Why Startups Hella Love Oakland

Gertrude Stein once famously said of Oakland, “There is no there there.” Nancy Pfund, of the VC firm DBL Investors, makes a case for how modern Oakland is proving Stein wrong.

Most urban centers like to describe themselves as “a city of contrasts”—but few actually clinch that description like Oakland, California. A sleepy tidal town whose redwoods were logged to build nearby San Francisco, Oakland’s fortunes accelerated in the mid-1800s, first as a supply depot for the California Gold Rush and then as the western terminal of the Transcontinental Railroad. The 1906 San Francisco earthquake and the city’s port fed Oakland’s immigrant boom until brisk drug trafficking rendered Oakland a violent-crime center and, more recently, the nation’s unofficial headquarters of the Occupy movement.

Now for the “city of contrasts” part: despite persistent crime and its homely sister status to the more glittering cities on the Bay, Oakland boasts world-class sports teams, rich urban culture (music acts born here include Sly and the Family Stone and Tupac Shakur), all at a sweet discount to pricy San Franicsco.

Business prospects are surprisingly rosy in Oakland, too. Home to Kaiser Permanente and Clorox, the city ranks consistently among America’s most sustainable cities and as a result lures green-energy startups galore. Startups thriving on the East Bay include streaming-music site Pandora (whose IPO was a roaring success, even in 2011), First Solar, Sungevity, and other green-energy, tech, and life-science plays. We talked with Nancy Pfund of DBL Investors, a local VC firm with five Oakland startups in its portfolio, including Pandora. Here, she shares five things you need to know about starting a business in Oakland.

Oakland is hella' green.

Oakland offers unusually deep support for startups in green tech. DBL co-sponsors StartupOakland, an annual event hosted in a freshly renovated Art Deco landmark, the stunning Fox Theater. Stop Waste helps local environmentally friendly startups get funding and other support.

There’s obvious synergy to be found when your neighbors intuitively understand the green thing. Among Oakland’s companies is another DBL firm, BrightSource Energy, a solar thermal energy provider whose galloping growth recently hit a snag as it abruptly dropped its IPO plans. Other Oakland green-energy plays include Solar Millennium, biodiesel producer Sirona Fuels, and EarthSource Forest Products, a sustainable timber firm.

Pfund lists other Oakland players ready to support startups of any industry. Nonprofit Inner City Advisors offers small businesses guidance from business plan development to funding. One PacificCoast Bank is a community-development bank committed to funding Oakland-based ventures. And then, of course, you can always hop on B.A.R.T. and wow some San Francisco backers.

The City’s New Office of Economic Development is another theoretical resource, although remember: California has a famously catawampus state government, now underfunded to a record degree. Proceed with caution.

Oakland lets you rub shoulders with the world’s best engineering talent.

“UC Berkeley is up the street from Oakland. It also isn’t very far from Stanford or UCSF in the city,” Pfund says. “Wtihin 10 miles of Oakland you’ll find a lot of horsepower.”

Although a lot of recent grads flock to San Jose for tech or San Francisco for life sciences, many others stay put in the Oakland-Berkeley area. According to Pfund, Oakland is (slowly) materializing as a talent mecca.

It’s easier to get to places in San Francisco from Oakland than it is from San Francisco itself.

Oakland grew up as a transportation hub, with a bustling international airport and the nation’s fifth largest port. Its position east of San Francisco and proximity to Highway 880 are all advantages. But Oakland also kills with its frequent ferries and B.A.R.T. (cummuter train) hubs.

Pfund drops a much-cited point in Oakland’s favor: “It’s easier to get to most places in San Francisco from Oakland than it is from San Francisco itself,” she says. Not just attractive to reverse-commuters, Oakland makes sense for residents of Berkeley, Marin County, and the peninsula. Bedroom communities east of Oakland, like Piedmont and Danville, are booming with formerly fed-up commuters whose travel-times are eased by Oakland’s outstanding connectivity. “Look at Google and Facebook,” Pfund says. “They offer vans because people don’t want to live in the Valley, and they don’t want to drive [and there’s no public transit]. If your workers want a rich urban experience, Oakland is a great choice.”

One of DBL’s portfolio companies, Revolution Foods, makes healthy, affordable lunches for public schools. Oakland’s centrality helped them grow rapidly; today, they deliver 120,000 meals delivered daily. “Whole Foods’ distribution center is nearby, which is a great help,” Pfund adds. “It’s useful to be near a freeway to transport the meals to the schools.“ (Revolution Foods ranked among our 50 Most Innovative Companies in the World in Food in 2012.)

Now for the caveat: Oakland is a tougher sell to diehard Palo Altans and residents of San Jose. Those two original epicenters of the tech boom still attract workers who need to live and work right on top of the action. However, for more seasoned (and commute-weary) tech workers settled in areas near Oakland, locating your headquarters in Oakland may actually come as a relief to the talent.

“Affordable San Fran” isn’t an oxymoron.

The numbers don’t lie: residential real estate in San Francisco proper runs as high as $1,000 per square foot in premium spots. In Oakland prices top out at $500 to $700 per square foot. Office real estate prices follow suit—if anything, the comparison is even sweeter. Grubb & Ellis rates Oakland as the seventh best office market in the U.S. and No. 3 for industrial office space.

Buy a bike (but don't get too attached to it).

Oakland’s manageably hilly landscape and warmer weather (it’s consistently 10 degrees hotter than San Francsico) make it “a biking mecca,” Pfund says. That said, this is a city known for sky-high crimes—No. 1 in violent crimes in California in 2011. Guard your property and person accordingly, particularly in the dicey West and East Oakland areas.

Still, if you keep your wits about you and invest in bulletproof locks, Oakland can indeed beguile. The city has some great restaurants that won't break the bank like more famous establishments in San Francisco. “So many great restaurants in Oakland have spawned from chefs leaving Chez Panisse [and others] up in Berkeley,” Pfund say. Imagine savoring buttermilk fried chicken at Brown Sugar, the sun warming you up for a day of gentle biking, water views flashing from every hilltop: not too shabby a way to recharge.

Follow the conversation on Twitter using the tag #USInnovation.

[Image: Flickr user Jeff Rosen]

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6 Comments

  • casacaudill

    Danville is hardly a bedroom community of Oakland. And the author couldn't come up with any contemporary music acts to prove the point about the arts being alive and well here? It's almost as if the author didn't talk to anyone that actually lives or works in Oakland.

  • Shauna

    Sorry to add to the list of corrections-a common misconception regarding Tupac Shakur-was born in New York, Harlem specifically. He got his "start" rapping in Marin City and Richmond mainly, though he eventually joined Oakland based "Digital Underground". There are so many other Platinum-selling homegrown groups to mention- Toni Tony Tone, En Vogue, MC Hammer...

  • mlinksva

    Nice article, go Oakland (I live there, I mean here). But why throw in a "fact" that is incorrect and can be trivially checked? I'm talking about "(it’s consistently 10 degrees hotter than San Francsico)". No it isn't. The average high/low temperatures for downtown Oakland and SF respectively are 52.0/66.9 and 51.3/65.1 according to the NOAA via Wikipedia.

    I think the weather is slightly nicer on average across Oakland than SF, but "10 degrees hotter" doesn't capture that accurately, and both cities have many microclimates, such that it matters a lot more which neighborhood you're in than which city.

    By the way, for consistently ~10 degrees hotter weather, LA is your place.

  • CAgeography

    FYI Caltech is about 350 miles south in Pasadena.  These VC investors should do their homework.

  • Oaktown357

    Stein's quote has been misrepresented. She wasn't referring to Oakland, she was talking about her old neighborhood. One day writers will stop using the quote as a kickoff to discuss Oakland. Sigh.