Generation Innovation: Technology Advances Nevada Economy
Nevada Business Magazine, November 1, 2017, By Jennifer Rachel Baumer --
New, existing and relocating technology companies are making Nevada home in both metro and rural areas, bringing innovation across the board. So far, specific technology clusters have not developed. Nevada is seeing everything from bioscience to construction and telecommunications to entertainment.
“In a lot of cities you have a sector that’s doing well or a place where it’s mostly big companies or all start-ups,” said Dave Archer, CEO, Nevada’s Center for Entrepreneurship and Technology (NCET). “What strikes me about Nevada is that, simultaneously you have a vibrant startup community, you obviously have a huge number of companies that are already doing great things and then the large companies like Google, Switch, Apple and Tesla moving here.”
Tech companies are diversifying Nevada’s economy, doing everything from medical software to manufacturing hardware, building batteries and making new construction safer.
“We’ve got a handful of companies that have received external venture capital from Tier 1 and Tier 2 venture capital. Companies that are mostly on the start-up side have relocated here and are engaging in our local ecosystem,” said Doug Erwin, senior vice president, entrepreneurial development, Economic Development Authority of Western Nevada (EDAWN).
“One reason [diversification] is good is if you’ve invested heavily in one sector and there’s a downturn in that sector, there are huge economic ramifications,” said Archer. “One of the things going for Nevada is that we’re so diversified.”
A vibrant community of startup and relocated tech companies is forming in Northern Nevada with its members participating in the business community.
Breadware, new to Reno this year, is working with the University of Nevada, Reno (UNR) on an accelerator program called the Innevator, a six-week boot camp for early stage Internet of Things (IoT) companies.
The IoT refers to a network of physical devices, vehicles and other items embedded with electronics, software, sensors, actuators and network connectivity which enable these objects to collect and exchange data.
On August 17, Governor Sandoval signed Nevada into the FirstNet and AT&T plan, a dedicated communications network for emergency workers. FirstNet ensures that, in a crisis, first responders don’t have to battle “all circuits busy” messages to get emergency calls through.
FirstNet will eventually link nationwide and Southern Nevada tech company ClearSpace Aeronautics (CSA) will integrate with it. CSA is a leader in drone traffic management and control. The company’s patent-pending technology is a scalable solution consisting of hardware, software, firmware, algorithms and artificial intelligence, utilizing communications through satellite cell towers.
“It allows us to know who’s flying what and authorize and de-authorize it,” said Shana Whitmarsh, co-founder, CSA. “Visualize a new technology with no way to control the traffic. Imagine drones crashing into aircraft or interfering with first responders or being used to hack bank accounts or medical data.”
Imagination isn’t necessary because that’s what some drone operators are doing: sending drones into the path of emergency response helicopters, planes dumping retardant on wildfires or using them to access proprietary information while creating dangerous situations. A drone hit by a helicopter propeller could cause a crash and create shrapnel. Just as birds can damage aircraft by being sucked into the engines, so can drones.
CSA’s technology will allow first responders to control drone traffic, moving it out of flight paths or away from unauthorized areas, freezing it while disconnecting the operator and connecting law enforcement to land and contain it using apps on existing devices.
Not all communications are critical in the sense of emergency, but 21st century communications are critical to business, medical and economic functions of communities.
“High speed communication is obviously critical infrastructure and very important in our society,” said Thomas Husted, CEO, Valley Communications Association (VCA). “It’s even more important in the rural areas that you have high speed communications not only for business commerce, but for education and for the medical industry, because we’re farther removed from those sorts of facilities. It’s important we don’t lag behind in communications and education, healthcare and business commerce.”
The economic side of the communications puzzle: rural areas without adequate access to critical communications infrastructure will continue to fall behind, and investments already made to their utilities become less profitable because of society’s reliance on communications technology.
Answering the need for infrastructure in rural communities, VCA partnered with Switch and Churchill County Communications and embarked on a $100 million mission, installing fiber optic cabling in communities between Reno and Las Vegas. By the end of 2017, Beatty should be the first community in the U.S. with all fiber optic cabling, serving today’s needs and tomorrow’s infrastructure demands.
VCA is paying for the project, which is made feasible by parent company Valley Electric Association, a non-profit electric utility committed to bringing critical infrastructure to its 6,800-square-mile service area. Installing fiber optic cable forwards the opportunities to develop smart homes and allows for real time control over electric distribution systems.
Five or 10 years ago, high speed communications were a luxury. Now they’re a necessity, said Husted. “If we do not make the investment today, we’re simply hurting the return on all those investments we made for tomorrow. Who’s going to want to live in those rural areas if their children might not have access to all the educational opportunities they do in the urban areas.”
Battle Born Starups
More than 16 million zombies have been killed in Southern Nevada. Nearly 110,000 individuals have traveled a combined 19,000 miles plus for the opportunity to waste zombies in a 2,000 square-foot arena in the MGM Grand. The warehouse-scale or epic-scale live virtual reality game allows up to eight players to take their chances against zombies in the Zero Latency free-roam game. While the company may be in Australia, the tech – and the zombies – have made their way to the Las Vegas Strip.
Another Nevada startup is Shirtwascash, born out of online message board conversations. Founder Ardon Lukasiewicz started the company on his laptop, combining user-submitted ideas to create clothing. Established in 2014, the unique clothing line is becoming something of an online community where followers contribute designs, vote for favorites and share how having unique clothing sparks new conversations and friendships.
Nevada’s burgeoning technology field hasn’t settled into defined industry clusters yet – which means there’s a lot of diversity, from zombies on The Strip to earthquake technology outside Sparks. Located in the Tahoe Reno Industrial Center, Dynamic Isolation Systems, a pioneer in the development of seismic isolation technology, essentially makes shock absorbers for freeways and high rise buildings.
In rural counties, advanced manufacturing is growing and data centers like Apple and Switch keep expanding. Some companies are using technology in new and innovative but not media-splashy ways. For example, ITS Logistics uses a technology-driven system of ID chips on boxes in their 630,000-square-foot warehouse in Northern Nevada to track what’s stacked on every forklift. The forklift drives by the scanner, which logs the products on it and where they’re going.
Calling All Angels
One of the places Nevada falls short for technology is capital. Where hub cities like San Francisco and Boston have startup funding available, Nevada doesn’t have enough angel investors or venture capital companies.
In September, the U.S. Department of Commerce invested $17 million to accelerate entrepreneurship across the country and EDAWN received a grant for $300,000, which will be used, in part, to create more venture capital for startup companies.
One Northern Nevada company bridging the gap between technology and funding is Capstak, Inc.
“Capstak is a commercial real estate technology company,” said Heather Goldman, CEO. “We’re matchmaking borrowers in commercial real estate with funding sources by introducing them to the investment bankers and mortgage brokers to place capital.”
Because real estate is by its nature a local industry and capital investments can come from anywhere in the world, Capstak uses technology to mix and match debt equity sources that fund development, construction, acquisition and refinancing with local commercial real estate deals.
Finding startup capital is only one challenge for Nevada tech companies.
“There are challenges to just being a startup,” said Goldman. “They’re not unique to Nevada versus other markets.” Goldman herself has 25 years experience in the commercial real estate private equity and investment management field, and still there are challenges to being a startup company.
“At the end of the day, when you’re doing a technology startup, you need to be very conservative with the capital you’re investing as you’re launching your product, and you also need to recruit and retain the best quality staff,” added Goldman.
Staffing and Recruiting
Recruiting and retaining hasn’t been that hard and Capstak’s worldwide online network means geographical location isn’t as important.
Capstak is housed at the UNR’s Innevation Center, which is located off-campus to be accessible to the business community. While Goldman could draw from 25 years worth of contacts in her field, Capstak hired its chief technology officer in Reno.
“That was the bedrock for making the decision to stay: we can hire great people and there’s a wealth of talent in the area,” said Goldman.
“We currently have six venture-funded startups running out of our Innevation Center, all technology companies,” said James Sacherman, director, Innevation Center, UNR. “I think a big reason for focusing on technology jobs is that they’re a driver of our economy. Technology creates jobs and creates very high salaries which, not only brings up wages for those people earning those salaries, but actually brings up the whole community.”
Eighteen months in, the center is home to 50 companies, three investor groups and three mentor groups.
Clickbio, also located in the Innevation Center, solves staffing issues by cherry picking the University’s best engineers and putting them through a training program.
“We get the brightest and most energetic new grads, which we love,” said Mykle Gaynor, CEO, Clickbio, which designs and manufactures tools for life science research. By improving on the standard plasticware used in lab analysis, they’re able to cut down on the number of steps researchers have to take.
“I moved to Nevada to work for a local company on the automation side of sample analysis, making robots that would account for efficiencies in plasticware,” Gaynor said. After years of doing that he put together a business plan for a company that optimizes the plastic for better use.
Clickbio’s challenge is lack of local customers. Proximity to California helps, but doesn’t solve everything.
“I was in Hong Kong last week, San Diego today, Philadelphia and Boston Sunday and Monday of next week and Texas on Wednesday,” said Gaynor. With customers that scattered, he’d still have to travel even if he was located in a tech hub. However, with 30 percent of the market in San Francisco, 15 percent in San Diego and 15 percent in Boston, the company is in Nevada for the lifestyle and the business environment.
Clickbio’s in the process of hiring eight new people, which is an interesting twist on the tech industry in Nevada. For years, workforce was a sticking point; Nevada didn’t have the talent tech companies needed. Higher education is trying to meet that challenge.
“Community colleges tend to be very responsive to workforce issues and are doing a lot of certificate programs and mini degrees,” said Archer. “They can create a program and turn out qualified workers.”
When tech companies contact EDAWN, they want to know what other tech companies are around, what university and community college training programs exist and all about the workforce.
“Workforce is the biggest question they have, just because, from a community size perspective [for a company] leaving the Bay Area, one of the best places for tech in the world, they need to get a sense of what’s feasible here,” said Erwin.
What they’re told is to talk with other tech companies that have successfully hired in Northern Nevada. If told honestly what they need is beyond the area’s grasp, the move probably isn’t going to work for them. “Talent is definitely an issue,” said Erwin.
In some ways, it’s the diversity of Nevada’s tech industry that’s making it hard for new companies to hire in state because Nevada doesn’t have specialized knowledge.
“One thing we’re trying to overcome on the technology side is, we don’t have a deep labor pool in any one area,” said Sacherman. So, specialized tech professionals – say a chemist with knowledge of mechanical systems for a biotech firm – would be hard to find in Reno, though that’s starting to change. The more tech companies locate here, the more attractive Nevada is to professionals.
Sometimes companies bring their staff. Breadware, which creates circuitry for devices that connect to the IoT, started up in Santa Barbra in 2015, but the cost of doing business in California led them to Nevada. Breadware arrived with eight employees in March and now has 15.
Daniel Price, CEO, calls Breadware’s product “IoT in a box” because it comes ready to build the right electronics for an individual company’s use. Some people use Breadware’s product to teach IoT in the classroom and Breadware’s personnel, themselves, are getting ready to teach. They’re working with UNR to teach a micro degree related to advanced topics in electrical engineering and computer programming.
One question that gets asked as Reno’s tech industry takes off is whether or not Reno is or could be or even wants to be the new Silicon Valley. The influx of creativity and economic rewards would be welcome, but would the traffic, the sizeable income inequality and the housing prices?
Plus, Silicon Valley didn’t become Silicon Valley overnight. “The roots of Silicon Valley on the technology side go back to 1850,” said Archer. “The transistor was invented there, the microprocessor was invented there, Stanford University, one of the top research universities in the world is located there, 30 percent of the U.S. venture capital is located there. They have such a head start on being Silicon Valley I think starting over is like saying wouldn’t we like to be the next Washington DC or the next Las Vegas. Look how many years it took Las Vegas to get to be Las Vegas.”
“If you look at where we are now, we’re nicely diversified, doing well in startups, existing and relocated businesses, so I think we’re doing a pretty good job. There’s a balance between the right amount of growth and too much growth, and I think people are aware and paying attention to that now,” said Archer.
“As we continue to invest in communications not only within the areas [VCA serves] but across the state, we’re building another leg on the economic stool,” said Husted. “That’s good for the entire state. As we increase our technological capabilities, that makes us more attractive for economic development business commerce opportunities. We have gaming, we have tourism, but to continue to develop and build the technology leg on the economic stool for the state is a tremendous opportunity.”