MedicaLogic, a 15-year-old medical-records-software company in Hillsboro, Oreg., made its first Internet play in 1999. That was late enough to run into the two biggest hurdles plaguing dot-coms today: recruiting smart workers and finding office space.

There was only one thing to do: take the company to the talent. So MedicaLogic opened an office for its Web division on Internet turf in northern California. "Even if we could convince employees to move to Portland," CEO Mark Leavitt explains, "getting them to relocate and get productive would add three months to our schedule."

It wasn't enough just to move to San Francisco. Leavitt knew that the best workers would demand cool office space. He had to find a reasonable, hip location in San Francisco, a city in which every cash-rich Net start-up is competing for funky old warehouses. "We saw horrible places," he says. "The few that were on the market needed a tremendous amount of work or were in an undesirable location."

Leavitt eventually found the perfect spot -- 40,000 square feet in a historic wine warehouse at 101 Green Street. But he couldn't reach the landlord on the phone. "Our VCs had to call him up to get the place shown," Leavitt says.

To beat out several other companies trying to lease the same space, Leavitt had to sweeten the deal. Old-fashioned cash didn't cut it in the heart of tech country. What did the job was a little California currency: stock options. When Leavitt offered a chunk of equity to the landlord, the keys were his.

It was worth it, he says. About 45 Internet all-stars, including 20 Netscapees, left behind jobs with lucrative options and other perks to join MedicaLogic. Jon Dillon, a 22-year-old senior content engineer, says he left Network Associates, based in Santa Clara, Calif., partly because he believed in MedicaLogic's business model and admired its existing Internet staff. Not to mention that cool office.