After losing YouTube five years ago, San Mateo creates council to attract new tech companies

Steve Parker is the executive director of an organization designed to attract new tech companies to San Mateo. (Photo: Joe Ciolli)

Steve Parker doesn’t want another YouTube to slip through San Mateo’s fingers.

In its early days, YouTube operated in relative anonymity in its hometown, San Mateo. The up-and-coming video-sharing company slid under the radar of the local chamber of commerce. But in 2006, Google bought the company and moved it to San Bruno. And now, city officials lament the missed opportunity to brand San Mateo as YouTube’s home. That, they said, would have offered great promotional value.

Fearful of missing another YouTube-type opportunity, the San Mateo Chamber of Commerce recently set up a new organization, the Economic Development Growth Enterprise. Its leaders say they will encourage collaboration and attempt to stimulate growth in the local business community. Executive director Steve Parker said the enterprise is trying to attract talent to the area, improve San Mateo’s business facilities and promote discussion between local companies. And while the leading project on the enterprise’s current agenda is a broadband Internet installation for San Mateo’s business district – scheduled for completion this summer – Parker stresses that building relationships between local businesses is his primary goal.

Parker also notes that the organization has elected to focus more on attracting “non-Main Street” companies that specialize in technical innovation – a decision that has some local business owners questioning the chamber’s priorities. They worry that they will be left with a competitive disadvantage.

Founded in January 2010, the nascent enterprise has forged a partnership with the San Mateo City Council. Parker said cities across the peninsula are making “serious efforts” to draw companies but added that no neighboring organizations have formed relationships with their city councils with the main objective of encouraging more interaction and collaboration between local businesses.

And in fact, some other cities do not take that approach. Mark Sawicki, San Carlos’ economic development and housing manager, said that his department shares funding with the city’s various redevelopment programs. As a result, he said, San Carlos tends to focus more on capital improvements, with less emphasis on attracting new businesses and promoting community. Patricia Love, head of economic development in Burlingame, said her office, like Sawicki’s, prefers working to improve and expand existing businesses. “We’re not out there, spending our money, trying to land big companies in Burlingame,” she said.

Some nearby cities are not shifting their development emphasis from Main Street to the tech sector. In Redwood City, local development groups recently completed work on a downtown movie-theater district that has attracted restaurants and retail outlets. Jeannie Young, an economic development specialist, said high-tech companies are not a current priority, but added when the city starts a new economic-development campaign this summer, that could change.

However, Parker said that despite its unique outlook on economic development, San Mateo has yet to land even one new non-Main Street company. Rather, in the year since its inception, the city has only been able to lay the groundwork for a series of projects. The enterprise held a summit for local businesses in March 2010, and it will host another one this year. The organization also worked to strengthen the local talent pool by implementing entrepreneurial leadership coursework at several local community colleges. Further, the enterprise made arrangements with the small-business development centers in San Francisco and San Jose so San Mateo companies will now be able to use their various free services, including free conference calling, data back-up and Internet faxing.

Although the enterprise has few tangible results to show after a year of work, Parker insists that the organization is moving on course. But to fully understand the enterprise’s objectives is to understand Parker. With no background in politics, Parker is an unusual choice to run the enterprise given its close affiliation with the San Mateo City Council. However, Parker’s business experience explains why city officials found him appealing.

From 1998 to 2005, Parker worked at Rod McLellan Company, a consumer garden- products corporation, where he eventually served as CEO for more than two years. After helping to sell the company in late 2005, Parker said he decided to pursue corporate consultancy full-time, saying, “I decided I really wanted to spend more time in the community, helping lead a business organization here.”

Parker said the chamber ultimately offered him the enterprise job. They found him through “various connections,” he said, after four years as an independent consultant. In an environment marked by tight competition and even tighter purse strings, San Mateo made a risky decision to overlook Parker’s lack of political experience and instead focus on his past experience in businesses and raising money.

By August 2010, eight months after Parker took charge, the organization agreed upon a $75,000 initial funding agreement with the city council to provide seed money to cover general operating expenses. The council also agreed to provide the enterprise a $50,000 matching commitment contingent upon the initiative’s ability to raise $50,000 from the private sector. Having already received funding from such area businesses as Franklin Templeton and Salesforce.com, the enterprise expects to reach that threshold in coming weeks.

Amanda Byers, a representative from Franklin Templeton, explained her firm’s decision to give the enterprise some money. “We feel it’s a smart approach to engage additional types of companies in” the enterprise’s “efforts to strengthen the local business environment.”

But who will ultimately provide this public funding? Linda Asbury, president and CEO of the chamber, said the enterprise will receive funding through state and government grants. She doesn’t believe the city will implement any new taxes.

Parker and Asbury recognize that they will have to lobby government officials to obtain these grants, but they are encouraged by comments made recently by Gavin Newsom, the state’s new lieutenant governor. Newsom stressed economic and job development in his first speech, and Asbury also expects the Chamber of Commerce to use existing connections in Washington D.C. to its advantage. As it continues to solicit government funding, the enterprise expects its partnership with the city council to will give it a more formidable voice in lobbying efforts.

However, some local businesses oppose the enterprise’s development initiatives. These companies, — retail stores, particularly — are still recovering from the recent economic downturn, and they say increased competition could be devastating. Although the enterprise is focusing largely on high-tech firms, not traditional Main Street retailers, Asbury recognizes that increased economic activity is likely to attract new companies of all types. Not to mention that an influx of businesses vying for high-quality workers could drive up area wages, yet another new expense for hamstrung businesses.

Arkadiy Drannikov, who has owned the Cyclepath bike shop since August 2010, has struggled to build a customer base. “Competition is already hurting my business,” he said. “I’m not sure I could survive even more competition.”

Skye Key, a sales clerk at Tandy Leather Factory, would like to see officials take a more hands-off approach, saying, “I think the local government should let local enterprise grow organically.”

Some other local business owners support the enterprise’s proposed economic development strategy but believe its approach is misguided. Phil Sollar, owner of Drum World, said, “The problem is that the infrastructure is disjointed. There’s no walking street, bike lanes or a public plaza. If we want to attract new businesses, we have to make San Mateo a more vibrant place to be.”

Despite these dissenting viewpoints, Parker believes these local businesspeople are overlooking a major goal of the enterprise’s efforts: increased tax revenue. According to Parker, the redistribution of tax revenues is crucial to helping companies of all sizes survive, particularly in a time of budgetary constraint. This, he added, is particularly important for struggling small businesses that don’t generate much retail revenue on their own.

San Mateo Mayor Jack Matthews said he welcomes the third-party consultancy role the enterprise has taken. “I don’t think tinkering with the economy, in the long term, is the best way to inspire economic development,” Matthews said. “Plus I believe competition is healthy for promoting a strong business environment.”

Matthews notes that the city council has no long-term funding plans for the enterprise. After all, a year into its tenure, the organization has no new businesses or facilities to show for its efforts. But Matthews says that success in 2011, such as the installation of business-district broadband, could lead to further monetary aid, and he notes that the city will be monitoring the enterprise’s progress. But ultimately, regardless of the organization’s longer-range viability, the city has made it clear that the future of San Mateo economic development lies within the tech sector, not Main Street.