May 19th, 2008

The Portland Internet Effect


[Editor: Nino Marchetti, a local freelance technology writer, recently put together an article about the local Web community. And while it's a little strange to see myself quoted in an article on my own blog, I was happy to oblige. Thanks to Nino for offering up this story.]

The Portland Internet Effect
By Nino Marchetti

What makes Portland such a hub of potential for Internet companies? Is there something in the water? Do factors like a well-established creative class, support for open source, and a lower cost of living make this a place for Web outfits to call home?

I recently set out to find answers to some of those questions. I spoke with local Web company owners, analysts, and investors. The answers vary but one thing is clear—Portland is making plenty of waves sandwiched between the tech power houses of Seattle and the Silicon Valley.

In the realm of Portland Web companies, Jive Software could arguably be considered one of the more established enterprises. Jive, which focuses on “online collaboration tools that make it easier for people to work together,” came to the local market via New York City. CEO David Hersh feels the area offers his company the right mix of things to make it easy to call this home.

“Portland has the best mix of lifestyle, business clients, and software cluster,” said Hersh. “It is less expensive and easier for us to grow a company here then in the Bay Area or Seattle.”

Hersh added Jive feels there is a good local software programmer group to draw from, but that the downside is there aren’t as many talented bodies as one might hope for—deeper pools of potential programmers exist in other markets. The local talent that is available, however, is potentially quite entrepreneurial—there is a group of Jive employees who might at some point strike out and start their own operations.

“There are plenty of opportunities,” said Hersh. “Anybody with a big vision can make it happen here.”

A smaller Web-based operation which has been trying to make it happen here is SplashCast. This company offers what vice president of business development Tom Turnbull calls a “rich media advertising and syndication platform” for media companies and brands like Sony to connect with consumers in popular social networks such as Facebook.

Turnbull, like Hersh, sees positives and negatives to Portland as a Web company cluster location. On the positive, the company loves the area for things like creativity, a growing Internet community, and less expensive house prices. He has never thought about relocating anywhere else. On the downside though, many of its clients are elsewhere.

“We pay a soft price for being in Portland,” said Turnbull. “The media companies that we partner with are not located in here. Most of the ad agencies are located in the bigger markets. Therefore, we are familiar with Jet Blue’s red eye to New York and make trips to California on a regular basis.”

Even very small Web companies are finding some success and challenges in the Portland area. One of these is Values on n. This outfit, founded in March 2006, has had some success in developing Web services which focus on “personal and small group productivity with a particular emphasis on harnessing everyone’s de-facto productivity tool: email.” This is according to company founder Rael Dornfest, who reflected on some local start up thoughts.

“By being even such a short distance from the Silicon Valley,” said Dornfest, “Portland start-ups are buffered to a certain degree from the ‘startup scene’ and so tend to spend more time thinking about building community and customer base—and, at least within the group of start-ups we know, those are viewed as fairly synonymous. There’s just something about the Portland startup gestalt that’s different—in much the same way as Portland itself feels different somehow to those who visit (and almost invariably want to stay).”

In looking at what seems to make Portland tick for Web companies, tech consultant Marshall Kirkpatrick has made some interesting observations. Kirkpatrick, who said he consults “on everything from product road mapping to site usability to social media marketing ,” has made a name for himself in the online world, writing for tech industry blogs like TechCrunch and ReadWriteWeb.

“I think there’s an unusual feeling of camaraderie among startups here,” said Kirkpatrick when asked to compare Portland to other tech hotspots like San Francisco and Seattle. “It’s less nasty than San Francisco and less obscured in the shadow of a monolith than Seattle.”

Kirkpatrick highlighted that a lot of local programmers are involved in “pseudo-geekish” technologies like RSS and wikis, as well as there being a strong community of open source developers. This all adds up to a lot of “self-made Web application power users here.”

You can, of course, have local Web outfits, consultants, and others promoting the values of Portland as a tech spot on the radar, but without venture capital funding many projects remain in the garage. Portland, until late, has definitely flown under the radar in this area and one could say it still has some growing to do.

“In terms of fund raising,” said SplashCast’s Turnbull, “Portland has a bit of a bad reputation in the startup community. There are certainly fewer VCs here. That being said, we are having great success in the Portland angel investment community and are very optimistic about our future VC prospects.”

Kirkpatrick echoed Turnbull in the VC perception of Portland, saying “venture capitalists are sometimes hesitant to invest in startups based in Portland, because of the perception that this is a place you move to enjoy the quality of life—not to ruin your life giving everything you’ve got to a startup.”

Not all VCs are hesitant though about Portland Web company investment opportunities. Erik Benson, managing director of Voyager Capital, sees local outfits as offering great potential products for end users, though he also feels they “could stand to aim for a bigger scale.”

“We are enthusiastic about the level of passion and creativity that’s coming out of the Portland Web scene, particularly around Open Source and social Web technology,” said Benson. “JanRain, the leader of the OpenID movement, and Values of n, a social-Web-enabled personal assistant, are examples that highlight those areas.”

Other early investment stage firms also see Portland as potential funding grounds. One of these is Mount Hood Equity Partners, managed by Bob Wiggins.

“There are a number of companies in the Portland area I’ve looked at that I would consider quite interesting,” said Wiggins. “There’s a good pool of talent both on the engineering side and, to an extent, on the executive side as well.”

Wiggins has observed a lot of local Web companies focused on using the Internet as a tool for taking care of some kind of problem. This can range from online collaboration like Jive does to managing multiple fast food locations as a franchisee.

Also observing the Portland Web scene are analysts like Raven Zachary of The 451 Group and bloggers such as Rick Turoczy of Silicon Florist. It is observers like these which can fan or quench the flames of potential hot companies with their comments.

“With this many highly-independent, intelligent people in Portland,” said Zachary, “you’re going to see a lot of startup activity here… Portland is becoming a destination for the California tech scene as they grow up and want to settle down and have a family while continuing to pursue tech.”

He also noted, realistically, Portland is not the “center of the tech universe.”

“That won’t change,” said Zachary.

Turoczy, for his part, maintains feverish coverage of local Web companies as information is passed along to him. This perhaps gives him one of the most insider views of all on what works locally and what doesn’t.

“I think the Silicon Forest—if we define the Forest as stretching from the coast over to Bend and quite a ways down south and up past Vancouver—has the potential to be a hot bed for Web startups,” said Turoczy. “I don’t think we have really realized its true potential, yet. We’ve taken steps. And I think we have a good start.”

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4 Responses to “The Portland Internet Effect”

  1. I run a local garage-level social networking site for musicians (MusicianForest), and Portland is absolutely wonderful for that level of business.
    The entrepreneurial spirit is everywhere, and people are always willing to help out.

  2. Great article Nino, good balance between the rise of interest in Portland as a homebase and the reality that it will never be a Seattle, SF or whatever, not that that’s a bad thing. You can actually keep up and get to know all of the local startups. Nice to see you back on the scene!

  3. Mateu says:

    Once again I find myself wondering if an Entrepreneurial League wouldn’t raise the game here like it seems to be doing in other cities.

    Anyone have any personal experience with them?

    adeu,
    Mateu

  4. kfox says:

    Nice post. I work for a company called Vidoop (Internet Security, Identity, OpenID) and we are actually in the process of moving the company to Portland for all of the great reasons mentioned in the article.

    Hopefully PDX doesn’t jump the shark…


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