Hear the word “startup,” and the location that comes to mind is Silicon Valley. That’s only natural: it’s still ground-zero for many of the world’s largest and most powerful technology companies, as well as the home of thousands of tech startups launched each year.
But the Bay Area is not the only place where exciting things are happening, as I found out during a whirlwind tour of San Diego’s flourishing startup scene -- a trip arranged by my friend and business associate, Leslie Fishlock. Leslie, the founder and CEO of Geek Girls, is intimately connected to the San Diego technology community. When she heard I wanted to do a piece for Startup Grind, she generously offered to arrange a number of meetings with entrepreneurs and founders. Talking to people in the trenches is always the best way to research a story, and, since my previous familiarity with the San Diego startup community was limited, I happily accepted her offer.
Paying Respects to the Godfather
On my way down from Los Angeles, I was fortunate to get a sit-down with Brant Cooper, considered by some to be the “Godfather” of the San Diego startup scene. Brant, who is the author of the New York Times bestseller The Lean Entrepreneur, and co-founder of Moves The Needle, was kind enough to share some valuable insights.
As he sees it, San Diego is a great venue for startups because there is a world-class infrastructure: academic institutions, a thriving community of professional service providers, a large number of co-working spaces and accelerators, and proximity to venture capital both locally and throughout California. That said, Brant reiterated numerous times that “this business is not for the faint of heart.” He stressed what every good entrepreneur knows: that they must be go-getters. “They can’t expect things to come to them, they’ve got to hustle,” Brant pointed out. As I left, I told him I looked forward to reading the second edition of his book, coming out in the Spring of 2016.
San Diego's Engines of Growth
Despite the fact that its population has risen to 1.35 million and cranes erecting million-dollar condo units are popping up all around the city, San Diego maintains the feel of a small town. This became increasingly noticeable as I met and talked to members of the startup community. Everybody apparently knows everybody else, and there appears to be a spirit of collaboration rarely encountered in the highly-competitive world of Silicon Valley. That, at least, was my initial impression, and I spent the rest of my visit digging deeper to see if it was true.
My first meeting was with Jon Belmonte and Ryan Bettencourt, two of the co-founders of Cursive Labs, which is a startup ideation studio and venture capital firm that boasts an experienced team of developers, designers, and company growth experts. The studio recently announced a $2.2MM round of financing from Wavemaker Partners, Crescent Ridge Partners, and other well known investors.
Jon and Ryan believe in approaching new ideas in a highly disciplined and systematic way. Jon says he believes that is critical, because one’s natural tendency is to look for metrics that prove something is a good idea rather than looking at it honestly and impartially. To combat that tendency, the company sticks to what Jon and Ryan call a 2-2-2 incubation approach. Specifically, they spend two months building a "saleable" minimal viable product (MVP), two months developing customer traction (users), and two months demonstrating a revenue model. At the end of six months, they either kill the idea or move it into a growth phase. “We believe our approach helps us to stay objective and leads to better ventures,” they told me.
Cursive Labs currently has two projects underway: Spoutable, an “exit discovery platform” that engages traffic on site exits and makes relevant recommendations for where to go next, and BumbleCast, a marketing platform through which organizers of one event can further monetize their attendees by routing them to other, similar events. It will be interesting to see how Cursive Lab’s “make or break” philosophy ends up applying to both companies. If the two founders are anywhere near as effective as they seem, I’m betting the odds for success are high.
Heeding Leslie’s advice, I reserved a good block of time to visit 101 West Broadway, the city’s startup-hub. The building is owned by the Irvine Company, whose roots date back to 1864, when James Irvine acquired 93,000 acres of land in and around the San Diego area. 101 West Broadway houses a number of startups in a unique, three-tiered arrangement that includes a lower floor, where EvoNexus is located, a middle level, which houses The Vine, and finally a polished and modern space at the top of the building, known as The ROC. Startups can follow the progression in the building from start to finish or they can move to another of The Irvine Company’s many office spaces located from San Diego to Santa Monica.
EvoNexus, the centerpiece of 101 Broadway, is a well-known and highly respected accelerator, and its statistics are impressive. To date, it has incubated 49 companies that have gone on to raise more than $670MM in funding. Eighty-eight percent of those are still operating today -- an impressive batting average by any accelerator’s standard. Among the Evonexus success stories are: ecoATM, bought by Outerwall (Redbox, Coinstar) for $350MM, and Fat Skunk, acquired by Qualcomm.
EvoNexus, the 101 Broadway Accelerator
Out-of-town entrepreneurs looking for a California-based accelerator should give serious consideration to EvoNexus. As a result of its nonprofit status, it’s able to offer an approach that is atypical: startups that are accepted work rent free for four months and give up no equity. At the end of the four-month period, they are evaluated and either granted or denied an additional four to eight months in the space, also rent-free.
Getting into EvoNexus is challenging: The accelerator only takes applications twice a year and of the hundreds it receives, only 10 are accepted. Startups that make the cut have access to mentoring, as well as events and networking opportunities such as Marketlink, which connects large tech companies to the EvoNexus entrepreneurs. Other programs include speakers and panelists who outline current industry trends and offer technology roadmaps.
Austin Neudecker is the co-founder of Startup San Diego, which produces Startup Week San Diego, a five-day event that attracted more than 400 startups and 1,500 entrepreneurs this year. He is also a long-time mentor at EvoNexus. During an informative and often animated lunch, he explained that mentors at Evo are entrepreneurs in the community who have decades of experience and spend a lot of time with the companies, challenging their assumptions and pushing them in the right direction. Austin is not only an enthusiast of EvoNexus -- he is a vocal promoter of the the San Diego scene in general. As he points out, “The energy and growth here is palpable, and people are starting to help each other like never before.”
Moving Up the Entrepreneurial Ladder
Later-stage startups, many of which have raised seed capital, find a good fit in 101 Broadway’s co-working space, known as The Vine. Occupants pay rent, but at a sub-market rate. I visited two portfolio companies housed here, and I was impressed by both.
Chris Memmott and Clive Savacool are co-founders of Exposure Tracker, a B2B app that enables firefighters to track toxic and communicable disease exposures and injuries. The data gathered by this app is critical, Chris explained, not only to the health of individual firefighters but also to their careers, since there is a ceiling on how much exposure an individual can have and still go out on calls. The initial addressable market is significant, given that there are 1.1 million firefighters in the the U.S. alone. Once the initial Exposure Tracker is complete, the founders plan to expand into other first-responder verticals with a variety of related cloud-based solutions. Belief in the company seems well founded, to the tune of an oversubscribed $600,000 seed round, and an eight-person team that appears well on its way to the next level.
I also spent some time with Al Bsharah, CEO of Email Copilot. Al has an impressive background in large email system logistics, and he describes the problem he’s solving for marketers as “send anxiety.” For marketing and growth managers who are tasked with sending emails out to thousands -- even millions -- of users, there are an endless number of issues that can negatively affect the open rate and therefore success of those campaigns. Email Copilot has a set of algorithms that determines where issues are coming from and identifies weaknesses in the system. Al is definitely the guy I’d want to have my back the next time my career hinges on how many of those 5-million emails open -- or not.
At The ROC, I got a personal tour of the facilities and definitely noticed a feeling of “having arrived” as soon as I stepped off the elevator. Geared toward later-stage technology companies or firms with regular cash flow, the offices are private, spacious, and polished -- guaranteed to impress. If a startup is earning revenue and can afford it, The Roc is a great option.
Toward the end of the day, I met with Jeremy Sanders and Tom Schultz, who run the San Diego Startup Grind Chapter. They took over the operation this year and are excited about their upcoming meetup Thursday, October 8th. Jeremy believes the entrepreneurial scene in San Diego is as diverse as its people. It touches on all areas of daily life, from defense and biotech to sports and software. “We know the world can be a better place,” Jeremy told me, “and we believe we have found ways to make it better, even if it’s only in small ways.”
Infrastructure First, Atmosphere Next
After a couple of days of back-to-back meetings and conversations, I decided to unwind with a nice dinner at Cowboy Star, a local eatery that specializes in American cuisine with a western flavor. As I enjoyed the excellent food, I reflected on my three days in the city. One moment in particular stuck in my mind. It was a conversation I had overheard earlier that evening at the Summer Social Beer Bash, an event organized by the San Diego Venture Group and held at the Scripps Center at UCSD. The group was made up of 500-plus lawyers, VCs, academics, and entrepreneurs. The atmosphere was cordial, but a bit subdued for a startup event. I was making my way through the crowd and had paused for a moment at the beer station when I overheard a young man say to someone standing next to him, “You know, in San Francisco, when you say you work for a startup, people say, ‘Awesome...you may hit it big one day.’ In San Diego, the standard reply is, ‘Too bad you don’t have a real job.’”
Cowboy Star Restaurant
I am assuming the young man was joking, since that certainly wasn’t a sentiment expressed by any of the people I met in San Diego. Like me, they know that being an entrepreneur is not only a “real job” but that it requires passion, intense perseverance, and a will to step into the unknown. The majority of founders I talked to for this story have already taken that step, which isn’t surprising given that entrepreneurs are by nature risk-takers. But what I found unique about these founders is they seem to view each other more as “fellow travelers” than competitors. It’s that attitude that many would argue makes San Diego one of the best cities for startups. If they are right, it’s an approach that all of us might consider -- even in Silicon Valley.