A New Model of Local Entrepreneurship

The skyline of Victoria from the harbor.

The skyline of Victoria from the harbor.

I am standing at the corner of a bustling intersection surrounded by a sea of young professionals and curious tourists of all ages. Buildings of 10 stories and more extend into the sky all around me, boasting small shops on their ground level with apartments layered in the floors above. The line at a nearby bus stop extends half way down the block, as locals and visitors alike wait their turn for either a commuter bus or a double decker sightsee-er. The local brewpubs, cafes, and restaurants are crowded, with spillover easily covering the open outdoor seating. I am in the center of what is undoubtedly a flurry of economic activity. It’s a scene that could be found on the streets of any larger, more developed urbanized city the world over.

And yet, I am actually in downtown Victoria, a city of only 80,000 people, on an island, in the most southwestern part of Canada. I am here as a representative of the Santa Cruz business community, and as intrigued visitor. The primary purpose of my trip is to learn about and compare our communities.

Like Santa Cruz, Victoria is the home of a large public research university, with a 3-1 ratio of undergraduate to graduate students. The local economy is primarily based upon tourism and hospitality, with droves of fresh visitors arriving each day to see a number of anchor attractions and partake in many of the local activities. It is the Provincial seat of government, which, while being much larger in scale than Santa Cruz (Provinces are more akin to States than Counties), carries with it the high percentage of government employees.

It also has some of the same problems facing Santa Cruz. Housing is extremely expensive, and they have a vacancy rate of roughly 1 percent. They have a high rate of homelessness, with community leaders openly expressing frustration at their own inability to adequately address the problem. Residents tend to be more resistant to new local development projects, despite their initial buy in to the widely supported principles and community plans. And the lack of cooperation with other municipal partners in the region has left them fragmented in key areas of public management (wastewater treatment for instance). Overall the similarities between our communities are astounding, but there is one area in particular where they have an obvious edge, and that is economic development.

Now before I dive into the lessons learned portion of my trip I do have to address some obvious caveats about this particular subject. The major differences in economic activity between the City of Santa Cruz and the City of Victoria are structural in nature, meaning no amount of successful policies and innovative new programs are going to counter the fundamental differences between our economies.

For one, Victoria has access to substantially more government funding than we do. It’s just the nature of the beast; Canada has a substantially higher marginal tax rate that in turn funds much more robust public healthcare and education systems. You wouldn’t believe how often members of our group would ask panelists from all walks of life (entrepreneurs, developers, and government staff just to name a few) about where they received their funding, only to have their jaws hang open at the answer: the provincial and national government funds almost all of their programs, at least to start with. Contrast this with our own state government, which in 2010 raided the redevelopment coffers of all local governments to the tune of millions of dollars per year per city, figuratively pulling the rug out from any similar scale efforts here.

The other major difference that cannot be affected much is our proximity to Silicon Valley, which for better or for worse has turned Santa Cruz into a bedroom community of sorts, with roughly 1 in 4 worker commuting over the hill. Victoria is the opposite. While they are within close proximity to Vancouver, the 2 and a half-hour long ferry ride each way (on a good day), isn’t really practical. Instead, a large portion of their workforce commutes into their city every day from surrounding communities.

Those major structural problems out of the way, there are some very clear takeaways that we can apply to Santa Cruz, even if we have to bootstrap them a bit. I am talking mainly about the potential to grow our local tech industry, among other industries, by utilizing a well-proven and effective model for creating organizational capacity.

You may have heard of it before, it’s sometimes referred to as the “lean startup”, or “lean canvas” approach, which basically champions an accelerated process of business development through the testing of hypotheses. Rather than writing a traditional business plan which can take a helleva lot of time and is usually based upon some rosy assumptions, these lean models challenge their participants to create a series of incremental functions to fully assess any given idea’s potential. For instance, if I believe I can sell product X at price point Y, rather than build a investment strategy around this fundamental assumption that inevitably leads to other assumptions, a lean plan should focus only on one thing at a time: prove it. What resources do you need to test this assumption? Great, here you go, test it, if it works, think of your next assumption. If it doesn’t figure out why, internalize the results, and build a new hypothesis.

Here in the Bay Area I have often heard of this methodology being referred to as “failing fast”, in Canada it was put more optimistically, “failing forward”. But the difference in terminology is irrelevant, as both models essentially advocate for the same thing.

In all we visited 3 different accelerator programs of sorts on this trip, one at the University of Washington in Seattle, VIATEC, a privately run program based in downtown Victoria that was paired with a storefront space, and the entrepreneurship and business school at the University of Victoria, which contributed significantly to the talent pool that was then scooped up by VIATEC.

Out of all these programs VIATEC appeared to be the most self-sufficient, and the most immersive from the standpoint of would be entrepreneurs. Their model and recruitment strategy were what set them apart from the University run programs. Specifically, they owned their own building, which included an open space for would be entrepreneurs to mingle and have access to amenities (think co-working space), paired with an event space that was rented out to other groups, but also used for plenty of internal events and parties. And the latter cannot be emphasized enough, because an essential part of VIATEC’s recruitment strategy and messaging was based upon quality of life for young people. And in panel after panel we heard the same thing from the younger entrepreneurs, “I met my partner/investor at a ViaTech party,” or “I had been coming into the space for awhile now for the really fast internet”, and finally “I just really love living in Victoria.”

And when we heard directly from VIATEC CEO, Dan Gunn, this is exactly what he talked about. In order to maintain the local talent, of which much comes from the University, they needed to create a space that appealed to young people. And not just a business space, but a town that provides them with the nightlife they desire, the recreational opportunities they need, and of course, access to other mentor entrepreneurs who can provide guidance and support. What kept all of these people local, many of who had raised money in Silicon Valley and come back to Victoria, was a sense of pride and fulfillment in their community. Sound familiar?

And to me this is the value proposition for Santa Cruz, because we have all of those things. We have a tremendous local talent pool as evidenced in countless surveys and the huge commuter presence leaving town everyday. We have the quality of life index that can compete with the best of them, incredible natural beauty, amazing recreational opportunities, freshly grown food, and a bastion of expressive art and culture. Combine this with the 4000+ new young people who arrive here every year to attend UCSC and you have a perfect storm. The larger message is not if you build it they will come, because they are already here. Just build it. If it doesn’t work, analyze your hypothesis and try something new.

3 Comments

  1. Doug Erickson says:

    Victoria and Santa Cruz should be sister cities. We have so much in common, and so much we could learn and share with each other. I like their “fail forward” attitude. If we could only create a giant moat around Santa Cruz, we could reverse that 1 in 4 commute stat.

  2. Barry Scott says:

    Commuters, our proximity to Silicon Valley jobs and restricted transportation infrastructure is killing us. Fortunately, our visionary Regional Transportation Commission saw the opportunity presented by the historic Santa Cruz Branch Line rail corridor and purchased it using Proposition 116 funds for use as a combined passenger rail line and bike and pedestrian trail. Planning for present and future citizens who are fed up with the wasteful American model of suburbia and commuting is critical. We need to move forward with the Monterey Bay Scenic Sanctuary Trail project which will free many of us from the automobile and permit truly sustainable urban design.

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