Santa Cruz Works founder Doug Erickson.
(Via Santa Cruz Works)
Business & Technology

Santa Cruz Works’ Doug Erickson on how region’s affordable housing crisis affects local tech economy

The tech sector has been hit hard the past few years, and analysts anticipate that tech layoffs in 2023 will exceed the number in 2022. While recession fears continue to reverberate within the larger tech ecosystem, at the local level we’ve seen some significant growth activity. In an interview with Lookout business columnist Jessica M. Pasko, Santa Cruz Works founder Doug Erickson discusses how the region’s affordable housing woes have affected the growth of the local tech industry — and why AI is about to upend everything.

The tech sector has been hit hard the past few years, and analysts anticipate that tech layoffs in 2023 will exceed the number in 2022. Amazon, Google and Zoom are just a few of the big names that have made cutbacks this year. So far, there have been over 234,000 people laid off globally this year in the technology industry, according to the tracker (Those numbers are based on where the companies are headquartered, not where the affected employees live.)

While recession fears continue to reverberate within the larger tech ecosystem, at the Santa Cruz County level we’ve seen some significant growth activity. Joby Aviation continues to grow, taking over the former Poly campus near Harvey West Park in Santa Cruz in June, gaining new investments and landing lucrative contracts for its electric aircraft technology. And Capstan Medical and Ambient Photonics have announced new funding rounds in recent weeks.

What does all this say about the strength of our local tech economy? And where are we going next? For context, I spoke with Doug Erickson, the founder of Santa Cruz Works, a nonprofit hub for tech entrepreneurs in Santa Cruz County. The longtime veteran of the industry (and Community Voices contributor) has seen immense change here and is a strong believer that the future is in artificial intelligence and hybrid work.

Lookout: First off, some background: Why did you start Santa Cruz Works in the first place?

Doug Erickson: In 2007, I was deep in a tech career that had taken me all over the world. I had connections all over the world but few in Santa Cruz, where I lived and still live. I decided a good way to work with other tech professionals locally was to build a community. We created the entrepreneurial hub. We were seeing a lot of businesses leaving Santa Cruz once they got started to move to Silicon Valley. We wanted to create a tech ecosystem where people would stay here.

I established a board of directors who represented different pillars such as housing, education, etc., and we found that the No. 1 problem for most startups is affordable housing. We wanted to really work to see how we could help with this.

Lookout: How have things changed in the past few years amid the pandemic and recession fears?

Erickson: We recently conducted a survey of our members. We found that most people are now working hybrid and there’s been a major reduction in commuting. But the most challenging issue remains affordable housing and the cost of living. These are the things that are making it difficult for businesses right now to get going and keep going. We didn’t see many people [close shop] as a result of the pandemic, but many definitely had to pivot to survive. But we haven’t seen them as impacted by layoffs [at locally based companies]. It’s all about the new way of hybrid working, but we’re also not seeing a lot of businesses come to Santa Cruz because of that.

Lookout: What do you see as the biggest growth opportunities? Any specific subsectors?

Erickson: We are seeing a lot of people struggling to be part of the AI [artificial intelligence] world, which has just come at us so fast. Most of the venture capital funding is going to AI companies as opposed to pure software companies. We’ve had a couple of our partners tell us that venture capitalists have told them they’d give them a lot of money if they only had an AI component. We’re seeing the same thing with biotech.

Local tech guru and Santa Cruz Works co-founder Doug Erickson ponders the fear surrounding artificial intelligence and...

This is upon us. This [AI’s approach] is faster than anything we’ve ever seen in the tech world. We’ve never seen anything like this and it’s not going away. It’s advancing at such great speed. If you take your eyes off it for one day or one week, you’re kind of missing the boat.

We’re seeing a lot of interest in this from companies and that’s why we have two events next month specific to AI implementation and how AI is going to impact education, jobs, etc.

As we look to bigger problems — planetary health, addressing global warming, pandemics and things like that — those aren’t going away and AI will be a tool that can significantly help with solving these challenges, too.

We’ve started Santa Cruz Ventures, a $10 million venture fund focused on technology companies in Santa Cruz, Monterey and San Benito counties. AI is going to be a big part of our considerations.

Biotech is another area that’s still alive in Santa Cruz and I think we’re about to see a whole new acceleration of AI in this, too.

Joby founder and CEO JoeBen Bevirt (center) and others open the air taxi company's headquarters in Santa Cruz.
Joby Aviation founder and CEO JoeBen Bevirt (center) and Santa Cruz Mayor Fred Keeley (right) open the air taxi company’s headquarters in Santa Cruz in June.
(Alison Gamel / Lookout Santa Cruz)

Lookout: What do you see as the most exciting tech developments locally?

Erickson: Joby Aviation, that’s the sweetheart. Four years ago, it was Looker [which was acquired by Google in 2019].

Fullpower is another one to watch. Ambient Photonics is going big, they are setting up offices in Europe. And I love what Capstan Medical is doing, and Cruz Foam. Onewheel is another one that just keeps going.

Lookout: Given that so much work can now be done remote, what incentives are there for companies to base their headquarters in Santa Cruz?

Erickson: Remote and hybrid work are changing things. I love the fact that if you talk to Bonnie Lipscomb [director of economic development for the City of Santa Cruz] about the number of affordable homes going in this year and next — it’s astounding. I think we’re going to see more people staying here, living here and starting their headquarters even as remote work changes things.

Lookout: What gets you really excited about the future of tech here?

Erickson: The shift in the entrepreneurial culture. It’s realizing you can be anywhere in the world and you can have a workforce anywhere in the world and you can be successful anywhere — and that’s better for the planet, too.

I think AI is going to help us significantly solve things. I think we will really see it drive entrepreneurship, aided by hybrid work. And we’ll see solutions like Joby Aviation driving the future. I am very positive about the future. I know there will be some bad actors out there who will use AI for things like political disruption, but I’m very positive we will figure it out.

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