Meeting of minds

Published 5:00 am Monday, October 17, 2005

The future of business came to Bend on Friday. Six firms, who pitched their business plans to a panel of professional investors at the second annual Bend Venture Conference, brought ideas that ranged from new software to run banks to a new high-tech emergency warning system.

The brave new world they represent – a world of fast-growing, entrepreneurial, innovative companies who trade on intellectual capital – is increasingly spreading from the nation’s major cities to a select few smaller towns.

A nationwide study, commissioned by the federal Small Business Administration and released in April, concluded that eight of the nation’s 10 most entrepreneurial local markets are in small- to medium-sized cities, mostly in the mountains of the West.

Bend was No. 7 on the list.

That’s no surprise to some.

Bend has become a new home in recent years to hundreds of highly-skilled current and former executives, said Bruce Juhola, one of the conference organizers and the former owner of a Silicon Valley semiconductor company.

That influx of talent and capital, along with the citys existing base of aircraft and aerospace, alternative energy and biotech firms, gives it a strong base for further growth, Juhola said.

Still, the choices the city makes today on issues ranging from school funding to the pace and quality of growth, may determine whether it remains high on the list of desired places to be for budding and experienced entrepreneurs as the years go by, other industry observers said.

And that, in turn, may determine what powers the towns economy not if, but when, real estate slows down, a Portland venture capitalist noted.

Im optimistic about Bend, said Eric Rosenfeld, a managing partner of Portlands Capybarra Ventures LLC and one of six venture capitalists on the Bend conferences panel. But I think Bend is at a really critical time when its civic leaders need to figure out what Bend wants to be when it grows up.

Conference attendees

This years conference drew more than 300 investors, entrepreneurs and observers to the Tower Theatre, up from 190 the year before, Juhola said. They came from as far away as Texas and Arizona.

Two of its six presenting companies were from Seattle. Three were from Portland. One was from Bend: bank information management software producer Nexsys.

Along with Rosenfeld, the conferences panel of venture capitalists included Wayne Embree of Cascadia Partners in Portland, an investor who has helped create nearly 20 spinoff companies from research universities and corporations, including spinoffs from Bend Research; John ODonnell, head of Bozeman, Mont.-based TechRanch, a company that has backed 27 new technology ventures; and Dan Eilers, a former chief marketing officer for Apple Computers, Inc. who currently runs Vanguard Ventures, a high-tech investment company.

The conferences regional flair was no accident.

Juhola said he and other conference organizers many of whom also are former executives from Silicon Valley and other regions, with contacts throughout the world have worked the phones for a year to build a word-of-mouth buzz about the Bend conference. The goal, he said, is to make it the premier venture capital conference in the Pacific Northwest and to show off Bend, while were at it.

Already discovered

According to the Small Business Administrations report, the city already has been found.

The report, produced by an Ohio consultant using data from 1991 through 2001, based its measure of local entrepreneurship in hundreds of cities on three factors: the number of new firms started per 1,000 workers; the average annual change in the number of new firms; and the percent of rapidly growing firms.

Based on those factors, Bend came in seventh overall. The western Colorado mountain town of Glenwood Springs led the pack, followed by Las Vegas; two Salt Lake City-area college towns, Logan and Provo; the coastal city of Wilmington, N.C.; and Farmington, N.M., a small city in the mountains of northwestern New Mexico.

The study showed that Bend ranked third in the nation in the number of new firms created, with 6.258 firms created for every 1,000 workers. But it ranked 29th in the average annual change in new firm births, at 2.8 percent, and 37th in the percentage of rapidly growing firms, at 5.6 percent.

Overall, the measures of relative entrepreneurship are strong indicators of economic health, the report concluded. The nations most entrepreneurial regions had 125 percent better employment growth than the least entrepreneurial regions, along with 58 percent higher wage growth and 109 percent higher productivity.

Some of Bends entrepreneurial base has been homegrown.

Bend Research, the areas oldest high-tech firm, has spun off 11 companies since its founding in 1975, President and Chief Operating Officer Rod Ray said. Four were intentional; seven were created by former employees.

The company has matured since its early years, when a bunch of guys who just liked to do science spun Bend Researchs core polymer membrane technology into companies as diverse as Consep (todays Suterra), which uses pheromones to control agricultural pests, and AquaAir, which makes washwater recovery systems used by car washes and the space industry, Ray said.

Today, the company works almost entirely on projects for Pfizer pharmaceuticals, but its 140-person workforce including 23 doctorates have scored some significant successes, including Zmax, a new microencapsulated antibiotic that Pfizer expects will reach $100 million in sales this year, Ray said.

The company also expects to succeed at producing a process that will make a powerful new good cholesterol enhancer more useful in the body a development that may help protect billions of dollars of revenue in Pfizers Lipitor market.

On the lower-tech side, Bend-based Deschutes Brewery has grown to include more than 50 employees, with distribution in 12 Western states, since it started brewing in 1988, owner Gary Fish said.

Newer companies in the citys entrepreneurial mix have come in a variety of forms, but most have come for similar reasons.

Some, like Accent Optical Technologies, a manufacturer of process-control equipment for the silicon chip industry, have moved only their headquarters here. The companys main manufacturing plant and some of its research department is based in England, and its 200 employees are spread among nine countries.

Co-owner Bruce Rhine, a former Silicon Valley executive, explained his reason for moving the companys brain trust to Des-chutes County five years ago with a picture of himself holding a huge fish. Locating this far away from major airports has added hundreds of hours of travel time to his executives annual flight schedules, Rhine said, but the ability to live in a small community has outweighed the hassles.

Others have moved here as individuals, adding to a growing supply of intellectual capital that can be tapped in any number of ways, Juhola noted.

Some, like John Ballantine, flirt with retirement here, but get drawn into telecommuting through their regional and worldwide web of contacts. Ballantine, who created Online Interactive, the first online software store, in 1994, got drawn into working with high-tech emergency notification company Swan Island Networks after he moved to Bend to spend time on my John Deere.

Portland-based Swan Island one of the six companies chosen to make its pitch at Fridays conference is hoping to grow into a multimillion-dollar company with software that cleans up often-chaotic emergency communication systems, Chief Operating Officer and Co-founder Pete ODell told the investor panel.

Ballantine says hell continue to help Swan Island, but he wont leave Central Oregon.

Thats the whole point for me, he said. Its a great place to raise a family.

People like Ballantine are lending confidence to entrepreneurs like John Guyer, president and founder of Nexsys, a two-year-old firm that produces software that helps midsize banks manage their customer information systems.

Guyer said he has three employees to handle software development, analysis, documentation and testing. He needs investment capital to hire software sales and marketing executives, but he doesnt think hell have to look far.

I dont think Ill have trouble finding resources to fill those positions in Bend, he told the investor panel. There are quite a few people with those skills.

In Embrees experience, an urge to work, combined with the desire for a higher quality of life, is typical of the talented people who are moving their families to smaller cities like Bend; Boise, Idaho; or even Spokane, Wash. But remaining a quality place to live will be crucial if Bend wants to continue to attract them.

Its not that theyre saying, No, I dont want to work hard anymore, Embree said. No. I think a lot of people are saying, If Im going to work hard anyway, I dont want to drive three hours to get home.

Bend already has some of the social capital in place to keep them coming, Rosenfeld said. Quality developments, like the Old Mill District and the Tower Theatre, are adding the kind of atmosphere that well-educated, upper-income people want. The airport has enough flights to connect business travelers to major hubs without long waits; high-speed Internet access is strong; and the citys riverfront parks are among the most beautiful in the Northwest.

On the downside, the road transportation system is growing crowded; a full-scale, four-year university is years in the future, if one is built at all; and the schools are becoming crowded, with questionable funding.

I think the real question is, What is Bend going to do next? Rosenfeld said. Its kind of at this crossroads.