Oregon got some sad news last week when Jive Software announced the company was moving its headquarters to Palo Alto. Jive is a terrific company that has built one of the best social media businesses around: unique technology, a deep customer base, and national recognition in publications like The New York Times. Dave Hersh, Jive’s current chairman and founding CEO, helped mentor many other Portland startups and was an inspirational technology leader here. What happened?

For those of us who have lived in the Northwest for a long time, it’s a familiar story. The excuses are plentiful: it is difficult to find great sales and marketing talent here. The epicenter of the technology world is the Bay Area. There's not enough venture capital in the state. I could go on and on.

So, why try to build a company in Portland?

• Well, first off, there are great technologists here. Intel, Mentor Graphics, Tektronix, InFocus Systems, Clarity Visual Systems, RadiSys, Pixelworks – these companies have engineering teams that know how to build world-class products. That’s a good place to start.
• Second, employees and executives tend to be loyal through good times and bad. A tough quarter or two doesn’t send them running for the door.
• Third, for early stage companies, Portland actually has a very supportive entrepreneur ecosystem. The Oregon Angel Fund, a private-public partnership that invests about $3M per year, gives dynamic startups the capital needed to get to the next step. Elemental was fortunate to be selected by OAF for investment in 2007, and the process not only provided some desperately needed seed capital but also taught us what a professional due diligence process looked like.

Clearly, Portland has some of the basic ingredients required — technical talent and early-stage capital. That's a start. But what gets us to the end -- an environment where the Jives of the world stay and thrive?

In my mind, it’s simple. We need some WINS. Big exits, either via public offering or company sale. Liquidity events that pay back the investors who have deployed significant capital here, and thus encourage more investors to back more companies. Exits that give employees the financial freedom to take risks on new ventures, to be able to go without salary for a couple years and innovate. These exits create a virtuous cycle of re-investment, which drives new value-creation innovation. Rinse and repeat!

While the Bay Area, Boston, and New York have perfected this cycle, cities like Austin (Dell) and Seattle (Microsoft) also provide examples of the innovative ecosystem that can be created on the financial back of one successful company. The last time this happened in Portland was ten years ago when Pixelworks went public. Ten years ago! Until a few more local startups manage to scrap their way to successful exits, it’s going to be tough to get this cycle in motion and build an innovation ecosystem.

Jive was the poster child for the Portland technology scene, and now we’ve got to take that poster down and put up a new one. We still have a lot of great startups here; some of these include AboutUs, Avnera, Clear Access, Kryptiq, GreenPrint, Ontier, Prolifiq, Tripwire, Urban Airship, Vesta and Zapproved. Here’s hoping that the next poster child grows up to be a poster adult, and does so right here in Oregon.

NEWS UPDATE (5/28/10): How coincidental that the next day Tripwire announces that they plan to become Oregon's next public company. We're cheering for them!

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