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>> to introduce this illustrates how, please welcome the ceo of our nation's second-largest green builder, a member of the silicon valley leadership group border directors, and the ceo of webcor builders andy ball. >> thank you [applause] -- thank you. [applause] welcome back to our third session. i hope you enjoy the first two as much as i did. i think we found out how much of a character governor brown can be we are going to talk about silicon valley and the bay area innovation to the economy today. as you look at the panel, talking about the silicon valley, we have the mayor of san francisco. it will come into perspective,

that when you have a giant like ibm anchor here in the valley, you are seeing in between companies like google and apple and facebook with incredible growth. in san francisco, mayor lee has welcomed to the fold in twitter, zynga, companies that are into cloud computing, hiring lots of people that not only want to live and work in the valley but recognize san francisco as being part of the valley. we are, indeed, fortunate, from san jose to san francisco, to be part of the innovation economy. we are finally seeing once again california's innovation is leading us out of the last three years of recession. i do not know about you but i am pretty tired of the recession. i made a statement several years ago that it was about time for

an adjustment to the economy, things were too expensive, overheated. two years after that, i regretted making that comment. it was great to hear jim say when you look at education, you look at the programs, traveling around the world, that there is one constant. there are people and technology that say this is a place they want to be. entrepreneurs say this is where they want to be. when companies like facebook are started at an institution like harvard and a pier, you start to recognize why this is so special and fiber and why innovation is a bleeding heart economy. so let me try to give some brief introductions about our panel today. i have to confess, i only just met one of our panelists, lee

said dyson, the ceo of coverity. she got a ph.d. in physics from mit but felt the urge to come out here to california and she did her research at stanford and lawrence berkeley. that is an indication we are getting smart people like her out to california to start companies like hers. 15 employees in 2008. it is interesting, we talk about cloud computing and these technology companies, but she takes electronic waste that is rich in carbon and recycles that into oil for plastics and a variety of other things. i wish i had more time to talk to you and get to know you because i am sure there's an interesting story that you will really enjoy hearing from her. you have already heard from

michael, who is wonderful at ibm. clearly, they are a leader in this area. with michael's travels around the world, he will share more of his experience, and that will also be an interesting perspective. i really want to welcome the san francisco mayor ed lee. it is difficult for me to call him mayor lee because i have always known him as ed. you are going to get to know him really well. the 43rd mayor of san francisco was born in seattle, went to college in maine, this tiny college out there. he decided to come back and get his law degree from uc-berkeley, and then was appointed by art agnos in government in 1979. he became the director of the human rights commission under willie brown.

he became the director of public works. 2005 city administrator, and then the fateful day in january 2011 when the board of supervisors could not decide on anybody and decided that family was not going to be a threat to their future political aspirations. [laughter] he got more than six votes, six more than anyone else. and he became the interim mayor. he did an amazing job. he is outspoken, both feet on the ground, a person you can trust, a person who is very honest, and based upon his experience, knows how to get the job done. i believe he is the best player ever that san francisco has had. we are so lucky to have him up there. he has balanced the budget, reform pensions, created jobs, and mayor, it has been a pleasure to work with you. i look forward to working with you further.

they san francisco transplant coming down here to work on yet another newspaper, the business journal, doing a great job of it, and james mcgregor. we welcome you here as a moderator. we know you have a lot of questions, so i will let you have at it. thank you. >> mayor lee, after that stellar introduction -- the first question is for you. it is apparent that you are trying to make san francisco more friendly for business and employees. can you talk about the payroll tax issue and how it is helping san francisco in the region? >> thank you, james, for the question. let me say i am happy to be here in silicon valley. i know the relationship with san francisco, the valley, san jose,

is extremely important. i wanted to be down here to join these electors panel of guests as well. the payroll tax in san francisco had been one -- i was here about a year ago explaining twitter. as everybody knows, they were not only threatening, they were planning to leave the city of san francisco. they had already identified a building. they said, we are about to grow to about 2000 employees and we are quick to get taxed for that. we think that is not going to be our business model. so we fought through it, david chiu, jane kim and i, we started to discuss with them, met with them. the key thing was job growth for our city, coming out of the economic challenges. so we started a good conversation, started the central market tax exemption.

we got something out of it, which was to potentially relocate. they responded by signing the lease and we gave them a six- year exemption. we also said that we would have dialogue, continue to discuss with them and other technology companies what it is we reading they need to stay in the city. they indicated strongly there were about 30 of us to meet -- they really had to look at the long term. what could we do to not punished job creation? so we have had a very robust discussion with all the different elements of our business community. we are at the cusp now of making some long-term decisions about replacing our payroll tax with some ideas of hybrids and gross receipts. >> i want to follow up on that.

what surprises did you hear when you met with all those businesses? >> they wanted to be engaged. that was the number-one thing that they said. the city, if you wanted job creation, innovation, you had to create an ongoing dialogue. we listened carefully and acted on it. we created a whole technology group. ron conaway and others have stepped up and said, why don't we have a consistent voice? yes we have the chamber of commerce, the wonderful group we have worked with for many years, but why not also have an additional voice? so we formed sf city, a citizen's initiative for technology and innovation, which was aimed at the new developing companies to give us a constant dialogue about their ongoing needs. anything we have done is they have also embraced the needs of

our city. it is a two-way conversation. that led to us revising our stock options. we were one of the few cities in the country that was taxing stock options. again, not understanding how the ipo was working for the startup companies, realizing that we would be punishing them for their growth and turnaround, so we gave them another six-year exemption on that. by the way, if we grow, if we sustain and assist you in growing, can you help us with job training? that is what started the conversation on sf city. they have an ongoing program to create the curriculum for hiring kids or our public schools and aimed at returning veterans, career folks that want to get into technology-based industries, and then the

snowball effect has really helped. twitter, not even moving in -- there are four companies that have moved into the market because of this. san disk, zoosk, allie pincus started an on-line returned as an company. hundreds of square feet of space that had been vacant for many years. revitalizing our city of the same time, doing job creation, creating the conditions for hiring and training local 7 siskins to get into the workforce. as andy is saying, that has caused other industries, particularly the construction industry, to get revitalized immediately. you have heard sales force had 18 acres in mission bay. they got excited about just being downtown, so they went ahead and did 400,000 square

feet, now looking at an even larger space to continue their growth downtown. >> i want to direct this next question to you, lisa. every company in the valley, no matter how it is defined in terms of geography, has been a start up at some point. where did the idea for great products and services come from? >> thank you very much for allowing me to be here to address you today. that is a great question. i want to start by thanking the city of san francisco for being a part of an incubator that we are a part of, the kiwi3 innovation center. it is located in san francisco next to the ucsf mission building. there are lots of biotechnology laboratories available. about 29 startup companies in that space developing innovative

technologies. i am in biotechnology primarily. our technology creates oil using a biological process that takes waste carbon as an input. ideas such as ours often come from universities and it is a real benefit for us to be by ucsf to be part of the innovation center. not only is ucsf a part of that, but uc-berkeley and uc santa cruz. so we are part of this network. in addition, we have technology partners with berkeley laboratories. for us, a lot of the breakthroughs in our technology have really come from our partners that research laboratories and our staff. i would add to that, not only is that where it came from, but it is the type of environment that fosters creation. there is another benefit to

being in this type of environment. lots of service providers, lots of other companies that are also starting businesses, whether you need legal assistance -- obviously, we have the lab space. recruiting is important for start-ups. staffing, exactly. so we have that as part of this innovation center. >> access to education and access to the right environment. >> yes, i would say so. >> ibm is a big company. i am sure there are a lot of people in the valley that still see it as an east coast-based company. the reality is you have been here for a long time. can you talk about the ontario culture here and what is being done that with the great ideas -- a entrepreneurial culture here and what is being done with the great ideas? >> we started here in 1962. this building is about 25 years

old. we were down the hill at the san jose raiders center. -- research center. one of the things that ibm does -- a couple of things. one is having an eye on where things are going. one of the reasons that we focused here on data, relational database disk drive, was, looking at the time, the inability to access data quickly on a computer was actually an inhibitor to getting business done. one of the ways that you get innovation out there is you understand how it is going to be used, really, before you start.

the major reason for working on the disk drive, aside from the obvious technology base that this place has and continues to have, was just an understanding that high-speed access to data would create an opportunity. remember, this was 1955. we reinvented ourselves. ibm made the first product with cheese slices. we cannot do that anymore. [laughter] this place also reinvents itself in a continual basis. in that sense, we feel very much at home here. the ability to reinvent, the ability to have a real sense of where things are going is also something we see in the bay area. strategic view.

one of the things that i learned we do not talk about as much in the bay area is this amazing mentoring culture. we see folks like lisa who are young, dynamic maniacs -- i think -- but there is this a very active, quiet, kind of a grey-haired mentoring culture that helped people do what they do. i do not see that anywhere else. people give up their time, give of themselves. it is just a spectacular way to foster innovation. >> i want to talk about innovation in the bay area for a moment. this is for all of you, but i will start with you, mayor lee. how would you describe the state of innovation in the bay area right now?

are you concerned -- instagram comes to mind -- about a bubble? >> we have been trying to analyze that question with financial people and people in the industry. i do think there is more maturity with the companies. i get a chance to go out and talk to one new company week, when i get out of my city hall prison to meet the innovators. they introduced me to their employees. i get to have a direct dialogue with the employees and ask them what they need to stay. they say they really like being in our city because of the night life, the culture. they want education, they want a better transit system. they always have ideas to improve the municipal transit system. but when the talk about the bay area, including silicon valley, it is the same thing.

transportation symptom -- systems, central subway, high- speed rail. clearly, bart to san jose has been incredibly important to everyone, so that people could travel. i think there is a lot more maturity. there are many successful company that have already turned a corner on making a profit. start-ups have long-term views. they are not looking for instant gratification, as i believe the attitude was in the late 1990's, 2000's. people are talking a lot about issues on stability and asking government, like ours, to be with them in the long term, and to create relationships. certainly, for capital investors, it really is that relationship building. they want that face-to-face time with investors around our city. so we are creating conditions for that to happen. they are not short-term leases, these are long-term leases.

twitter signed in for a good 10 years. others have signed long-term leases as well. they are in it for the long haul. i think they are measuring their success, building it up on that. not only innovating and starting up, we want them to stay and grow. we have been creating those conditions for that conversation to happen. >> michael connolly said, anything to add to that? is this the right time in the valley? is there a bubble? >> i would like to speak about the clean technology sector. there was a little bit of a bubble that emerged in 2005, 2006, 2007 time frame. what has happened since then is you see the landscape changed. there have been a lot of companies and vc's, founders,

that are focused on very few investments in companies but are in it for the long run. the time and invested it takes to build a clean tech company. the difference with clean tech, there might be large facilities required, investment to build your first plant, for instance. we are seeing a change in the landscape. one thing i want to add, too, for clean tech, there are organizations like the clean tech opened that foster innovation and identify and help on to produce with that system, present their idea, put together their business plan, attract the mentors and advisers to help them build their technology. the incubators are contributing to a maturing clean tech and biotech sector -- sector. >> just a short comment. we focus in this building, a research center, on technology. some of it is near term, some of

it is very long term. i am glad to hear what we suggest said. i worry personally that we do not see as many long term investments as we used to. >> how do you define a long-term investment? >> good question. so, i think the question is, how speculative is this? i will use us as an example. we have a team in this building working on lithium batteries. their goal is to build a battery with 500 miles of range, for obvious reasons. we hope they will have a prototype in the feet next few years. we think -- in the next few years. we think the stars are lined up.

that is a long-term investment. >> next question to all of you. michael, we will start with you. we know government is the regional -- at the regional, state, and local level can help or hinder startup companies. what would you like to see from the governments here in the valley, sacramento, or in d.c., that would strengthen the innovation economy? >> i could go on about immigration and corporate tax policy reform, but i am a researcher, so i will not. >> and we have seven minutes. >> mayor lee said it perfectly. the fundamental thing that companies are looking for is to be engaged in the process. we use a term in computing called agile. we look for more ability and the possibility to work with us,

iterate in the process, rather than what we often see as we call the waterfall, take-it-or- leave-it. flexibility and agility is what is most important. >> mayor lee? >> i have always thought of our city as being the gateway to the rest of the world. i have often talked, with companies, i want to be with you when you turn the corner. we want to be the city that treats international markets for your products. i do not know if you know this but we have 70 counsel general offices in san francisco, the highest number outside of washington, d.c. we want to make sure that our companies know we are not just in it for san francisco, the region. we have to tap international markets. they love hearing that. some of the companies already know that they have game players in china and japan, but also,

clout computing, all the technology breakthroughs have international capacity. i think that is why we need a regional approach. that is why i am here, to make sure we protect our hetch hetchy water system. that creates the standard of living that we want, that keeps people here. that is why we have regional transport systems. whatever companies do not come here could end up going to europe or japan or china. we want them to maybe have their headquarters here in the bay area. >> is there one regional issue that elected officials across the region could focus on? if we are back here 12 months from now, i am able to ask you the question -- here is what you said 12 months ago and here is where we are now. is there one thing? >> i think it will be transportation. we have to make that

infrastructure investment. we have to get our federal and state government more aligned. i know jerry is a big fan of our high speed rail, but we have to turn the corner on that. for us, in san francisco, a third of our flights out of sfo is to los angeles. we cannot have the capacity for international flights. the whole secret behind international success is having those flights coming in. unless we move that l.a. commute over to high-speed rail, which is an excellent thing, we will not be able to treat the capacity we need because we cannot expand the airport. >> last word to you, lisa. >> i will sit a couple of things slightly differently. one of the core things that started to do is they develop lot of ip. when getting our patents filed, approved, it is a very long run up process.

if there could be emphasis on accelerated patenting process is, that would be beneficial. maybe even having a patenting office here in the silicon valley. i know there are some that have pushed for that in the past. the other thing i will add about funding and investing, the different initiatives that governments have, grants and are given to -- that are given to foster and push innovation is something that is done very well in the university setting. i think further investing in companies that take the research at the commercialization phase is something that we have benefited from and would love for that to continue. >> the last question for the panel is to you, lisa. say, this is a room of potential funders. what is your elevator