Why Bay Area tech companies are key to Sacramento’s economic strategy

Barry Broome, chief executive of the Greater Sacramento Area Economic Council, speaks at an economic conference at Sacramento State in January 2015.
Barry Broome, chief executive of the Greater Sacramento Area Economic Council, speaks at an economic conference at Sacramento State in January 2015. Sacramento Bee file

When the Sacramento region’s new economic development guru arrived in town in early 2015, he preached a mostly homegrown approach that emphasized nurturing industries in food, agriculture, water and other fields connected to the area’s natural strengths.

Since then, Barry Broome has helped recruit a biomedical company from China, a maker of email-management systems from Tampa and a watercraft manufacturer from upstate New York, among others. His latest hit was a small digital-marketing company from San Francisco, named Parrable, which expects to hire 25 to 70 workers over the next three years.

So what happened to homegrown?

Broome, the first-ever chief executive of the Greater Sacramento Area Economic Council, said he still believes the region can build industries from the ground up in fields such as agriculture technology. But the homegrown strategy will take quite a while to gain traction in a community where essential ingredients such as venture capital firms are still scarce.

In the meantime, Broome said Sacramento can generate significant success by snagging companies from other cities.

The Bay Area in particular is bursting with small tech companies that are eager to cut costs but still want to stay in California.

“The opportunity is better than I thought,” Broome said in a wide-ranging interview at Greater Sacramento’s office on Capitol Mall. “There’s a gold mine down there, and it’s coming loose. We’d be silly not to go down there.”

It’s a different approach than the strategy employed 30 years ago by Greater Sacramento’s predecessor, the Sacramento Area Commerce and Trade Organization. Emphasizing the region’s low costs, SACTO succeeded in landing major job sites from big-name companies like Hewlett-Packard and Intel Corp. Many of those jobs eventually drifted away, however, shifting to lower-cost regions of the United States or overseas.

Broome, who was brought to Sacramento after a successful stint running Phoenix’s economic development organization, said going after the big dogs of high tech is no longer realistic; California’s costs are too high and the companies are more apt to wind up in a place like Austin or Denver. It makes more sense to recruit scores of small fish that want to stay in California – and hope some of them blossom into major tech companies.

It will be a painstaking process, consuming a decade or longer, with jobs coming in small bites instead of big gulps. “We’re going to have to bring in 200 of them to have three to five globally successful companies,” he said.

Broome added that selling Sacramento as simply a cheap place to do business isn’t his plan. He instead pushes Sacramento as a hotbed of “talent and creativity” where the costs happen to be lower than the Bay Area’s. “The affordability pitch has to be at the back end of the conversation,” he said.

Selling Sacramento on any basis remains challenging, he said. The region remains captive to a “military-ag-government brand,” and it can be hard to convince out-of-town CEOs that the workforce is up to par, he said.

It’s not just a matter of persuading CEOs. Venture capitalists and other financial backers of young companies in Silicon Valley traditionally have insisted on keeping the companies in the Bay Area.

That attitude is starting to loosen up, Broome said, but it remains a hurdle. Sometime this month, Greater Sacramento expects to announce the successful recruitment of another Bay Area tech company. The move might have come sooner – the CEO is eager to make the move – but the company’s financiers were reluctant to let the company relocate to Sacramento.

“It took us three months to convince the investors,” Broome said.

Dale Kasler: 916-321-1066, @dakasler