JANUARY 2008: HIGH TECH
CEO Steve Sliwa of Insitu, which makes unmanned
aircraft systems and anchors a growing tech
cluster.
PHOTO COURTESY OF INSITU
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The Gorge effect
Forget the storied orchards and iconic wind sailors. Dozens of
tech companies producing everything from unmanned aircraft to
solar energy are finding the Columbia River Gorge is the place
to do business.
By Michelle V. Rafter
Picture Oregon’s high-tech hot spots and the bucolic
riverside community of Hood River isn’t the first that
springs to mind. But the Columbia River Gorge region, best
known for orchards, wineries and windsurfing, steadily and
without much fanfare has become home to an assortment of tech
ventures in numbers strong enough they’re reshaping the
very nature of industry in the area.
In little more than a decade, at least 50 aerospace
engineering, electronics, Internet, computer hardware and
software, and most recently, alternative energy technology
companies have sprung up in and around Hood River and The
Dalles and across the Columbia River in Bingen, Wash. Many
companies in the so-called Gorge tech cluster are small, one-
or two-person enterprises started by outdoors enthusiasts who
wanted to work where they played. Several have grown big enough
to gain regional or even national acclaim. The most notable is
Insitu, the area’s largest high-tech employer and a
venture capital-backed pioneer in the field of unmanned
aircraft. Then there’s Google, which in 2006 opened a
massive computer server complex in The Dalles that employs
about 200 people, including some full-time permanent contract
workers.
The impact of the Gorge tech cluster is visible everywhere.
Tech companies are tucked into office buildings all over Hood
River. During a four-year growth spurt, Insitu’s employee
ranks have blossomed tenfold, to 240, forcing the company into
10 buildings in Bingen and nearby White Salmon. The company has
started year-round internship programs to attract college
grads, and helped fund robotics courses at several local high
schools.
It’s also spawned several local spinoffs and
supported a number of area subcontractors that in turn have
hired workers who in bygone days would have picked apples or
waited tables. Spurred by the area’s burgeoning wind-farm
businesses, Columbia Gorge Community College in The Dalles is
swamped with applications for a new renewable energy
certificate program that’s graduating technicians into
high-paying jobs. The college is also building a
10,000-square-foot satellite campus in Hood River to meet
growing demand for classes there.
Such activities are one reason why unemployment in the five
rural and historically poor Oregon and Washington counties that
make up the Columbia Gorge area has fallen to half of what it
was five years ago; 5.1% in August 2007 compared with 11.4% in
December 2002, near the height of a statewide recession,
according to Oregon and Washington employment departments.
State and local agencies don’t specifically track
technology sector jobs. But manufacturing and other private
sectors — traditionally where most high-tech positions
are counted — have added 1,145 jobs since December 2002,
a 19.7% increase.
“It’s been huge on the regional
economy,” says Bill Fashing, Hood River County’s
economic development manager. “The influx of talent, the
incomes these individuals are bringing into the community are
significantly higher than the traditional average wage in this
region. That’s extremely important to the long-term
economic vitality of the community and the people who live
here.”
Insitu’s ScanEagle unmanned aircraft launches
off a U.S. Navy ship. The planes were developed with
Boeing.
PHOTO COURTESY OF INSITU
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What’s happening in the Gorge is a classic example of
economic clustering, where a bunch of companies in the same
industry benefit from being located near each other. The
proximity lends itself to local partnerships and idea sharing.
The downside is that companies work near competitors and
employees get poached or leave to start their own gigs. But the
positives outweigh the negatives. Because of the cluster, when
sales reps or parts distributors come to town to see Insitu or
other big companies, they stop at the little ones, too, says
Arthur Babitz, a Hood River city councilman and co-owner of a
two-person animation equipment company. “We’re on
the map now.”
IF THE REGION’S TECH BUSINESS has a founding father,
it’s Andrew “Andy” von Flotow, an MIT
astronautics engineer and windsurfer who followed his bliss and
moved to Hood River in the early 1990s. Von Flotow started an
aeronautics systems supplier, Hood Technology, and convinced a
few friends to follow.
One was Tad McGreer, founder of Insitu, which opened in 1994
and gained industry acclaim four years later for flying the
first unmanned airplanes across the Atlantic. Over the years,
innovating engineers departed Insitu to start their own
businesses, including Bill Vaglienti and Russ Hoag, who left in
1999 to start Cloud Cap Technology in Hood River, now an
indirect competitor.
Today, Insitu is a leading maker of small tactical unmanned
aircraft such as the ScanEagle, a 38-pound long-distance plane
jointly developed with Boeing that the military has flown on
surveillance missions in Iraq and Afghanistan since 2004. In
2006, Insitu raised $23 million in venture funding from a group
led by Silicon Valley-based Battery Ventures that’s
helped bankroll its product development and expansion.
From 2003 to 2006, the privately held company saw revenue
climb from $2.8 million to $50 million. The uptick has
translated into an influx of cash into the area, says Insitu
CEO Steve Sliwa. In 2006, Insitu paid Hood Technology, Sage
Technology and other local contractors a total of $18 million
to $20 million, and had a slightly higher total payroll for its
240 employees, Sliwa says. In early December, it got an
additional $25 million in venture capital financing.
“Those are all dollars coming from outside the area.
That pumps up the whole community,” he says. That’s
likely to continue in the light of a three-year, $18 million
contract Insitu and Boeing won from the U.S. Marine Corps in
July 2007 for additional ScanEagle support services, a contract
with options that could see its total value climb to $381.5
million.
Insitu’s ScanEagle unmanned aircraft launches
off a U.S. Navy ship. The planes were developed with
Boeing.
PHOTO BY LEAH NASH
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Insitu has used part of its newfound wealth to give back to the
community. When the city of White Salmon couldn’t afford
to repair a 1940s-era former high-school building, Insitu
leased half the ailing structure and spent $350,000 renovating
it into the company’s software research lab. In the short
time Google’s been in The Dalles, the company has started
a number of community outreach programs, including providing IT
support for local fire and emergency departments.
In addition to bringing high-salaried knowledge workers to the
area, tech companies have improved wages for local residents.
At the Gorge’s larger tech companies, average annual
incomes range from $40,000 to $60,000, and 90% of owners and
their employees have health insurance, according to a report on
the Gorge tech cluster published in early 2007 by the Gorge
Tech Alliance, a local tech business advocacy group.
By comparison, average annual wages in Hood River County are
$24,000 and a smaller percentage of workers have health
benefits, according to the report. Custom Interface is a case
in point. Located just three blocks from Insitu’s
downtown Bingen headquarters, Custom Interface is one of the
company’s electronic assembly subcontractors. Nancy
White, an electronics industry veteran and lifelong Gorge
resident, started the business seven years ago and now has 70
employees.
Many of the company’s assemblers previously picked fruit
or worked in sawmills or the hospitality business, White says.
Now they have above- average wages and medical benefits and are
learning skills. And if they work hard and stick around,
she’ll pay for their college education. As a result,
“I haven’t had a job position open more than 30
days,” White says.
ABOUT THE SAME TIME THE FIRST aeronautics engineers moved to
town, other tech types settled in the area, drawn more by
outdoor recreation than the business opportunities or
amenities. Dave Fenwick remembers them as the bad old days. The
former Portland resident sold a software company to Apple and
moved to Silicon Valley to work for the computer maker but
missed the Northwest and relocated to Hood River in 1992 to
start another software venture. At the time, the only empty
offices in town were semi-industrial space owned by the Port of
Hood River. Getting business phone lines was tough and local
insurance agents didn’t know how to classify his software
business. “They put us in manufacturing, like we made
sheet metal,” Fenwick says.
Gradually, conditions improved. As more tech companies moved
in, supporting business and services caught on. The local
electric company struck a deal to piggyback fiber-optic data
lines on power lines from Bonneville Dam. In 1999, the Oregon
Investment Board and a partner agency in Washington state began
doling out the first of $5 million in federal development loans
and grants to Gorge businesses, including tech companies.
Bill Vaglienti (left) and Ross Hoag started Cloud
Cap Technology in 1999.
PHOTO BY LEAH NASH
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Another milestone came in 2004, when a handful of tech
executives formed the Gorge Tech Alliance to give local
companies a base for networking and joint marketing efforts.
With staff contracted from the Mid-Columbia Economic
Development District, the Gorge Tech Alliance today holds
regular meetings and education sessions and has developed
marketing materials promoting the area as a great place for
“lifestyle entrepreneurs.” The group is also
amassing data on its members, all the better to understand the
financial impact they’re having on the area “so we
can raise the awareness of officials and the public,”
says White, with Custom Interface.
Perhaps the biggest example of the tech sector’s growing
significance in the Gorge was Google’s decision to open a
30-acre server farm in The Dalles, taking advantage of cheap
electricity, available land, a generous package of tax
incentives, and QLife, an existing 18-mile fiber optic loop
funded by a consortium of local government agencies.
GORGE TECH COMPANIES FACE some obstacles. There’s too
little affordable housing for teachers, firefighters and others
who work in service industries that support tech businesses,
according to Fashing, the Hood River County economic
development manager. Local government and housing authority
officials are working to ameliorate that by, among other
things, building affordable living spaces on government
property, he says.
There’s also been a dearth of commercial property in the
area for fast-growing companies that need a combination of
office, product development and light assembly space, according
to the Gorge Tech Alliance’s 2007 report.
In recent years, ports in The Dalles and Bingen have
constructed office buildings on their properties to help solve
that problem, and the city and port of Hood River are starting
a waterfront district redevelopment project that will include
“just the sort of uses we see in our cluster,” says
Hood River’s Babitz.
But the biggest obstacle is attracting enough highly educated
workers to fill a growing supply of jobs. Because many of those
workers come with equally skilled spouses, for every opening
“I have to find two jobs,” says Hoag, co-founder
and president of Cloud Cap Technology. While prevailing wages
in the area are similar to what engineers or software
developers make in Portland or Seattle, good schools and easy
access to outdoor recreation also are a draw, local business
owners say. Once people visit the area they’re hooked.
“It’s a culture fit. I bet the original Insitu guys
saw it as an impediment, but now it’s a selling
point,” Hoag says.
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Tech employers in the Columbia River
Gorge
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COMPANY
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LOCATION
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BUSINESS NICHE
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EMPLOYEES
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Embarq
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Hood River
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Local, long distance, Wi-Fi, Internet service
provider
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400*
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Insitu
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Bingen, Wash.
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Unmanned aircraft systems
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240
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Google
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The Dalles
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Internet search
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200
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Hood Technology
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Hood River
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Unmanned aerial vehicle systems and controls
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72
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Custom Interface
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Bingen, Wash.
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Contract electronics manufacturing
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70
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Electronics Assemblers
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Hood River
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Contract electronics manufacturing
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56
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Summit Projects
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Hood River
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Internet ad agency
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36
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Innovative Composite Engineering
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Bingen, Wash.
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Carbon composite manufacturing
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33
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PPM Energy
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Various locations
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Wind-farm energy
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28
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Gorge.net
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Hood River
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Internet service provider
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26
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Cloud Cap Technology
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Hood River
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Unmanned aircraft systems components
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21
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Real Carbon
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Hood River
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Custom carbon fiber parts manufacturing
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7
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*Includes variety of positions including unknown
number of employees at a regional call center
Source: Hood River County Office of Economic
Development, companies listed
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To that end, companies do the usual help-wanted advertising on
Internet job boards and at local colleges and university
campuses, and then some. The Gorge Tech Alliance held its first
job fair this past November, attracting seven hiring companies
and 40 job seekers. While the numbers sound small, organizers
say they’re pleased with the amount of follow-up
interviews scheduled. Insitu’s worked around the
workforce problem by maintaining an office in Vancouver, Wash.,
for employees who can’t or don’t want to sell their
homes. The company also changed an in-house policy against
spouses working together to attract more married working
couples.
Google runs a shuttle bus for eight or 10 employees commuting
from Portland, and another for employees from Hood River,
arrangements that parallel commuter services Google offers in
other cities. It’s “a younger workforce and they
want the hustle and bustle of the city,” says Ken
Patchett, Google’s site manager in The Dalles.
“It’s a good way to mitigate it for both sides,
because we get people who are happy at work and live where they
want to live.”
When wind-farm makers estimated they’d need up to 400
trained technicians to help build the number of turbines
predicted to be erected within a 100-mile radius of the Gorge
by 2011, representatives asked Columbia Gorge Community College
to create a training program. The first class began in January
2007 and was so successful that some of the 24 students got
jobs even before finishing the program, says Susan Wolff, the
community college’s chief academic officer.
Graduates are earning $20 to $24 an hour, and one who returned
to give a lecture last fall expected to make $125,000 in 2007,
Wolff says. Google and a consortium of other local tech
companies are talking to the community college about starting a
similar training program for IT technicians, Patchett says.
“It would be beneficial for the younger generation or
people who want to go to school to change their careers and
stay employed in this area.”
Wind farms, like the ones hiring those community
college-trained technicians, and other alternative energy
providers will be the next wave of companies bolstering the
Gorge’s tech scene. Among those companies are Seraphim
Electric, a solar- and wind-powered electric company
that’s already been in the area for five years, and Gorge
Analytics, a two-person startup that tests biodiesel fuels.
Even Google’s getting into the renewable energy business.
In late November, Google said its philanthropic arm would
invest tens of millions of dollars in research and development
and related investments in renewable energy in 2008 through an
initiative called Renewable Energy Cheaper Than Coal, or
RE<C. Patchett doesn’t know if those plans include
investments in the Gorge, “but I hope so,” he says.
“The wind energy business was spawned here. It’s
the right environment.”
Alternative energy “is a very big wave for this
area,” says Hood River County Commissioner Maui Meyer.
“A lot of people want renewable energy. Guess where it
comes from? It comes from rural Oregon.”
Michelle V. Rafter is a
Portland business and technology journalist who has written for
Reuters, The Los Angeles
Times and The Industry
Standard.
Have an opinion? E-mail feedback@oregonbusiness.com
