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How San Diego Lost A Tech Unicorn GUEST: David Wagner, KPBS technology reporter

Transcript for audioclip 30687

In folklore, the unicorn is a mythical creature. But in the startup world, it's a very real beast.

In this context, "unicorns" are privately held companies valued at $1 billion or more. The term has been applied to billion-dollar startups because such companies were once thought to be rare. But today, the San Francisco Bay Area alone is home to more than 50 unicorns.



Meanwhile, the San Diego region — which some local startup workers have been calling "the next Silicon Valley" — has actually lost one of the few unicorns it had.



Walking into the corporate headquarters of Razer is probably as close as you'll get to walking into the movie "Tron." Everything here glows.

Razer makes high-end computer gear, and they use colorful, pulsating lights to bring a distinctive look to their mouses, laptops and keyboards.

"When you hit a key, it kind of lights up and slowly fades out afterwards," said Kevin Sather, a product marketing director at Razer. "As you're typing really fast you get this really cool visual."

Customers aren't buying Razer products just for the pretty lights. They're buying Razer gear because it's designed with video gamers in mind.

A Razer keyboard in 'reactive mode'

In many games, the difference between winning and losing is measured in split seconds. Elite pro gamers and casual players alike want faster reaction times out of every keystroke and mouse click. Sather said a meticulously engineered, mechanical Razer keyboard gives them a competitive edge.



"When you're casting a spell or you're reloading your weapon, you want to be as precise as possible," he said. "Minimizing the variation in where that keystroke registers is critically important for gamers."

Razer products tend to have a lot more features than your typical office keyboard or mouse. Company spokesman Kevin Scarpati said their popular Naga mouse, designed for massively multiplayer online games like "World of Warcraft," is a good example.

"The mouse has 17 buttons on it," Scarpati said. "When we came up with it, we had no idea it would do as well as it did because nobody had ever made a mouse with that many buttons before."

Sales are brisk enough that Razer is now venturing into brick-and-mortar retail. Earlier this year, the company opened its first physical store in San Francisco. Today, Razer is reportedly worth over $1 billion, making it a bonafide tech unicorn.



The company was founded in San Diego in 2005. But about a year ago it pulled up stakes, moving its headquarters from Carlsbad to Irvine. Scarpati said Orange County, with its huge concentration of gaming companies, is just a better fit for Razer.



"We got a fantastic opportunity up here. And while we were sad to leave San Diego, it made sense as a business," he said.

Razer's new office is just across the street from "World of Warcraft" developer Blizzard Entertainment. The company can recruit from a larger talent pool here, and its spacious new office has more room for growth than its old Carlsbad office.

Scarpati said the San Diego region's business community didn't do anything to push Razer away, but it made sense to relocate.

"Being in such a great area was great for the company for many years," he said. "Certainly being in Irvine and having a nice office space and being able to draw from larger talent pools, it's great to be up here as well."

Lately, some local startup scene boosters have been calling San Diego the next Silicon Valley. But tallying up the unicorns in each region reveals a huge disparity.



The Bay Area has dozens of unicorns. With Razer now gone, the San Diego region has only a few known unicorns. One of them is Human Longevity, Inc., a company run by J. Craig Venter, who played a key role in sequencing the first human genome.



Another, Samumed, is targeting specific genes to develop treatments for baldness, arthritis and other cosmetic and medical conditions.

"We'd love to have more unicorn companies here, of course we would," said Mike Krenn, president of the San Diego Venture Group. "But that said I don't think you count that against San Diego. It's not everything to have a bunch of unicorn companies."

Krenn said not all unicorns actually turn out to be worth a billion dollars (ahem, Theranos). He said Bay Area venture capitalists tell him valuations there are getting too high. They worry some companies are chasing unicorn status at the expense of building a solid business.

Krenn thinks there are a few reasons why San Diego doesn't have more billion-dollar startups. Companies here don't tend to be as consumer-oriented as Bay Area unicorns such as Uber and Airbnb. And successful local companies often get acquired before achieving sky-high valuations.

Krenn would've loved to see Razer stay in Carlsbad. But he understands why the company moved: It was lured by another region's stronger gaming industry cluster. He hopes San Diego's growing industry clusters will bring other types of unicorns here.



"If it was best for them to move to Irvine, then they should move to Irvine," Krenn said. "Hopefully, it reciprocates the other way around. If you're a good genomics company, you're going to come to San Diego."

It's not like Razer moved far. Many employees still commute from North County. The company is also very much a global operation. Close to 100 employees work in Irvine, but Razer also has offices in San Francisco, Germany and throughout Asia.

But the company no longer has any physical presence in San Diego County. For San Diego's aspiring game industry workers who can't make the commute, their dream of working at one of the few companies where gaming at your desk won't get you fired may now be out of reach.

Correction: An earlier radio version of this story said San Diego is home to one unicorn company: Human Longevity, Inc. The audio has been updated to reflect the fact that San Diego has more than one known unicorn company.

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