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Waiting for Zuckerberg

Ellen Lee | June 18, 2014 | Story Tech World

Editor's Note: This is one of many dispatches from Oakland that San Francisco magazine is publishing over the next month, all part of our June "Oakland Issue." To see the rest of the issue's contents, and to read stories as they become available online, click here.

A few years ago, Pandora cofounder Tim Westergren made a bold pitch to Twitter and Zynga: “move to Oakland.” Both tech companies were fast outgrowing their San Francisco headquarters, and Westergren saw an opportunity to expand Oakland’s promising but overlooked tech sector. He baited them with the city’s many benefits: cheaper office space, more affordable homes, warmer weather, and a flourishing arts and entertainment scene.

The 48-year-old music industry visionary had himself bet on Oakland when he’d launched the music-streaming company (then named Savage Beast) in 2000. He knew that Oakland had been instrumental in Pandora’s success and that had he settled Pandora in San Francisco, it might no longer exist. During Pandora’s early days, its landlords had shown leniency when the struggling company couldn’t pay its rent: “Had we been in San Francisco, we would have been evicted for sure,” says Westergren. When a federal ruling on music royalties threatened to shut down the company, local officials such as representative Barbara Lee and then-mayor Ron Dellums had lobbied on Pandora’s behalf.

But even with all its perks and a location just 10 minutes from San Francisco by BART, Oakland was still a tough sell. San Francisco lobbied hard to keep Twitter, offering a lucrative tax break that lured the company to the city’s blighted mid-Market neighborhood, with 17 other tech companies following suit. Meanwhile, Zynga moved into Sega’s old headquarters in SoMa. Westergren watched from across the bay as San Francisco’s tech industry shifted into high gear.

Last year, more than $7 billion in venture capital funding poured into San Francisco. By December, the city’s unemployment rate had dropped to under 5 percent, no doubt aided by the city’s 1,957 tech companies and over 49,900 tech jobs. Oakland, on the other hand, hasn’t seen the same explosive growth. Today it has about 300 to 400 tech companies and 5,700 tech jobs. Last year, Oakland startups took in about $673 million in funding, and the unemployment rate fell to an improved but still lackluster 9.7 percent.

You can blame the city’s PR problems, its reputation for crime and poor public schools, and its generous share of political strife, but the real reasons for Oakland’s small tech sector are much more nuanced. Unlike San Francisco and Silicon Valley, Oakland is still missing certain critical components needed to nurture a successful tech haven: a big parent company like Google to light the way; prolific, deep-pocketed investors (à la Ron Conway) to dish out cash; and politicians like Ed Lee to back incentives.

Oakland also lacks the deep talent pool that has helped San Francisco grow so quickly. “I have nothing against Oakland,” says West Stringfellow, chief product officer for Bigcommerce, which recently beat out seven rivals for office space in SoMa. But Stringfellow says that it was worth the premium to tap into the pool of neighborhood engineers who have the experience the startup needs. “It’s one of the few places on earth that has that density in a 12-block radius,” he says.

But as San Francisco’s commercial real estate supply becomes stretched, Oakland starts to benefit. It has room—its commercial vacancy rate is 13 percent, and office space costs half of what it does in San Francisco. Recently, a handful of startups have taken note and relocated from San Francisco to Oakland, including Black Girls Code and Clef, a tech security firm. But for the most part, the growth is not due to an influx of outsiders: The city is seeing a groundswell of homegrown startups, many of which are interested in building a tech community that embraces the city’s diversity and pursues social good, goals that they feel San Francisco has lost sight of in its pursuit of the next billion-dollar acqui-hire. There’s GoldieBlox, a toy maker whose video about girls and engineering became a viral sensation. Mindblown Labs’ app teaches young people financial literacy skills. Sleek-geek, founded by teachers in East Oakland, is developing classroom apps. “The rest of Silicon Valley is being overwhelmed by the next hit app,” says Kalimah Priforce, the cofounder of Qeyno Labs (who led a hackathon that drew the attention of President Barack Obama this year). “Oakland can teach the world about making technology more inclusive and innovative.”

This May, Oakland hosted a tech startup conference, Vator Splash, where the keynote speaker was Mitchell Kapor, an old-guard San Francisco tech founder. Inspired by Oakland’s emerging scene, he and his wife, Freada Kapor Klein, moved from their Pacific Heights home to Jack London Square. The couple now runs the Kapor Center for Social Impact, which offers grants and seed funding to startups and nonprofits. “Around the next corner is a big tech boom in Oakland. It can become a major economic hub in the Bay Area,” Kapor says. In fact, Oakland has recently been drawing in more venture capital funding than cities like Austin, Chicago, and Los Angeles.

Now the once scrappy Pandora, which had a $235 million debut on Wall Street in 2011, employs close to 600 people in 100,000 square feet of two high-rise buildings in Oakland’s Uptown. The neighborhood, formerly a ghost town after 6 p.m., has sprung to life with cocktail bars, restaurants, and coffee shops—the kind of renaissance that mid-Market has been trying to kick-start for years. A few blocks away, Impact Hub Oakland opened its doors in the Hive, one of several new coworking spaces. “It’s critical that the people who live here not only participate but also benefit from the growth that is happening from the tech field,” says Konda Mason, chief executive officer of Impact Hub Oakland. “We certainly don’t want to duplicate what’s happening in San Francisco.”

Over in Jack London Square, a cluster of solar technology companies, led by Sungevity, have also found a place here. Sungevity employed about 40 workers when it moved in to its headquarters four years ago. Now, with more than $200 million in corporate equity, it has hired more than 400 people. The company sponsors the solar technology incubator SfunCube, which houses a dozen startups. As for the fear of not being able to attract developers or funding to Oakland? Unfounded, says Sungevity cofounder Danny Kennedy. “They can catch the ferry, be here in 20 minutes, and have their assumptions about Oakland smashed.”

Originally published in the June issue of San Francisco.

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