By Alan Deutschman

(FORTUNE Magazine) – | A new hot spot for high-tech startups is San Francisco's so-called Multimedia Gulch, a warehouse district hard by the ramps to the Bay Bridge. Here's where an urban breed of computer programmer -- too hip to live in the banal suburbia of Silicon Valley -- is getting together with the city's artists to create software filled with video, animation, and music. In only a year or two of colonization, the Gulch has become a high-tech version of New York City's SoHo, with loft offices, trendy restaurants, and art galleries interspersed among factories and gas stations. Denizens include Wired magazine; director Tim Burton's animation studio; Macromedia, a leading maker of software used for creating CD-ROMs -- and the San Francisco Multimedia Development Group, a trade association with 400 member companies. Typical of the Gulch trend: Vivid Publishing, founded in 1990. The 18- person startup develops software and produces books such as Demystifying Multimedia. Vivid took over a 4,000-square-foot space previously filled with immigrant Chinese women hunched over sewing machines. Monthly rent: 60 cents a square foot, which is around one-third of downtown rates. Vivid's founders gutted the space and installed 4,000 feet of cable to connect their Macintoshes. Now a massage table occupies the conference room, and an iguana named Jim roams around freely. Vivid's entrepreneurs say that San Francisco's lively and diverse subcultures and its antiestablishment aura contribute to a creative environment, as does the proximity of hundreds of photographers, designers, cartoonists, and documentary filmmakers. Says general manager and co-founder J. Sterling Hutto, 30: ''There's a critical mass of creative people.'' The market for multimedia software is still small, and employees are motivated more by creating great products than by making money, Hutto says. They are probably earning more than the Chinese seamstresses who are still working downstairs.