SAN LUIS OBISPO, Calif. — San Luis Obispo has a reputation for being a sleepy town in central California known for its laid-back charm. Top tourist draws are a nearby 18th-century Spanish mission and Bubblegum Alley, a walkway lined with chewed gum. But Rick Stollmeyer, the chief executive of MindBody, envisioned it as a bustling tech hub.
Nestled along the coast about 230 miles south of San Francisco, San Luis Obispo is far from Silicon Valley. The distance presented a challenge for Mr. Stollmeyer, who sought to lure talent to a small college town known by the acronym SLO, where nature buffs and health food junkies go to find their nirvana.
In 2001, he helped found MindBody, which sells cloud-based business management tools for the wellness industry. By 2010, Mr. Stollmeyer had attracted $14 million in venture capital funding. In 2014, he raised $50 million more. A year later, MindBody went public, and it remains the largest private employer in the region, with locations around the world.
Today, the tech community is growing, Mr. Stollmeyer said: “It is hopping. I’ve seen a dozen tech start-ups launch in the past year.”
Venture capitalists are also chiming in. “MindBody has proven that a billion-dollar company can grow up in SLO, and that is a massive milestone,” said Stephen Beck, managing partner at Serra Ventures, an early-stage venture capital firm. “The tech scene has become authentic, dynamic and real enough to pay attention to.” He is so convinced, he has invested in WhiteFox Defense Technologies, a local start-up selling devices that mitigate drone threats.
To date, more than 7,800 tech employees work in San Luis Obispo County, an increase of more than 20 percent in the last five years, according to the California Center for Jobs and the Economy.
“I would call it a boom in the tech industry when you consider double-digit per-year growth,” said Michael Manchak, president and chief executive of the city’s Economic Vitality Corporation, a nonprofit provider of economic development services.
At the crux of this growth is a rebounding economy and a pool of engineering and computer science students from California Polytechnic State University. Added to that is a network of support from government, education and community agencies that provide access to real estate, funding and business connections to encourage fledgling enterprises.
And not only are new companies sprouting up, but renowned high-tech firms are moving in. Amazon leases two spaces downtown, and in October, Amazon Web Services announced a strategic partnership with Cal Poly. Called the Digital Transformation Hub, the organization will be staffed with employees from both entities to help solve “public-sector business challenges,” said Amy Schwartz, a university spokeswoman.
GE Digital is moving into offices at the Cal Poly Technology Park. Erected on the former campus softball field, the tech park will be expanded to include four more facilities over 10 years, said Jim Dunning, the director of economic development and technology transfer at Cal Poly.
To encourage the entrepreneurial spirit, the university established the SLO HotHouse as a space for the community and students at the Center for Innovation and Entrepreneurship. The center opened its new home last year in a historic brick building downtown with 15,000 square feet, triple its original footprint.
The SLO HotHouse brings together the center’s students and entrepreneurs, who rent shared work space. HotHouse inhabitants have access to mentors, venture capitalists and sources to help with prototypes.In the center’s 13-week accelerator program, each student business gets $10,000 in seed money.
Since the center’s inception in 2010, Cal Poly students and graduates have started 75 companies and generated more than $150 million in venture capital funding, said Tod Nelson, the center’s executive director.
The SLO HotHouse has proved so energizing that when a building across the street that was once home to a bread bakery was up for lease, the university jumped at the chance to transform it into the Cal Poly Lofts, 32 apartments rented exclusively to the center’s students. The apartment building opened last year, allowing residents to connect, brainstorm and participate in one another’s companies. One student hired a fellow resident who was an accounting major to do the books for his start-up, said the Cal Poly media relations director, Matt Lazier.
Start-ups in the city are typically clustered downtown or near the regional airport, where MindBody has its headquarters. It operates four eco-friendly buildings, including fitness facilities with yoga classes and a health-conscious cafeteria selling items like acai bowls.
The growth in the number of new firms in San Luis Obispo means that office space is becoming harder to find. Derek Senn, a broker at Anderson Commercial Real Estate Services, said it was possible for a start-up to find office space of up to 3,500 square feet.
“Beyond that, it’s challenging,” he said. “Inventory for larger spaces is low, and it’s not easy to build something right away since not much land is available for development.”
This has forced some start-ups to get creative. One firm, the 125-employee iFixit, wanted to stay close to Cal Poly to attract fresh talent, so it moved into a vacated car dealership and renovated the 17,000 square feet of space.
The firm offers over 31,000 online guides on how to fix everything from broken iPhone screens to torn jeans. Luke Soules, a founder and a Cal Poly graduate, said the company is a 10-minute bicycle ride from campus.
“We have a lot of employees tired of the Silicon Valley pace and come to raise a family,” he said. “The biggest contention we have is not having enough bike parking spaces.”
The expansion of the start-up community has also contributed to a housing shortage in the city. Based on its clean environment, walkability and access to healthy food, San Luis Obispo is consistently ranked as one of the happiest cities in the United States, said Dan Buettner, the founder of Blue Zones. At the same time, it is considered among the 10 most unaffordable places to live in the country, according to independent surveys from RealtyTrac, WalletHub and Magnify Money.
Several recent decisions by the city should help offset the shortage. For instance, it has approved more than 2,000 new homes and housing units over the next 10 years, Mayor Heidi Harmon said.
But residents have already started to grumble about the newcomers encroaching on their quiet town.
Allan Cooper, a former city planning commissioner and a founding member of the Save Our Downtown citizens’ coalition, said there was no doubt the tech community was growing. As rising housing costs force people to live outside the city and commute into town, he expects that the quality of life will suffer and traffic problems will escalate because of “the failure of our city to pay for the infrastructure such as roads, sewer and water that would be required to accommodate our growth.”
And Gary Dwyer, a former Cal Poly professor who taught urban design for more than 30 years, said the tech workers were using San Luis Obispo as a playground to surf and ride mountain bikes.
“The techies are building and buying secondary homes they can use as time shares,” he said. “They are already here, and more are on the way.”