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KPBS Midday Edition

How San Diego Lost A Tech Unicorn

Razer employee Josh Collins keeps tabs on what fans are saying about Razer products on social media, July 19, 2016.
Nicholas McVicker
Razer employee Josh Collins keeps tabs on what fans are saying about Razer products on social media, July 19, 2016.
How San Diego Lost A Tech Unicorn
How San Diego Lost A Tech Unicorn
How San Diego Lost A Tech Unicorn GUEST: David Wagner, KPBS technology reporter

This is KPBS Midday Edition . I'm Maureen Cavanaugh. The unicorn is a mythical creature, in the start up world the unicorn is a real beast. The term is been applied to privately held companies valued at $1,000,000,000 or more. These startups were once thought to be mythically rare, today the Bay area is home to more than 50 unicorn's. Meanwhile David Wagner says the San Diego region has lost one of the few unicorns it had. Walking into the corporate headquarters of Razer is as close as you will get to walking into the movie Tron . Everything is going, Razer is a company that makes high-end computer gear and use color -- colorful lights to ring distinctive look -- looks to their keyboards. Kevin Sather does product marketing. Customers are buying Razer products for the lights, they are buying them because they are designed with the Guio gamers in mind. Elite programmers and casual players turn to Razer products for speed. In many games the difference between winning and losing is measured in split seconds and father says a meticulously engineered mechanical Razer keyboard gives gamers an edge. When you're reloading you want to be as precise as possible. Minimizing variation is critically important for gamers. Razer products tend to have more features . Kevin Scarpati says there popular Naga mouse . It is 17 buttons on it. We had no idea it would do as well as it did. No one had ever made a mouse with that many buttons. Gamers are happy to pay a premium, the Naga mouse retails for $80. Today Razer is worth $1,000,000,000 making it a tech unicorn. It was founded in San Diego, a year ago it pulled up stakes and moved from Carlsbad to Irvine. Scarpati says Orange County with its huge concentration of gaming companies is a better fit. We got a fantastic opportunity. We were sad to leave San Diego it made sense. Razer new offices is just across from blizzard entertainment, they can recruit from a large talent pool. Scarpati says, the local community didn't push razor away, it made sense to relocate. Being in a gray area was great for the company for many years. Being in Irvine and having nice office space, being able to draw from larger talent pools it's great to be here. Some old like -- local startups call San Diego the new Silicon Valley. The Bay area has dozens of unicorns. With Razer on the San Diego region has one, to Jen -- Human Longevity ink. EdVenture played a key role sequencing the first human genome. Mike 10 is president -- Mike Krenn suspects not all unicorns are worth $1,000,000,000. He says the bay area capitalist tom valuations are getting too high they worry companies are chasing unicorns at the expense of building a solid business. Krenn says they aren't as consumer friendly. Successful companies get acquired before it quick -- achieving skyhigh evaluations. He would've loved to see Razer stay. He hopes San Diego's industry clusters bring other types of unicorns here. If it was for their best, hopefully reciprocates. It's not like Razer moved very far. Many still commute , if you have further South and you want to work at one of the few companies were aiming at your desk won't get you fired, your dream job may now be out of reach. Joining me is KPBS science and tech reporter David Wagner. We have a unicorn company, Human Longevity, because they are all private is a possible there are more that we just don't know about? Yes. It's possible that they are here in stealth mode. There are companies that have been talking about what they been doing, but previously have been keeping things under wraps. Not being public about what they're doing, there could be more companies like that here in San Diego, when it comes to unicorns we know about, there are not that many. Are they all likely to be biotech companies? If you examples we do have are more on the biotech side than the tech side. That's one of the reasons I wanted to reality check this idea that San Diego somehow is the next Silicon Valley. We aren't producing the same kinds of companies the Bay area is. We have a bigger footprint in genomics, biotech, life sciences and not so much this consumer oriented tech industry that you see with Uber and error B&B -- air B&B. The way that our startup companies are developing, the kinds of products that they are giving to the public, we should not expect to have as many? Looking at the current state of things we of catching up to do. We have very few of these companies compared to the Bay areas that have 50 plus. I don't see a ton of startups that are destined to become unicorns anytime soon. One of the interesting things about the supporting, there is an idea that San Diego will be the next Silicon Valley in a previous venture I went out and asked local tech workers if they thought it was too. Surprisingly, most of them said no, there is an idea that San Diego will be, a lot of people in the local tech scene don't believe that. There is a problem with the valuations, there is been criticism of this billion dollar plus valuations. Is there evidence some companies are worth more or thought of like that? It's not everything to have these unicorn companies, there is actually ample evidence that there are private valuations and are not borne out when they go public. There's a company called square, their payment company they make devices that attach to iPads. They were privately valued at $6,000,000,000, when they did go public their valuation was cut in half. There is evidence that these companies in Silicon Valley investors make these companies worth something that the market does not agree with. It doesn't count if you are a unicorn, it doesn't necessarily translate that you will be successful. That's the most dramatic example, a blood testing company that was valued at $9,000,000,000, after reporting showing they were misread presenting -- misrepresenting their devices, their valuation is now estimated at 1/10 of that. Just because companies are raising a lot of money and getting superhigh valuations, one scandal, one misstep could evaporate very quickly. You have looked closely at razor and San Diego didn't do anything to push it away. Could we have done anything to keep them? Yes I asked, I think the answer really is no. It made more sense for them to be in a city with the bigger concentration of gaming companies. That exists in Irvine it doesn't exist here, it's not something San Diego can create from scratch overnight. The question for San Diego really is, what industry clusters do we have, that are going to attract other companies here. We heard the case that San Diego may become the best place to start a genomics company. We have Human Longevity and alumina, in the future I'll be looking to see if any billion dollar genomics companies to come to San Diego. I've been speaking with David Wagner, KPBS tech reporter.

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.

razer keyboard lights

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.