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Downtown incubator spurs tech innovation

Fed up with sky-high price tags on textbooks at university bookstores, Jonathan Simkin co-founded a discount textbook website called SwoopThat in his dorm at Harvey Mudd College in Claremont, Calif. and then moved the company to other undesirable office locations: his parents’ house in Del Mar and then to a temporary space from a family friend in La Jolla.

His company’s latest and greatest home to date is in a prime downtown office building — and he’s not paying a dime to use the space, despite its priceless location just steps from business partners, bars and restaurants.

SwoopThat is one of 13 hot startups that lucked out and scored residence in the second tech incubator in San Diego to be run by EvoNexus, an arm of the San Diego-based nonprofit tech industry association, CommNexus.

The software companies, which develop mobile apps and Internet services targeting e-commerce, location-based services, social engagement and cloud computing, moved into the 15,000-square-foot space in Irvine Co.’s 101 W. Broadway — also known as the AT&T Building — on Jan. 30. Each company has about one to two employees.

“Being at EvoNexus really helps with credibility,” Simkin said. “It will resonate with investors as we look to raise money.”

The office space at EvoNexus, an incubator for tech startups in downtown San Diego. Photo courtesy of Irvine Companies

In October 2009, EvoNexus’ first 16,000-square-foot incubator opened in another Irvine-owned building in University Towne Centre, hosting 14 companies that have raised more than $55 million in venture funding since incubation. Six of those companies have “graduated” and left the incubator.

Under Irvine's partnership with EvoNexus, San Diego’s largest landlord offers the startups its space rent free in hopes they will someday expand and move into one of its buildings. So far, that theory has held true: Four of the six UTC graduates have inked leases in local Irvine space, including IO Semiconductor Inc., MicroPower Technologies Inc. and Pixon Imaging.

Up to 20 companies, or about 40 employees, can fit in the downtown space. When they start expanding and graduate, downtown advocates pray they stay in the vicinity to contribute to the economy.

Emerging software and IT companies are refreshing additions to downtown’s traditional tenant pool of law, accounting and finance firms, said San Diego City Councilman Todd Gloria.

“Location is critical to attract talent. The workers these [EvoNexus] companies are identifying want to live and work in a vibrant, urban core,” Gloria said. “It allows us to compete with other communities trying to attract this talent.”

Young tech entrepreneurs tend to gravitate towards walkable, urban environments, and Gloria hopes the downtown office’s proximity to nightlife, coffee shops and clients will help lure employees from San Diego’s traditional high-tech areas like Sorrento Valley.

Another selling point is many of the startups in are in downtown-related sectors, such as food, retail and booze. TapChow, for instance, is a cloud-based restaurant experience manger, and Taphunter is a craft beer finder app with more than 10,000 Twitter followers, while Fashioning Change is a shopping website for eco-friendly apparel.

The setup is similar to San Francisco’s South of Market, which has become a magnet for social media and mobile app developers.

Companies admitted to EvoNexus' incubator go through a vetting process similar to the due diligence done by prospective investors.

Space and services are offered free of charge to startups with no strings attached, making EvoNexus unique among incubators. Graduating companies leave with no obligations to EvoNexus and CommNexus.

“As far as we know, we’re the only pro bono incubator in the country,” said Kevin Hell, chairman of EvoNexus and former chief executive of DivX Inc., a digital video company that’s now part of Santa Clara-based Rovi Corp. (Nasdaq: ROVI).

The incubator model, which has become more popular over the years in budding metro areas, typically charges its occupants rent or asks for something in return, like an equity stake or royalty revenues from patents.

Startups in EvoNexus’ space get other free perks as a result of donated services, including broadband Internet and utilities, office and technology services, as well as access to business mentoring, consulting and networking.

Funds to keep the incubator afloat are also coming from the public sector. Gloria, for example, is injecting $10,000 into the downtown EvoNexus office.

His investment came through the city’s budget committee, which allows council members to spend savings from their office budgets.

“This whole world has reoriented itself in this economy and no individual source can get things across the finish line on their own,” Gloria said.

Irvine said it plans to keep working with EvoNexus to set up future incubators.

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City of San Diego Executive(s):

Sherri Lightner

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Kevin Faulconer

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Todd Gloria

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Myrtle Cole

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Mark Kersey

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Lorie Zapf

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Scott Sherman

  • City Council Member

David Alvarez

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Marti Emerald

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