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36

Life In The Silicon Rain Forest
 

Oregon has always been a great place to fish or raise a family. Lately it has become one of the hottest places around to start a company.
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Back in the early 1970s, former Oregon Governor Tom McCall ran around the country telling out-of-staters that they were welcome to visit Oregon, but he would rather they didn't stay. Ever since then, Oregonians have nursed a complex about their state's image. McCall's remarks didn't keep anyone away -- the state's population increased at a rate of 2.2% annually, faster than that of California or Washington, during his eight years in office. Nor were immigrants deterred by the "ungreeting cards" containing invitations like "Tom Lawson McCall, Governor, on behalf of the citizens of the Great State of Oregon, cordially invites you to visit Washington or California or Idaho or Nevada or Afghanistan," and jokes about the rain. The whole pitch seemed to be facetiously antigrowth.

Besides, it wasn't just a joke. A lot of Oregonians had come to the state to get away from places like California, or to carry on a less frenzied way of life among the tall trees and rolling farmland, and they didn't want to see their state turned into another southern, or even northern, California. People hadn't come to Oregon for the weather or to get rich or from a vague sense that this was where something was happening. They came because people seemed nicer there, because Oregon was still small enough to get your arms around, and it had some of the last unspoiled countryside in the nation. It was a great place to fish and to raise a family.

Nonetheless, the economy in Oregon had boomed during the '60s and, at least by Oregon standards, there was quite a bit of urban sprawl. People got upset when legendary strawberry fields started disappearing under shopping mall parking lots. Oregonians depended on natural resources for their biggest industries -- timber, agriculture, and tourism -- and McCall helped mobilize the state to preserve or, in some cases, reclaim them. Oregonians passed the country's first bottle bill, spent the money to clean up their rivers and air, and required industries to establish environmental controls.

For the most part, they supported McCall's cuts in the budget for promoting tourism and his elimination of the Oregon Industrial Development Commission's budget. They even backed his appointment of a Conservation and Development Commission to oversee a statewide, comprehensive land-use plan. Every city and county in Oregon was supposed to come up with a plan that complied with such state planning goals as preservation of open spaces and scenic, historic, and natural resources; protection against urban sprawl; and planning the housing, streets, sewers, and water for future growth. It was, and still is, the most ambitious land-use planning anywhere in the world.

Until the late 1970s, Oregonians weren't particularly concerned about catering to industry, or even to putting out a welcome mat to growth. Industry there -- timber, agriculture and electronics (primarily Tektronix Inc., a large electrical-instrument maker) -- provided enough jobs to keep all but 6% of the state's workers employed. And it seemed to operate profitably enough in spite of a personal income tax structure that some claimed was horrendously progressive, as well as environmental impact permit processes that sometimes delayed the building of a corporate facility for a couple of years, and a noticeable lack of incentives from local and state governments to induce any company to stay there. Portland had remained a comfortably small city (population under 400,000; tallest building, 39 stories), with the view of Mt. Hood unobscured by smog, the highways relatively free of congestion, the corporate buildings landscaped among the trees. And people had still managed to build successful companies and get rich.

The recession of 1979-82 changed all that. One hundred and fifty three thousand people, or 11.5% of the work force, found themselves without jobs in 1982. Georgia-Pacific Corp., one of the country's largest timber companies and a major Oregon employer, moved its headquarters to Atlanta. And Tektronix, a company many people had looked to as a buffer against the ups and downs of timber-related industries, was forced to cut back its staff by about 6%.

Oregonians began to look a little harder at the four-color magazine advertisements luring industry to South Carolina. They worried about the tax structure. They remembered Intel Corp.'s complaints about the land-use-permit process.

By early 1984 they had, on the one hand, such companies as Tektronix, Nike, Floating Point Systems, Hewlett-Packard, and Intel, and a whole raft of start-ups that seemed to indicate a healthy business climate. On the other hand, however, they were reading about Hyster Co., a forklift manufacturer that was consolidating its manufacturing in Illinois and Kentucky at the expense of a plant in Portland; about Mitsubishi Corp. turning down an Oregon site in favor of one in North Carolina; and about Star Technologies Inc., a Floating Point Systems Inc. spin-off that had decided to locate its manufacturing facilities in Sterling, Va., 3,000 miles from corporate headquarters.

The average person didn't know what to think. Should the state of Oregon and the city of Portland have coughed up the $6 million in cash that Hyster demanded to keep its 200 manufacturing jobs in Portland? Did the land-use permits really take too long to obtain? Was Oregon's tax structure driving off the kinds of companies the state desperately wanted to keep?

"We're having a state identity crisis," says James Towne, president of Metheus Corp., a three-year-old company that makes engineering workstations and graphic controllers.

Oregonians, who once led the nation on environmental issues, marijuana laws, and land-use planning, no longer feel they are leading in anything, and they don't like it. In 1982, the Portland Chamber of Commerce hired SRI International to do a study of the "Strengths and Weaknesses of the Portland Area as an Industrial Location." Governor Victor Atiyeh put together an "Economic Recovery Council" to study the state economy and recommend solutions to the unemployment problem. Oregonians wanted jobs. And they began to wonder if it wasn't time for the state to try to combine quality of life with financial development. They knew they didn't want their state to become another Silicon Valley, with its smog and congested freeways, but maybe it could be another North Carolina.

Oregonians continue their struggle to remove obstacles in the way of economic growth. They put a sales tax initiative on the ballot last March, streamlined the permit process, and built a research institute responsive to the needs of high technology. And they continue to grow frustrated with the state's inability to produce a North Carolina-like environment.

But some people seem to forget that the debate about the role government should play in the development of industry and the role industry should play in the development of things ordinarily done by the public sector had been key to the development of the environment Oregon already has. Economic growth -- the spawning of new jobs and new technologies -- hasn't been the result of a coordinated effort of such forward-thinking leaders as the governor, the mayor, or the economic development officer, but rather a series of historical accidents shaped by the idiosyncracies of the Pacific Northwest and its resources, its quality of life, the kind of people it attracts, and their commitment to preserving their way of life.

"People in the Northwest have always had this attitude ofindependence and self-reliance, of leave-us-alone-and-we'll-solve our-own-problems. Everything at Tektronix was homegrown. They even owned their own vending machines." -- Jonathan Birck, Tektronix alumnus, founder of Northwest Instrument Systems Inc.

In 1946, Portland, Ore., didn't seem the most likely site for the birth of a small company that would produce some of the world's most sophisticated oscilloscopes and grow to annual sales of more than $1 billion. But, at the time, neither did the prune orchards and horse pastures of Palo Alto, Calif. William Shockley, the inventor of the junction transistor, was still at Bell Labs in New Jersey; Robert Noyce, the co-inventor of the integrated circuit, was still in college in Grinnell, Iowa; and even Bill Hewlett and David Packard were barely out of Packard's garage. In fact, there wasn't much of what we now think of as the electronics industry anywhere. But the electronics establishment -- RCA, Westinghouse, and General Electric -- was still headquartered in the east, and Portland, to outsiders anyway, seemed even more of a backwater in "radio," as electronics was called in the early days, than most.

But Howard and Jack, as almost everyone in Oregon refers to the founders of Tektronix, didn't want to leave home. Howard Vollum, a scion of a homesteading family, was a tall, thin, unassuming guy who became interested in radios as a boy, and worked his way through Reed College in Portland fixing them. Jack Murdock, more outgoing than Vollum, had set up a radio and appliance store with a stake offered to him by his father as an alternative to college. Both Vollum and Murdock had been born and brought up in the Portland area and, although a lot of people their age left for career opportunities elsewhere, the two talked about starting an oscilloscope company in Portland.

Vollum had built his first oscilloscope during the Depression, in the year in which he had had to drop out of college for lack of money. After graduating from Reed with a degree in physics, Vollum had fixed radios in a radio service department he had set up in Murdock's store. There, before the war, the two had discussed starting a company.

Vollum was the technical genius, and Murdock, if his years at his radio and appliance store were any indication, was a natural businessman. The war delayed their plans, but Vollum had learned a lot about oscilloscopes during his four years in the Signal Corps, and it looked like there would be a lot more of an electronics industry after the war.

On January 2, 1946, just six weeks after Vollum was released from the Army, he and Murdock incorporated Tektronix to design and manufacture cathode ray oscilloscopes. "Our philosophy," said Vollum in a 1980 interview with the Oregon Historical Society, "was to build the best instrument that we possibly could for the lowest price that we would come out with a satisfactory profit on, and make all of them that people wanted to buy."

From the start, Tektronix reflected the character of its founders. The company was notoriously independent, although this was more a result of necessity than philosophy. Murdock and Vollum started out in a two-story building in downtown Portland, where they bootstrapped their cash flow in the way they knew best -- fixing radios and running a retail electronics shop on the first floor. Venture capital was out of the question. In those days, young guys from Portland didn't just call down to Silicon Valley or out to New York for $5 million, particularly not guys without a track record in either start-ups or big companies. Not only did Murdock lack an MBA, he hadn't even gone to college, and neither he nor Vollum had ever worked for anyone else. They got turned down for a loan by one of the city's big banks, First National Bank of Oregon, although they did get cash from another, U.S. National Bank of Oregon.

And finance wasn't the only respect in which they were alone. There was no Stanford University or Massachusetts Institute of Technology or Berkeley up there in the Silicon Rain Forest, no one encouraging them to stick around and make their mark in Oregon. There was no convenient interaction with a great research institution, and no peers, no young bucks getting together over beers at the local bar at the end of the day to trade stories about integrated circuits and cathode ray tubes and impedance meters.

Still, there was something very exciting happening on the second floor of that building in downtown Portland, and word was getting around that Vollum and Murdock were building a new kind of company there, similar to the embryonic Hewlett-Packards and Fairchilds in California. Vollum and Murdock espoused the same first-name, no-reserved-parking-places, elbow-high-partitioned office cultures that their peers in California were making into a calculated corporate statement. It just never occurred to them to do anything else.

"People just did what came naturally," says Bill Webber, whose job description when he joined Tektronix in 1951 was "to help Jack." "First it was just 'Jack' and 'Howard' at the shop. Then it was 'Jack' and 'Howard' and 'Miles' and 'Logan.' They were all people of about the same age and experience." It seemed silly for people to call anybody by anything but his or her first name.

With Howard and Jack's desks out there on the shop floor just like everyone else's, the no-one-flies-first-class rule, the "committed to excellence" motto coined before the word "excellence" became the corporate rage, Vollum and Murdock built a corporate culture and a company that became a mecca for Oregon engineers. Some of them thought working for Howard and Jack was more exciting than going to school.

But although many of the cultural symbols at Tektronix were the same as those to the south, there was something about the company's self-reliance, its reputation for keeping things to itself, its solidity as a corporation and the employer of decent, hardworking, family-oriented people that was characteristically Pacific Northwest.

When it became obvious in the late 1940s that the company was going to have to move "someplace where there was a large amount of ground," Vollum and Murdock asked their employees where they wanted to be, and the employees said west.

"West" at that point was mostly apple orchards and cow pastures, but land was cheap, and forward-thinking developers were building houses in all price ranges around the Cedar Hills Shopping Mall. Tektronix moved there. For all the absence of hierarchy in the Silicon Valley, employers there weren't asking their workers where they wanted to live.

And then there was the story about Vollum getting a telephone call from a woman whose radio he had fixed back in the days when that was part of what he did for a living. The woman told him that the radio had broken and asked if he would come and fix it. Although Vollum was then the president of a successful company, he drove over to the woman's house and fixed the radio. "When I fix something, it stays fixed," Vollum reportedly told the woman when she offered to pay him and he turned her down.

There weren't many environmental regulations in the 1940s and '50s, and Tektronix stayed out of politics. The company built its own waste-treatment plant when it moved west of Portland to Beaverton, and the company rule was to make sure the water that left Tek property was as clean as it was when it came on. Murdock didn't like the state tax structure, and moved across the river to Washington in the late '50s. Vollum's attitude was that he had been born and brought up in Oregon, and he intended to live there and pay the taxes without complaining.

For a long time -- 25 or 30 years of consistently strong growth -- Tektronix was like a family or a religion, and people stayed for life. Besides, there was really nowhere else to go in the Northwest. But in the 1970s, life at what had become the largest employer in Oregon began to change. The company was nearing the $1-billion level of annual sales. It chose not to go into small computers. Some sensed a wavering of corporate purpose. As in any large company investing in a wide range of research and development, there were a number of projects researched for which Tek didn't see an appropriate market. Projects got killed. And some of the managers and engineers of those projects began to think about leaving.

It had been happening for a long time in Silicon Valley -- employees leaving companies to start something of their own -- but until the '70s, this phenomenon hadn't quite caught on in Oregon. Of course, over the years a few people had left to start their own companies, but the relentless rollovers of people and resources of Silicon Valley just weren't happening in Oregon. People in Oregon had a sense that things were out of control in California. They had visions of headhunters cruising the streets during lunch hour. Drugs in the schools. Housing prices that even managers couldn't afford. People liked the slower pace of life in Oregon. They were generally more conservative than the folks in California.

But during the '70s, Hewlett-Packard Co. and Intel moved R&D operations up to Oregon, unrest at Tek grew, and venture capital started trickling to Oregon. Norm Winningstad left Tek in 1970 to start Floating Point Systems, a company that would build array processors. Although 1970 was a venture capital nadir, Floating Point struggled through a difficult four years, then got venture capital through the American Electronics Association (AEA) Monterey conference and went on to become a $100-million company.

The flood didn't really start until the early 1980s. Then Tom Bruggere left Tektronix to start Mentor Graphics Inc., Gene Chao resigned as head of Tek's applied research to start Metheus, Jonathan Birck jumped ship to start Northwest Instrument Systems, and Tom Clarkson left to start Graphic Systems Software. And each of them took top Tek employees along.

"People thought we were going crazy," says Gerard Langeler, one of the founders and a vice-president of Mentor Graphics. "Tek was stable. Respected. We didn't know what we were going to sell. We just wanted to start and grow something."

But, although Tek may not have purposefully supplied a climate that would encourage entrepreneurial activity by its employees, at least not in the form of spin-offs, it did supply the culture that most of its spin-offs took with them. "Tek is the glue that holds us together," says James Towne of Metheus. "It's a point of reference. We understand each other. Metheus was started by six people who knew each other well at Tek."

Tek emphasized the value of employees and invested in them, and it had a way of dealing with customers and making sure they were satisfied, points out Birck of Northwest Instrument. It's more laid back than some of the California companies, he adds.

Tek put less of an emphasis on money. Not only were salaries on the low side for the industry, but there was a sense that "Howard Vollum was looking for something more than an amazing number of turns on his bucks," says Towne. Like Tek, start-ups in Oregon seemed less flashy than those in California. Many of the people who joined Metheus took 50% pay cuts to join the start-up team. Entrepreneurs (with a few notable exceptions, among them Norm Winningstad) didn't drive Ferraris. "We're happy in our Hondas here," says Towne.

Tek was gentlemanly in an old-fashioned sort of way, a company that seemed to always try to do the right thing. Earl Wantland, Tek's current president, told a venture capitalist inquiring about the three men who had just left to start Mentor Graphics that they were three of the best people Tek had ever had. There were no lawsuits, not even threats. And the former employees responded in the same gentlemanly way. Metheus resolved not to call any Tek employees, unless, of course, they contacted Metheus first.

Tek even set up one former manager and practically his entire department in the flat-panel display-screen business. It was a case in which some of the engineers had been working on the technology for seven or eight years, and in the last couple of years, it had become apparent that Tek wasn't going to take the product to market. Finally, Jim Hurd, the project's manager, went to his boss and said that he and his department would like to buy the technology and start a company to manufacture the products. Not only that, he said, they didn't want to put up any cash right away, because they didn't have any, and they would like to continue to manufacture the product at Tek until they got their own place built.

And Tek agreed. The deal took a year and a half to work out, but Tek guaranteed the start-up's loans, backed its service agreements, and generally put itself on the line to give a group of former employees a chance to reap the rewards of their work. It also gave Tek a chance to recoup some of its investment in the technology, if and when the start-up, Planar Systems Inc., turned profitable. Here was a futuristic example of just how open-minded an employer could be. Tektronix, an industry giant, was demonstrating how far it was willing to go to help make something happen in the Northwest.

It was a step in a direction Howard Vollum could be proud of.

There were other ways Vollum and Tektronix were helping to shape the Pacific Northwest, other areas that a lot of people had abandoned to the government. Education was one of them.

"Oregon is an environment in which you can still make it big." -- Paul Carlson, president of the Oregon Graduate Center

A couple of farms away from the Sunset Highway, the state's main road west, a wood sign announces that the low-flying wooden-and-glass building across the lawn/mud is not a campus-type industrial building, but actually a campus, the Oregon Graduate Center, "a private center for education and research." The description makes OGC sound like a boarding school or a science-oriented think tank, but this building with the large American flags out front houses what private industry in the Portland area hopes will be the area's answer to Stanford and MIT.

Back in 1963, long after most of the world had abandoned the struggle for academic preeminence to the handful of institutions already near the top, Mark Hatfield, then governor of Oregon, proposed building a graduate research institute that would address the lack of advanced applied scientific research and engineering education in the Portland region. Reed College was one of the top undergraduate institutions in the United States, but it had no graduate school. The University of Oregon and Oregon State University (which was then called Oregon State College) didn't have money to expand advanced electrical engineering or computer science programs. Besides, they were three hours away from Portland, where most of the state's high-technology development was taking place. Even in the early '60s, before the SRI report had announced that Portland's weakness in advanced education put it at a disadvantage when compared with North Carolina, before high-technology industry leaders went around saying that Oregon State was not a world-class engineering institution, before the percentage of state revenues available for higher education had shrunk from 24% to 12%, Hatfield and a group of local businessmen started talking about what they could do. Howard Vollum was one of the members of that group, along with Doug Strain, founder of an instruments company called Electro Scientific Industries Inc.; and John Gray, vice-chairman of the board of Omark Industries Inc., a company that had revolutionized the chain-saw business.

What they envisioned was a new concept in education. They saw a hybrid institution that would provide graduate training in academic areas that seemed particularly suited to the needs of local industry, as well as the resources for academicians to continue basic research in those areas. They also envisioned contracts research for particular basic or applied projects, and an intellectual stimulus at an advanced scientific and technical level they felt the area lacked.

The vision was ambitious -- some said ludicrously so -- but people had said the same thing about the companies these men had started, and Vollum, Strain, Gray, and Sam Diack, a physician who was instrumental in OGC's founding, weren't used to thinking small.

By 1966, the Oregon Graduate Center had a president and a faculty, and research had begun in rented space on the outskirts of Portland. Three years later the school moved to its real campus, in Beaverton, about half a mile from Tektronix, and started enrolling students. In 1971, OGC awarded its first degree, a master of science in chemistry.

Now, there are 60 full-time and 20 part-time students hanging around the halls and the warrenlike labs in OGC sweatshirts. They research such things as the operating frequencies of gallium arsenide, the biodegradation of lignin, and the migration of herbicide residues in groundwater. Thirty-three faculty members, with PhDs from places like Stanford, the University of Chicago, Cornell, Princeton, Berkeley, and Cal Tech have been persuaded to risk their career tracks in academia or industry for the money, time, and equipment to research their dream projects and teach a few graduate students at this embryonic research and educational institution.

It seems to be working. In the past 10 years, OGC has awarded 80 graduate degrees, including 37 doctorates, and 90% of the full-time students get full tuition grants or scholarships. The average student at the center is 26 years old, has knocked around for a while, and has a fairly good idea of what he or she wants to study.

Private gifts, grants, and contracts provide about 50% of the school's revenues on a year-by-year basis, and the federal government supplies another 40%, mostly in the form of grants restricted to specific research projects. The faculty is involved in both basic and applied research; federal grants and contracts provide about 40% of the school's research budget. Another 40% comes from such companies as Tektronix, Intel, Omark, Weyerhaeuser, Crown Zellerback, and Eyedentify, a start-up that makes equipment for identifying people by prints of their retinas. Weyerhaeuser sponsored a project to add qualities to trees by cloning. Another genetics project is involved in an attempt to produce a colorless alder so that paper products won't have to be bleached.

Cooperative study programs have been set up with Reed College, Portland Community College, and the University of Portland to allow students to do two or three years of training at one of those institutions and then graduate work at OGC. In addition, OGC coordinates Saturday science classes in computing, electronics, and other fields for 6th-to-12th-grade students. One of the professors, Larry Murr, organized a "distinguished lecture" series in Graduate Materials for anyone in the community who wanted to come, and 80 people from the area's small steel mill, casting companies, and a titanium mining company attended.

There are voices raising concerns that the Oregon Graduate Center is tapping federal, state, and private support that otherwise would have found its way into the state education pool, that efforts should have focused on building up already existing institutions, rather than raising a new one from the mud. But Paul Carlson, OGC's current president, and OGC's supportrrs disagree. The federal grant money that the center gets is mainly in areas of research not offered at other Oregon institutions, they say. Private money might have been more difficult to raise for a public institution over which the donors had less control. In fact, Carlson thinks, there is something about a public-private duality in education that is healthy. Call it competition or intellectual tension, or just stimulus, but he points to Stanford and Berkeley, and to the University of North Carolina and Duke University as evidence that the existence of two schools in close proximity can be healthy. There is also a renewed interest in education in Oregon, manifested by the $1 million raised by the AEA Oregon High Technology Education Consortium and the state legislature.

Besides, Howard Vollum, John Gray, Doug Strain, Paul Carlson, and Sam Diack weren't going to sit around waiting to find out if the state would come up with more money for higher education while companies were deciding to settle in North Carolina. Across the state, the momentum of Oregonians doing something about their future was building. Some people in Washington County, west of Portland, were even building their own roads.

"The county said, 'OK, you can develop this land. However, the road is deficient, and the cars you generate out of your development will load the road to a point where it would be unacceptable. You, the developer, have to mitigate those problems by other means, because we, the county, don't have any money.' "So, we got together with our neighbors, and we collectively assessed ourselves through an LID [a local improvement districtl something like $1.7 million to get a nice road built where a very inadequate road had been, thereby eliminating the last hurdle for development. The public put no money into that road. The county really likes that. The National Association of Counties gave us a "Good Neighbor" award. -- John Rees, vice-president and general manager of The Quadrant Corp., a Weyerhaeuser subsidiary

The road is just two miles long. It has three bridges, no traffic signals, two lanes with turnouts, wide shoulders, and provisions for five lanes (wide shoulders and utilities placed out of the path of future expansion). A former cow path that had been oiled and then asphalted over the years, it was dug up two years ago, straightened, leveled, graded, and surfaced until it became the nice new road it is now. There is nothing physically exceptional about it. Still, it is an indication that maybe things really are different in Oregon. After all, developers don't go around building public roads everywhere. The county didn't even say that they should. But the three largest of the companies -- Quadrant, Standard Insurance, and Edwards Industries -- that owned the land bordering the deficient road had a choice between taking a role usually filled by the county (building roads), or sitting on the land paying interest while they waited for the county to get some money. Local governments were broke, and people just weren't passing levies to fund short stretches of road that happened to go by a piece of property some developer wanted to develop, even if it was a public road. So the developers went around to their smaller land-holding neighbors -- a nearby church, a school, and some private citizens -- and got the go-ahead from them and the county to put together their own LID. And a year and a half later, they had their road. It was a textbook case of the way things were supposed to work in Oregon.

Relations between the public and the private sectors were not always so sanguine. There was a time in the early and mid-'70s when the agencies and the rules were newer, when the mechanisms, and even the relationships to resolve differences of opinion, were not in place.

Five years ago, Floating Point Systems, a Tektronix spin-off, ran into problems when it wanted to build a new plant. Although the area in which Floating Point planned to build was zoned for light industrial use, the state's Department of Environmental Quality refused to allow the company to build there, because of concerns about air quality. The problem, the agency said, wasn't chemical emissions -- Floating Point is primarily an assembly operation -- but increased auto emissions from people traveling to and from the plant. And in a bureaucratic catch-22, the areas where the air was OK for commuting weren't zoned for light industry. Floating Point had had to appeal their case all the way to the Governor's office. The whole process took about six months, and, says Jack Carveth, formerly of Floating Point, "when the building time is a year, that's a problem."

But by the 1980s, people could sense a new spirit of cooperation that hadn't existed in Oregon three years earlier. Maybe it was nothing more admirable than desperation, but it was helping things to happen. Developers were not only building roads, they were also financing buildings. Corporations began to say that they were finding the state regulatory agencies more reasonable. The 1983 state legislature voted to cut the permit-processing time to 120 days, without reducing controls, and to mandate one-stop shopping for all local permits, to parallel the streamlining the state had approved for itself several years before. They weren't changing standards, they were simply being more responsive to the needs of industry for the process.

The legislature also approved a measure to put a state sales tax on the ballot for the seventh time, in hopes of raising revenue for personal-income and property tax relief.

Even the people who weren't directly involved with the legislative action or OGC or building roads could feel the momentum building. Even all the way out in Bend, Ore.

'All you need to start a company is a telephone, a mailbox, and cash. We had $5,400." -- Harold Lonsdale, president of Bend Research Inc.

Harold Lonsdale showed up in Bend, Ore., a city of 17,425 people on the east side of the Cascade Mountains, in 1972 with his wife and two children in the biggest U-Haul truck he could rent, towing a Volkswagen Beetle. Lonsdale wasn't sure exactly what he would do in Bend, a city better known for its proximity to skiing at Mt. Bachelor; its view of the Three Sisters, three craggy peaks in the Cascades; and its accessibility to hiking trails than for its career opportunities for high-powered membranologists, but he did know that trout streams were minutes from town, and Bend was where he and his family wanted to live.

The Lonsdales were tired of California. "I was sick of waiting in line at restaurants, at the lights on El Camino Real," says Lonsdale. "My wife used to joke that if you got caught at this one light, you'd better have your lunch."

The final straw had been an aborted family picnic. The Lonsdales had packed a lunch, gotten in the car, and gone in search of open land, and couldn't find any. "We drove all day," says Lonsdale. "California is a highly fenced state. All the land was owned by someone else." As the Lonsdales ate their picnic in their Los Altos kitchen, Harold realized he was ready to leave California. He wasn't so attached to his job as a principal scientist at Alza Corp., a major pharmaceutical company in Palo Alto, that leaving would cause much pain. So he and his wife piled the kids in the car and went on a five-state tour -- northern California, Idaho, Utah, Nevada, and Oregon -- to figure out where they wanted to live.

For the first year in Bend, Lonsdale fished, slept, and read. Then he spent a year as a visiting scientist at the Weizmann Institute in Israel and the Max Planck Institute in Germany.

When he came back, he was ready to start Bend Research with Richard Baker, a partner from California. They would do contract research in membrane technology for the federal government and large corporations. Eventually, his work would come to include such projects as desalting sea water, recovering metals from industrial wastes, and controlling the release of chemicals and drugs for such products as an all-day mosquito repellent.

From the beginning, Lonsdale looked at his Bend location as more of an asset than a liability. Sure, he was removed from the centers of "the membrane club" -- southern California and Boston -- as one Bend Researcher calls it, but the membrane network extended everywhere. People passed on information and new discoveries at scientific meetings, which were held all over the world.

Although nearly all Bend Research's new employees were recruited from out of town, and usually out of state, Lonsdale found that getting them to move to Bend wasn't a problem. Obviously, a committed urbanite wasn't going to find happiness on the edge of the Oregon high desert, but a lot of people came to Bend Research seeking exactly the outdoor, small-town life that Bend offered. And once they had agreed to move, there was a sense of real commitment. It wasn't as if they were moving their families to Boston or Palo Alto and could transfer to a company across the street if things didn't work out.

Like Tektronix, Bend Research bootstrapped its early growth independent of local support. The founders' $5,400 combined savings didn't leave much room for frills. They built their building with a plan that would allow them to sell it as a vacation house if the business didn't work out. Lonsdale's desk was, and still is, a polished door on top of two unmatching file cabinets. They minimized bank debt. "I don't trust them," Lonsdale says of the local banks. "They're weak." He cites the cases of a couple of local companies that were forced out of business when their banks suddenly called in their loans. He says Bend Research hasn't had any bank debt for the past three years.

Bend Research is currently a bright spot in an otherwise weak local economy. Like much of the state, the city of Bend has suffered from the depressed housing industry, which has hurt the lumber mills in the area. Because Bend Research is small, specialized, and relatively independent, benefits of its presence to the city have been primarily osmotic -- that of 50 employees and their families living and spending money there.

Lonsdale says he would like to make a more direct impact on the local economy. Bend Research is currently seeking $3 million or $4 million of venture capital to go into production with some proprietary products, production that might mean as many as 50 local jobs, certainly not enough to turn around Bend's economy, but enough to make at least a small difference. Creating jobs wasn't something Harry Lonsdale used to think about in California, but he says his years in Europe and life in Bend are making him more patriotic. In California, it was harder to feel that one person could change things. In Oregon, the effects of what he is doing are a lot easier to see.

Last updated: Jun 1, 1984




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