Tech Coast Coming of Age

Happy New Year, Tech Coast.

That’s right. In 1998, Southern California will come into its own as a bona fide technology capital, local tech leaders say. From Internet content to biotechnology to commercial aerospace, the Southland’s increasingly high-tech flavor will make it a worthy neighbor to Silicon Valley.

“This is going to be the year that Southern California is finally recognized as a technology leader,” said Bill Manassero, executive director of the Software Council of Southern California. “It looks like the term ‘Tech Coast’ is probably going to be real.”

The continuing quest for Internet profits will fuel much of the growth among tech companies throughout Los Angeles and Orange counties.

Leading the charge will be a handful of local Web firms that are emerging as industry leaders in the Internet content game. Santa Monica-based GeoCities has hit upon an intriguing business model by handing out free home pages, then grouping the content created by its 1.2 million homesteaders by subject in order to attract advertisers.

CitySearch of Pasadena has launched a dozen Web-based city guides that are particularly attractive to advertisers. The company has raised more than $75 million from private investors (including Los Angeles Times publisher Times Mirror) in the face of competition from the likes of America Online’s Digital City guides and Microsoft’s Sidewalk venture.

Local firms that produce behind-the-scenes technology for the Internet also stand to gain. Among the most promising are Tustin-based PairGain Technologies, which designs and builds systems to squeeze more digital transmission capacity out of copper wires; Sandpiper Networks, a Westlake Village firm developing software to speed the delivery of Web pages; and Rainbow Technologies of Irvine, a longtime provider of data-protection software that sees a big market in selling encryption programs for the Internet.

Although Web sites are continuing to collect more money from advertisers, fees from online commerce have more near-term profit potential.

“It’s the killer app for 1998,” says Jonathan Funk, managing partner of Media Technology Ventures, a Los Angeles venture capital fund. He cites Santa Monica-based eToys as an example of a company that combines a promising niche with an impressive management team.

At the same time, 1998 will be a year of reckoning for many Internet-related companies that haven’t figured out how to earn a good enough return. The Web design business, for one, is due for a shakeout. Santa Clara-based USWeb has launched the early stages of consolidation by buying three local Web design firms, including W3-design of Culver City, in late 1997. At-risk firms that don’t merge risk going out of business.

“There is going to be a consolidation among the independents,” said Dan Lavin, a multimedia analyst with Dataquest. “Eventually you’ll get large contractors that can do everything from soup to nuts.”

There will be plenty happening on the research side of the Internet scene in 1998 as well. The Integrated Media Systems Center at USC is expected to become a key player in the National Tele-Immersion Initiative, which the National Science Foundation will announce early next year.

Whereas previous government efforts focused on building an information superhighway, the goal of the National Tele-Immersion Initiative--a 10- to 15-year effort--is to improve the way people interact with computers, said IMSC Director Crysostomos “Max” Nikias.

For example, USC engineering researchers are developing a system that would use the Internet as the backbone for a more lifelike version of videoconferencing, with seamlessly blended images of multiple participants and immersive audio technology that makes it sound as if everyone is in the same room.

As a subset of the tele-immersion project, the Universal Access Initiative will focus on improving computer interfaces for the disabled, Nikias said. In addition to immersive audio, the initiative will focus on improved speech-recognition software and mouse-like devices that use force-feedback mechanisms to allow computer users to “feel” an object displayed on a computer screen.

The relationship between the region’s universities and the private sector will be crucial to the continued development of the Tech Coast. One such collaboration involves engineers at UCLA and Rockwell’s Science Center in Thousand Oaks, who are developing wireless networks of tiny sensors that can read data from global positioning system satellites data or measure vibrations or listen for sound waves.

Border Patrol agents could plant sensors in the ground several dozen meters apart and listen for groups of people crossing into the U.S., while companies could use sensors to monitor factory machinery and military units could use them to help soldiers keep track of their fellow platoon members, said Hank Marcy, program director at Rockwell’s Science Center.

The number of companies spun off from academe is expected to grow in coming years, says Ahmed Enany, executive director of the Southern California Biomedical Council.

Recent UCLA spinoffs include Santa Monica-based UroGenesys, which is developing diagnostics and therapies for prostate cancer, and USC has spawned Los Angeles-based Agrivax, which is creating a vaccine for cryptosporidiosis, a food-borne illness.

Researchers from Caltech have started Cyrano Sciences to develop a mechanical smelling device, Neuromark to create a test to detect mad cow disease, and MultiTarget to develop localized treatments for cancer.

In May, construction workers will break ground at Cal State Northridge for a bioscience park that will eventually include five buildings with 650,000 square feet of space. The initial tenants will include MiniMed and MRG, two companies founded by Alfred Mann that are developing treatments for diabetes.

The activity has been fueled in part by a newly energized Southland venture capital community. Funk, of Media Technology Ventures, says his own fund, which focuses on the convergence of entertainment and information technology, as well as Brentwood Venture Capital in Los Angeles and Enterprise Partners in Newport Beach will all be stepping up their activity in a variety of high-tech industries, he said.

Venture capitalists in Silicon Valley will also be giving Southland firms a closer look next year, said Rohit Shukla, director of the Los Angeles Regional Technology Alliance.

“In Northern California, deals are becoming increasingly difficult to do” because so many investors are competing for the same deals, Shukla said. “A virgin area burgeoning with opportunities like this is likely to warrant some interest.”

Perhaps the single institution with the most potential for shaping the future of technology here is the new Getty Center, said Dataquest’s Lavin. By providing grants and coordinating in-house activities with other local institutions, such as the American Film Institute, the Getty can help solidify Los Angeles’ place as the content center for the Information Age.

“The Web is about reaching large numbers of people, and L.A. as a city is about communication with a large number of people,” Lavin said. “If the Getty so chooses, they could really be the leader in trying to make things happen.”