Feature Stories - December 2006
Can You Hear Me Now?
High-Tech Puts Nevada On The Map
by Diane Glazman
In February 2001, Nevada Business Journal reported on efforts to bring high-tech businesses into the state. The dot.com boom and bust had taken its toll on California’s Silicon Valley, and the article focused on what was being done throughout the Silver State to reap the benefits of the Golden State’s woes.
In particular, the article focused on the advantages offered by Nevada’s lower taxes, better quality of life for employees and ease of access to Silicon Valley and Southern California. The challenges mentioned were the need to provide start-ups with investment opportunities, working with Nevada’s universities and community colleges to increase the pool of qualified talent, and gaining visibility within the national tech community. For the most part, Nevadans compared themselves to their larger neighbor to the West when describing the high-tech industry, but looked at efforts to build, grow and woo companies away from Silicon Valley.
Five years later, while California still gets mentioned, it is not with the same awe. Efforts to make high-tech a viable piece of the economic pie here have paid off. Several business executives and industry experts interviewed for this article said everyone comes to Las Vegas or Reno at least once a year for conferences or conventions, which provides valuable one-on-one contact between executives and their existing or potential customers and industry peers. That fact alone has increased the state’s visibility and made it a desired location for relocation and expansion.
In addition, national awareness of factors that disrupt business, such as natural disasters and terrorism, have made Nevada more attractive as a place where businesses can be reasonably assured their networks will not go down, productivity will not be squandered and data will not be lost.
Another factor contributing to the rise of Nevada’s high-tech businesses is the lessons learned in the wake of the dot.com bust. Companies are no longer being founded, built and bought with money invested on the basis of a cocktail-napkin business plan. Most high-tech businesses are based on more careful approaches and are driven by market demand, rather than how much venture capital they can amass. They are privately-held companies with little desire for acquisition or IPO, focused on providing a service or product to a specific niche. While relocation of existing companies commands the most attention, several groups, such as the Vegas Valley Angels in Las Vegas and the Center for Entrepreneurship and Technology in Reno, focus on helping home-grown high-tech businesses get started.
The Tipping Point
Shari Farkas, general manager of Acuity and president of the Technology Business Alliance of Nevada (TBAN), said that, though the tax structure, housing prices and quality of life issues are still factors for people coming to the state, those are no longer the only reasons. The tipping point for the Las Vegas area came when a handful of larger telecom companies located their businesses in Southern Nevada. “PurchasePro started a lot of that energy, and Mpower was a big deal in the late ’90s when it was started here. Once there are some bigger players, then other people start to follow the lead,” she said, adding that Las Vegas’ commitment to building the infrastructure required by businesses helped build the city’s reputation as a telecom hub.
“A tremendous amount of telecommunications infrastructure has been built and hubbed in Las Vegas over the past 15 years. It is a very good spot if you are in this particular type of business, because you have access to some world-class facilities [here],” said Dave Clark, president and CEO of CommPartners. CommPartners is a competitive local exchange carrier, or CLEC, that provides a link between data and people for small- to medium-sized businesses, functioning as both a carrier network and a provider for hosted applications such as call centers and IT and PBX functions.
Gaming Gives Tech a Boost
Surprisingly, or maybe not, the gaming industry has a lot to do with the viability of the state as an excellent location for high-tech. As tourism and business travel destinations, Las Vegas and Reno are places most people want to visit. This brings many local executives into contact with customers, competitors and other people in their industries on a regular basis.
“People love to come to Vegas to meet with us. Our travel budget has to be one-tenth what other technology companies’ travel budgets are because we don’t have to fly out to other markets to try and raise business. A lot of people will come to us,” said Mike Ballard, president and CEO of 1Velocity. Ballard is also the chairman of the Vegas Valley Angels, an angel investor group that provides seed money to start-ups.
Michael Legg, president of Petroglyph Games, says that though the main hubs for the gaming industry are Los Angeles and San Francisco, his company has no trouble getting publishers and business partners to visit Nevada. “We’re so close to Los Angeles and San Francisco that we can do an easy one-day business. You get up in the morning, get on an airplane, have your meeting and fly back in the evening. But on the reverse side, our publishing partners love it, too, because they can make a day trip. A lot of times they like to come out on Friday and spend the weekend,” Legg said.
The casinos also help alleviate one of the oft-cited challenges about the Nevada high-tech environment – finding qualified employees.
According to Farkas, the casinos and their vendors were one of the first industries in the state to go high-tech on a large scale. She cites IGT as an example of a company that may not be thought of as high-tech, but certainly puts technology to use. These companies, in turn, have brought about an increase in the number of supportservices for high-tech such as telecom companies, software developers and engineers, data processing and special effects. “Some companies were brought here when Treasure Island opened to create the pirate ship show and the pyrotechnics. There are a lot of technical aspects to the entertainment business,” she said.
In addition, the gaming industry is very sophisticated when it comes to data management. According to Clark, being located in Las Vegas gives his company access to a large talent pool of IT engineers and technicians who have gained their skills in the casino environment. They can be brought in to learn the specific skill set necessary for the telecom industry.
Mark Tapling, president and CEO of InfoGenesis, agreed. “The casinos are great at hiring people. They are a massive human resources organization. Their critical eye for recruiting and screening and training is certainly much better than an application-focused technology company. Not that we’re bad at it, it’s just a matter of scale. If they have 80,000 employees, they’re pretty good at it.” Tapling, whose company provides financial management tools for multi-venue businesses such as casinos, cruise ships and stadiums around the world, said Las Vegas also provides the perfect atmosphere for a 24-hour international business because it is the most well-lit 24-hour town in the world.
Nevada’s Business Climate
Another factor cited by business leaders for the growth of high-tech is Nevada’s business climate. They are not just referring to the tax structure and the pro-business attitude of state and local governments. Though those are, of course, important factors, the more intangible factors such as being able to network with peers and the presence of a real business environment make a tremendous difference in how Nevada is viewed both from within and outside of the state. Visitors to Las Vegas, for example, are often surprised to find that once they are away from the casinos, there is a real city and a real community surrounding it.
Recognition from publications such as Entrepreneur Magazine, which rated Reno as the No. 1 place to start a business, and Inc. Magazine, which ranked the city 25th out of 393 cities nationwide for providing a good entrepreneurial climate – along with many other recognitions garnered both north and south – have provided the state with a reputation as a good place for high-tech business.
Dave Clark said that when he travels, he often gets the same response when he tells people about where his company is located. First, he said, people tell their favorite Las Vegas story and then they ask why CommPartners is there. “People seem to be very interested about quizzing someone who’s actually from [Las Vegas]. I find there is a very vibrant tech community in Las Vegas, and it is growing. In the late ’90s, there was an assumption that at some point you were going to have to move to the East to be a real company, but I don’t think that bias exists anymore,” he said.
Building a Workforce
Dave LaPlante, CEO of Twelve Horses and chairman of the Center for Entrepreneurship and Technology (CET) in Reno, said one of the best things about Nevada is the size of the business community and the social networks that are possible within the state. “Nevada is still small – it’s not hard to meet people. Sitting on a plane between Reno and Las Vegas, you run into your state leaders, your business leaders. Probably more than in most states in the lower 48, you have incredible opportunities to have direct interaction with the leaders in the state. Unless you hide out and never go out, it’s difficult not to run into the people who can help you,” he said.
While Nevada’s reputation as a place to have a good time may be what people first think of, what happens in Vegas doesn’t stay in Vegas when it comes to the business world, which is good news for the tech businesses in the state. Building a qualified local workforce is often cited as a limitation, but most of the people interviewed said they have not had problems finding the people they need for their companies, though they do say they often have to recruit nationally.
Rahul Singal, president and CEO of WorldDoc, said his company has grown from 22 to 35 employees over the past year and he expects to add another 15 to 20 employees in the next 12 months. He said the company will have to look nationally to find the people they need for those positions, which will include software engineers, account executives and sales people, though he doesn’t anticipate problems finding the right people. “Because Las Vegas is so attractive and known nationally, and it’s an easy place to get to from anywhere in the country, we’re able to maximize our business development with companies all over the country,” he said, adding that Las Vegas’ visibility makes it possible to recruit top talent.
In 2001, one of the factors cited for moving companies to Nevada was the availability of affordable housing. Though that factor has waned as Nevada’s housing market has heated up, the state is still more affordable than many other areas of the country, most notably California. For high-tech companies, whose workforce is primarily composed of younger workers, being located in an area where employees can be home owners instead of renters is important. This was a factor for Michael Legg when his former company, Westwood Studios, was purchased by EA Games and moved to Redwood City, Calif. A portion of Westwood’s employees chose to remain in Las Vegas because of the quality of life available there and, when their contracts with EA Games expired, they formed Petroglyph Games.
As in 2001, a lingering assessment of Nevada’s colleges and universities is that they are still lagging behind the business community in teaching the skills necessary for today’s high-tech marketplace. This assessment comes mainly from people associated with economic development agencies, though, who want to see greater diversification of Nevada’s economy. For the most part, the business executives interviewed for this article said they hire a significant number of UNLV graduates.
The Next Phase
While much of the effort for the past five years has been on bringing existing tech companies into the state and helping them expand, the next phase may be providing a fertile environment for start-ups and making Nevada an attractive place for entrepreneurs looking for a place to set up shop. That is especially true for Northern Nevada.
“Five years ago we didn’t have the quality or depth of companies within tech industries that we’re seeing now,” said Michael Thomas, director of development for the Economic Development Authority of Western Nevada (EDAWN), adding that the area is gaining a reputation as an emerging market for high-tech, something that is attractive to entrepreneurs who want access to new markets. “That access to resources is a key area where I think a lot of businesses see a competitive advantage to coming to the Reno/Tahoe area,” Thomas said. Another advantage for entrepreneurs, according to Ballard, is the availability of talent and expertise available from retired executives who are willing to serve on boards and provide mentoring.
A major drawback to growing high-tech start-ups is the lack of funding. While Ballard’s organization, Vegas Valley Angels, puts together a group of investors looking to provide seed money to start-ups and functions much like a mutual fund, he said no venture capital firms are currently operating in the Vegas area, which limits access to the major sources of capital that are available to start-ups in northern California. Thomas said building high-tech incubators is another area in which the state is lacking. If the state is to foster entrepreneurial ventures, venture capital and incubators are both necessary components.
This last piece, providing for the next generation of tech companies, seems to be all that is lacking in turning Nevada’s silver to high-tech gold.
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