Why Some Companies Land in San Diego

It’s expensive to live and do business in San Diego, a reality that keeps many businesses out of California.

But for some companies that center on technology or niche services, a few key perks outweigh the factors that deter many companies from landing here – like California’s high cost of living or higher tax environment. They’re launching and expanding in San Diego.

Here are some of the top reasons these companies were motivated to start here or to develop a San Diego presence.

There’s a cluster of tech talent and businesses.

San Diego is home to scientists and technologists with expertise in everything from biotech to aerospace and more.

Businesses that’ve moved or expanded here say that worker population was a key motivator.

MediaTek, a Taiwanese company that develops smartphone chips, formally opened an engineering office in Sorrento Valley last week.

Kristin Taylor, MediaTek’s vice president of global, public and analyst relations, said San Diego’s so-called wireless valley was a key draw when the company etched out its global expansion plans.

Taylor said many wireless industry companies work in the neighborhood, and MediaTek sees lots of possibilities for collaboration.

“We really felt it was an opportunity for us to collaborate very closely with them,” Taylor said.  ”Secondly, there’s some really great wireless and engineering talent here in San Diego.”

Taylor said that talent encouraged MediaTek to develop a presence earlier than expected after it hired teams of engineers. The company currently has about 100 workers in Sorrento Valley.

“We decided to open quickly because we found so many talented candidates that we didn’t want to lose the opportunity,” she said.

Scott Dennis, CEO of Rancho Bernardo-based DK Engineering, said local talent is what’s kept his company in San Diego. DK Engineering makes a variety of products, including medical devices, 3D printers and kiosks.

Dennis acknowledged it’s not easy doing business here. What keeps the company in the region, he said, is the specialized skills that San Diego’s tech workforce offers.

“We design and manufacture products for companies on a service basis,” Dennis said. “In order to do that effectively, it’s all about the talent. You can’t expect to go to any old region and treat people like a commodity.”

San Diego’s talent offers the region a competitive advantage in technology-tied fields, he said.

Many biotech companies have opened offices in San Diego for similar reasons. One executive for Merck, one of the largest pharmaceutical companies in the world, recently described San Diego as a place “where scientific innovation resides.”

Jay Lichter of Avalon Ventures, a venture capital firm that supports biotech startups, said there are now generations of biotech companies that’ve essentially grown up and learned to innovate in San Diego. And other companies have sprouted to support them. They’re comfortable here.

“The talent pool is such that nobody wants to leave San Diego,” he said.

This means that even when companies leave or even shut down, the workers left behind stay and launch new ventures. This attracts both aspiring companies and big ones looking to expand.

That reality is central to a partnership that Avalon and GlaxoSmithKline, a major pharma player, announced last year to help launch new biotech firms in San Diego.

It’s expensive – but it’s less expensive than other California tech hubs.

Living in San Diego isn’t a bargain. Housing prices, transportation costs and even the cost of everyday items pushes the region’s cost of living above many other places in the U.S.

But some executives for tech and niche companies focused on having a California footprint say San Diego stands out by being less pricey than other California hotspots such as San Francisco or Silicon Valley.

Andrew Motiwalla, co-founder of Terra Education, which coordinates global travel experiences for students and families, said his company looked at Santa Barbara, Los Angeles and the Bay Area when it mulled a move in 2007.

Motiwalla said they ultimately decided to relocate from Venice Beach to San Diego because it was the most affordable California coastal city, among other reasons.

“In San Diego, you can be 10 to 15 minutes from the ocean and, granted, it’s more expensive than Middle America, but you can still have somewhat affordable housing,” he said.

Taylor, the MediaTek executive, said San Diego’s cost of living has also been a perk for her business and its workers too.

“Our employees can have a better standard of living,” Taylor said. “They can put their money away and eventually they can buy something in San Diego County.”

That’s not necessarily the case in Silicon Valley, she said.

Of course, affordability is relative. The median hourly wage for computer hardware engineers, for example, was about $45 an hour in May 2013, according to the Bureau of Labor Statistics.

That’s more than double the average for transportation or health care support workers.

What’s affordable for high-tech workers or even those who work for niche companies like Motiwalla’s may not match what’s within reach for workers in less lucrative industries.

San Diego isn’t like the Bay Area.

Countless startup and tech companies have felt pulled to the Bay Area. It’s a place with more venture capital money and more big-name startups and tech companies.

But the Bay Area can be a cutthroat business environment, and companies often poach the best talent from one another. Some San Diego startup founders and experts say other regions shouldn’t necessarily aim to become just like the Bay Area, a place with its own unique strengths. In fact, they like what differentiates San Diego area from tech hubs up north.

“Here, people come and they stay with us and they’re passionate about what they do and they work very hard because of it,” Motiwalla said.

Rick Backus, CEO of the digital marketing company CPC Strategy in Mission Valley, said he’s also found young workers who are driven and committed to sticking it out here.

Backus, whose company has just under 30 employees, said San Diego’s less competitive environment means it’s easier to bring in new workers coming out of San Diego universities.

They’d like to stay in San Diego and there’s less competition to nab them than there would be up north, he said.

“We’re able to get the best and brightest majors and it’s relatively easy for us to recruit those people,” Backus said.

There’s key demand here.

Sometimes it’s simple. San Diegans or other businesses have a need and other companies see an opening.

Allon Caidar is CEO of TVPage, a company that produces an online video marketing platform.

Surf-and-skate apparel companies with SoCal ties such as Hurley and Volcom and retailers like Tilly’s make up the biggest segment of TVPage’s business. TVPage’s proximity to those companies and the surf lifestyle in the San Diego area has made that possible.

“There is a huge benefit to being in San Diego,” Caidar said.

This is part of our quest digging into the difficulties – real or perceived – of doing business in San Diego. Check out the previous story in our series, For San Diego Businesses, the Sky Is What’s Limiting.

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