, they say, ‘Are you kidding me?’” said Courtmaneche. “The quality of life is through the roof. We can attract the best and brightest from all over the nation to come work here.” His problem is the other way around. “When you want to open a regional office in Boston or Chicago or New York, you can’t get anyone to work there,” he said. “That’s a serious challenge.”
Landon Ray, Ontraport
Starting out as a Wall Street investment banker, Landon Ray came to Santa Barbara because he didn’t like New York. His web marketing company for the real estate industry didn’t work out but made him realize that the world needed a suite of digital tools to power sales and marketing efforts. In 2006, he launched Ontraport and then cried in his beer and continued upgrading his services until 2009, when it finally caught traction.
Last month, Ray was onstage at the Lobero Theatre and at the Canary Hotel running Ontrapalooza, a conference that Forbes deemed a must-do for entrepreneurs. “Really, it has a lot to do with the experience of the people around us,” Ray told the Lobero crowd in 2014. “If you’re going to devote yourself to a vision that is anything less than totally inspiring, you can expect to be surrounded by people who are willing to do the same. We as a group are a little bit of a different bunch. We’re sort of natural builders … What we think is that we can make the world a better place.”
Max Drucker, Social Intelligence
Max Drucker’s career started at Apple in Cupertino almost 20 years ago, but he came to Santa Barbara in 2001 to run his own software company called Steel Card, which he sold to ChoicePoint (now owned by LexusNexus) in 2006. Why Santa Barbara? “That’s an easy one, man,” he said. “Anyone’s that’s ever been to Santa Barbara knows why.”
Today, Drucker runs Social Intelligence, which uses social media data to help people get better prices on life insurance, higher credit scores, and even identify insurance fraud. “Millennials have the lowest credit scores of any generation largely because they don’t use traditional forms of credit,” said Drucker. “Social Intelligence is really about giving people the power to leverage and monetize their own data.”
He’s happy that a major talent-sucking gorilla like Facebook or Google isn’t yet in town and proud of the employees that are here. “You have a talent pool that’s equally focused on the lifestyle and the job,” he said. “That makes for a great employee base.”
Expanding the Infrastructure
As with any industry, tech needs a support system to thrive. Santa Barbara now enjoys quite a healthy network of educational and experiential programs, as well as venture capital to support the best ideas. Here’s a rundown.
Dave Adornetto, UCSB’s TMP and GEM
Dave Adornetto left the private sector a few years ago to run UCSB’s Technology Management Program (TMP) and the associated New Venture Competition, which just celebrated its 16th annual affair. “TMP was developed to give highly technically trained STEM students at UCSB a broader background in business,” said Adornetto, “so that when they hit the job market, they can be much more valuable and advance quickly.” And it works: Almost every executive credits TMP’s impact as one of the major reasons Santa Barbara tech is thriving.
Adornetto recently took the reins of another promising initiative called GEM, or Goleta Entrepreneurial Magnet, a collaboration started in 2012 between the City of Goleta, Goleta Valley Chamber of Commerce, and UCSB. “The goal is really economic vitalization,” said Adornetto, who manages the shared office space and mentorship program in Old Town Goleta. “Hopefully when the teams graduate from the program, they set up shop in Goleta or Santa Barbara and they feed back, mentoring other teams. It’s a whole ecosystem that self-feeds over time.”
John Greathouse, Rincon Venture Partners
John Greathouse broke into the Santa Barbara scene with Computer Motion when robotics was hot at UCSB and has made wise investments of time and money since then in Citrix, RightScale, Eucalyptus, and Invoca.
“Hopefully there’s nobody left who thinks we can’t build world-class companies in town,” said Greathouse, who is a partner at Rincon Venture Partners, a real homegrown venture capital firm, and also teaches in UCSB’s Technology Management Program. “That was something that held people back like five-plus years ago. But we’ve arrived.”
He sees start-up companies as dandelions, with seeds blowing in the wind to start more little companies. “That takes time,” he said. “You can’t just flip a switch and have all those conditions manifest themselves. I definitely feel it here these days. But it’s taken 20 years.”
Melissa Moreno, SBCC & MIT Enterprise Forum
Santa Barbara City College is making an impact on the start-up scene, as well. In 2008, Melissa Moreno cofounded the Scheinfeld Center for Enterprise & Innovation, which teaches students how to build a marketable business while also inspiring them with lectures by successful entrepreneurs such as Yvon Chouinard of Patagonia, Pam Lopker of QAD, Doug Otto of Deckers, and Wayne Rosing, former VP of engineering at Google. “We’ve been discovering that not only is there a hotbed of tech activity,” said Moreno, “but this is a place where entrepreneurs like to retire.”
Moreno also recently started Enterprise Launch, where students have a single semester to take a product from concept to reality. “We’re more about, what skills do these students have that they can draw from to create their own jobs immediately?” said Moreno, noting that FuelBox started in this program and is now worth an estimated $4.5 million. “It gets students thinking in a different way.”
Moreno is also on the board of the MIT Enterprise Forum, which hosts monthly panels of experts in specific sectors, including recent ones on the audio industry and disaster relief. “It’s a simple model that keeps us going,” said Moreno, whose chapter spans from San Luis Obispo to Thousand Oaks and is one of 20 nationwide. “We’re just trying to keep connected to what’s happening in technology.”
Kyle Ashby, Impact Hub & StartupSB
When Goleta-raised, UCSB-educated web designer Kyle Ashby returned to town in 1999, he saw a lot of opportunity for tech in Santa Barbara but not much support, like what he’d witnessed for filmmakers and musicians back in his Isla Vista days. “The arts community has been doing this for a long time,” he said. “But nobody had wrapped their heads around how that could work for the tech community.” After working on his own for nearly a decade, Ashby was inspired by the start-up buzz from around the country and hosted the first StartupSB weekend in November 2011, when teams went from concept to prototype in about 72 hours. The fifth one will be sometime next year.
But Ashby’s primary goal today is opening the Impact Hub on State Street. An 11,500-square-foot building, the hub — one of nearly 80 nationwide focused on incubating socially progressive and beneficial businesses — will house small offices for start-ups and nonprofits, co-working space, programming for all to learn, and much more. “There are a lot companies doing the right thing and making the right impacts in our communities that we can learn from,” said Ashby, who plans to open by December 1.
Jacques Habra, Noospheric
Jacques Habra arrived in Santa Barbara from Ann Arbor, Michigan, in 2006. “I felt like I was the only tech entrepreneur in the area,” he said. “The focus was on tourism and real estate. That certainly has changed.”
Habra’s incubator Noospheric helps take companies like TrackR from idea to market and believes more should be done to foster such growth. “Planning officials should be thinking about software and the kind of tech companies that take up much less space,” said Habra. “They don’t need to manufacture anything. It’s more about people, and it doesn’t take a huge amount of people to build a powerful, worldwide-impact kind of start-up.”
Companies to Watch
There are a number of younger start-ups to keep an eye on, ranging from still in development to well-funded. They’re expanding the typical business-to-business, software-as-a-service scope of Santa Barbara tech, entering the Internet of Things, consumer electronics, and even virtual reality. Here’s a brief list.
Milo: This company, which is developing a Fitbit-like wristband to monitor blood-alcohol levels, won UCSB’s New Venture Competition this year, participated in Citrix’s Innovators Program, and earned the support of Matt Dies, whose daughter, Mallory, was killed by a drunk driver. “In Santa Barbara, there was a huge amount of respect and validation for our idea,” said cofounder Evan Strenk. “We would have gotten a little buried within the thousands of companies coming out of San Francisco. That’s allowed us to get buzz around our product. People want to help, and we instantly had angels. There is a really good scene.”
ShipHawk: When Westmont grad Jeremy Bodenhamer bought a packing/shipping shop and realized it would cost $4,800 to deliver a wooden rocking horse, he realized there was a problem. ShipHawk is his answer — a digital platform that makes it easy for e-commerce businesses to ship oddly sized packages and everything else to customers. Today, Bodenhamer could have shipped that horse for $300.
Smartstones: Andreas Forsland’s invention may improve the lives of the elderly, developmentally disabled, and others who have trouble communicating — and perhaps change culture for the rest of us. Called Smartstones, his handheld, rock-like devices allow people to communicate with preprogrammed gestures, so college kids could say hi to mom with a quick swipe, older people can check in with their kids the same way, and autistic people can better “talk” to each other. “We have big populations of people who live in the shadows,” said Forsland. “We could be introducing something that might help them have a more diverse social environment, where people who have felt isolated can comingle with everyone else.”
TrackR: TrackR, which makes a device that affixes to your keys or other easily lost items and tracks their location on your smartphone, recently received $8.7 million in funding. “The market likes the product, so right now we need to increase sales and expose the company as quickly as possible,” said CEO Chris Herbert, who’s attracted most capital from out of town. “It takes a lot to get the initial start-up going, but once you get that momentum, it builds rapidly and exponentially.”
World Viz: Getting an undisclosed amount of funding from Intel in April, World Viz is using virtual reality to exponentially save costs on the design of airplanes, hospital rooms, and other places that typically require expensive foam models. But the possibilities are endless, with VR value expected to exceed $150 billion by 2020. “We’re really focused on putting the rubber on the road,” said CEO Peter Schlueer, a former music journalist who’s helped the company double in size over the past year. “We definitely have a strong technology road map that will keep us busy for a while.”