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Roundtable discussion

Lack of venture capital money hurting local start-ups, say business owners

Entrepreneurial spirit here is strong, but funding too hard to come by

The businesses that San Diego’s entrepreneurs have founded are as diverse as the backgrounds of the entrepreneurs themselves, and they are each facing a different set of challenges and triumphs in today’s market.

At a recent Daily Transcript roundtable, the founders of three entrepreneurial companies shared their stories. For some, the poor economy has been tough. For others, the increase in government contracts has been a boon. Some found getting financing to be the toughest obstacle in the beginning. Others work in industries where having the right patent to start with is key. About the only thing they have in common is a drive to stay independent, and stay in San Diego.

“For a while, San Diego was considered the wireless Silicon Valley of Southern California, so from that standpoint, the talent is here that we need to get the job done,” said Sam Smookler, president and chief executive of E-band Communications Corp., a company that designs and manufactures large capacity wireless communications systems. “Communications is pretty easy to come by.”

While Smookler is looking for the kind of talent and business one expects to find in San Diego, Edward Fyfe, president and founder of the infrastructure engineering firm Fyfe Co., is staying here despite the environment.

“It’s been good for us, San Diego. It’s a great place to live,” Fyfe said. “As far as the air travel, sure you might have to hop up to LA or San Francisco to go somewhere, but that’s well worth it. And when people come to visit, they love to visit. This is where they want to come. When our international (clients) come, they say, ‘San Diego? Great!’”

Alex Kunczynski is the co-founder and president of D&K Engineering, a different kind of engineering firm than Fyfe’s, and he said his company has succeeded in San Diego because it has such a diverse economy.

D&K provides contracting of research and development and manufacturing services around the globe. He and his business partner lived here when they started the company, but looked into re-locating to places known for being more business friendly, like Texas, Atlanta and Colorado, but felt that where they were was the best place.

“We find that there’s a lot of good startup organizations here,” he said. “It’s a very entrepreneurial city. It is a great place to live.”

Kunczynski said that one of his biggest challenges in San Diego is the cost of living. D&K ends up hiring a lot of local people because they can’t convince potential employees to relocate. Fyfe has a similar problem, and it’s more of a concern because the engineering talent he needs doesn’t necessarily live here. He recently had a recruit from Utah tell him he’d need a 50 percent higher salary to relocate to pricey San Diego County.

However, Kunczynski said hiring local talent isn’t always a bad thing.

“I’m extremely impressed with the talent (here),” he said. “I went to school up in the Bay Area at Stanford … All my friends work in that area and there’s a lot of sharp cookies and a great entrepreneurial space up there, but I’m very bullish on San Diego. I think the talent here is outstanding. People are here because they want to be here.”

While San Diego’s universities and climate may generate talented people who want to be here though, there is one thing the area lacks: Funding money. The region’s entrepreneurial zeal doesn’t always match its monetary resources. This remains a challenge for startups, including those who spoke with The Daily Transcript.

Kunczynski started his company largely with only the savings of he and his business partner. Fyfe had the benefit of a patent for a special kind of bridge bearing that he designed right out of college nearly 40 years ago. Smookler had to raise money from venture capital firms, and largely had to go the Bay Area to get it. He said he would like to see more local funding, particularly during tough financial times such as these.

“Raising the money is a unique endeavor, and a lot of it is timing. If you hit the (venture capital firms) when the market is hot for certain things, the money comes easily,” Smookler said. “We started looking for our funding on the dark side of venture funding availability and it was a tough ride.”

Roundtable Participants

Edward Fyfe, President & Founder, Fyfe Co.

Alex Kunczynski, Co-Founder & President, D & K Engineering

Sam Smookler, Co-Founder & President, E-Band Communications Corp.

Vicky Zillioux, Chief Administration Officer, Strategic Development Worldwide

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