Businesses Find a Silver Lining in Inland California’s Downturn

At the moment, California’s Inland Empire — the local name for San Bernardino and Riverside Counties east of Los Angeles — would seem an inhospitable place for starting a business.
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J. Emilio Flores For The New York Times

Mike Stull, center right, the Director of the Inland Empire Center for Entrepreneurship, with Monty Dill, far left, Shawn Barker and Felix Zuniga, far right, all of whom are entrepreneurs.
Entrepreneurial Edge

James Flanigan writes about small businesses mainly in California and the West.
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The New York Times

The Inland Empire is a major hub of freight transportation.

Unemployment has already reached 9.5 percent, a third higher than the national average. And 350,000 homes have been foreclosed on — one house in three in an area with a population of 4.3 million. Commercial construction and expansions have halted, leaving unfinished projects and vacant buildings. The forecast is that “it will take three years, to 2011-2012, for the area’s economy to come back,” said John Husing, an economist whose company, Economics and Politics Inc., issues quarterly reports on the Inland Empire economy.

Yet the area, which had one of the nation’s fastest-growing economies in the last decade, has been attracting newcomers and small businesses. One of its advantages, paradoxically, is the result of its economic travails: low real estate prices for both houses and factories. But the other is the concerted support for small enterprises and start-up companies from the area’s universities and nonprofit organizations — programs that were set in place long before the current downturn.

That is why energy and hope were evident at a recent gathering of small-business owners at the Inland Empire Center for Entrepreneurship, a part of the College of Business and Public Administration at California State University, San Bernardino.

One of the business owners was Shawn Barker, a student in the master of business administration program who started a company, Virclom Technologies Services, last October to provide tutoring in mathematics and physics to high school and college students. Mr. Barker, who holds a degree in physics from Talladega College in Alabama, records lectures by teachers, adapts them to iPods and other formats and distributes them to students. “Our technology allows students to review the material and reinforces learning,” said Mr. Barker, who is looking to sell the service to school districts.

He also hopes to automate the distribution system so that students can download tutorials from servers. That improvement will cost about $100,000, he estimated, and Mr. Barker is seeking to attract financing from angel investors or grants from federal and state governments. This is a difficult time to raise capital, Mr. Barker acknowledged, but he has sent descriptions of his company’s innovations to members of Congress and feels confident, he said, because “the new administration and Secretary of Education Arne Duncan are in favor of new approaches.”

Felix Zuniga, who holds a master’s degree in business from California State in San Bernardino, started Armada Business Services last September to help independent truck owner-operators cope with many demands of regulation, financing, insurance and management. The Inland Empire is a major center for freight transportation. Trucks carry cargo containers 60 miles from the ports of Los Angeles and Long Beach to rail terminals in San Bernardino County, where they are transferred to railroad cars for transport to other parts of the United States.

But these are difficult times for truck owners. International trade volumes are down in the recession even as truck owners need to meet new environmental regulations by modifying engines. At the same time, banks and other lenders are pulling back on financing for small-business owners. “Truckers have a high failure rate, an average 14 months from going into business to failing,” Mr. Zuniga said. But perhaps adversity can mean opportunity, he said. “It’s when times are tough that the owners especially need our help.”

More than start-ups find opportunities in the current climate. Gem Power L.L.C. is an eight-year-old company that developed software under research contracts for the United States Navy to recharge and extend the life of batteries. “We can double or treble the life of any battery, whether for computers or heavy machinery,” said John James, Gem Power’s president.

The company is now trying for commercial work for its battery-charging systems, marketing to police and fire departments. The commercial effort follows recommendations of a feasibility study by faculty and students at the California State Entrepreneurship Center, which also operates a computer laboratory under a Defense Department program.

Like similar efforts to help small business at the nearby University of California, Riverside, the Inland Empire Center for Entrepreneurship ranges beyond academia to get involved in the business community. The center finances its $2 million annual budget independently, said Michael Stull, an associate professor of business and the director of the center, “by selling consulting and technical assistance services to public agencies.” And the center organizes an annual Spirit of Entrepreneurship award ceremony to encourage and publicize local innovators.