“Collaboration unlocks innovation.” This is the motto that drives Startup Circle, a for-profit organization focused on creating a supportive environment for local entrepreneurs to succeed in, and eventually choose to operate their businesses in, San Diego.
The group recently developed a partnership with the Sunnyvale-based funding powerhouse Plug and Play, and successfully lobbied this international incubator to locate its first domestic satellite program in San Diego.
Six of the eight companies that made it through Startup Circle’s competitive selection process are working with Plug and Play to prepare for their prize: participation in its Sept. 12 pitch day, a semiannual event that typically attracts upward of $10 million in investments from venture capitalists, and facilitates mergers and acquisitions from companies with names like Amazon and Google.
“This was really great news for San Diego that eight companies were selected,” said Gabriela Dow, entrepreneur and co-founder of Startup Circle. “They won a $25,000 check right off the bat in exchange for a 5 percent stake in the company, terms which they knew ahead of time, but then also get to go to Silicon Valley for Startup Camp that culminates in this Sept. 12 expo day.”
Dow said Startup Circle received 80 applications for 16 finalist spots. Those finalists were given three minutes to pitch to local big-name venture capitalists who decided which companies, if any, they wanted to fund and send to Startup Camp.
“This is not like a competition where judges pick first, second and third place,” Dow said. “These are real monies, and these are real venture capitalists. It was possible that we would have this big event, and no one would get funding. So once the judges went into deliberation and picked eight companies, that blew us away.”
Robert Reyes, the initial founder of Startup Circle, said they are working on choosing their second batch of companies and will have these whittled down by the end of the year. This process involves working with startup circle in San Diego for three weeks and then pitching for the opportunity to participate in Startup Camp.
One component that both Dow and Reyes stressed was crucial to the program and partnership is that the companies go to Silicon Valley for funding, but return to San Diego to bring their company goals to fruition.
“I’ve been working with Plug and Play for the last two-and-a-half years advocating to say we need a bridge to Silicon Valley,” Reyes said. “But a requirement was that we didn’t want to drain talent from San Diego; we just wanted to leverage the resources of the Bay.”
Though Startup Circle can’t force the entrepreneurs and startups to return to San Diego, Reyes said it is a part of the program, and the entrepreneurs are committed to returning. Of the six companies in Startup Camp now, he said only one is remaining north for the three-and-a-half-month session. The other five fly to Plug and Play for two or three days a week, but stay based in San Diego.
Aside from retaining innovators on its home turf, focusing on female entrepreneurs is another of Startup Circle’s main goals. Reyes said many startups that become successful are run by women, but the field getting to the point of sustainability has mostly been filled with men.
“Women with networks in technology seem to have a much more natural and fluid approach to building that then men do,” Reyes said. “I started looking at companies doing really well and being customer-centric with very strong leadership, and found that many of them were founded by female entrepreneurs. There’s more females starting businesses than men now.”
Why, then, were only four of the applicants and none of the eight winners of the Plug and Play-Startup Circle program women?
Reyes said that after studying this phenomenon and attending a Chic CEO conference about female entrepreneurs and executives, he found that it boils down to two main things.
“First, it’s the exposure and mindset female entrepreneurs have,” Reyes said. “They want to create a business funded through sales, versus a male who is not shy about going and asking people for money to build those sales channels. Females don’t want to ask for money unless they have a business that’s generating revenue.”
“I also learned that women are way more conservative in putting themselves out there and being criticized,” Reyes said. “The funding process is very adversarial; capitalists go after the individual, not just the business model. Female entrepreneurs don’t want to be exposed in such a way.”
To counteract this, Startup Circle is working to create opportunities for female entrepreneurs to pitch for funding, but focusing even more on finding female investors, which Reyes said is a small breed in a heavily male-dominated industry.
Of all the entrepreneurs who engage with Startup Circle through one of three venues, a mere 5 percent are women. Reyes said their goal is to jack that number up to half.
“We find there are females out there who are just not connecting with current communities,” he said. “We’re making it a focus because we know they’re there and the future is there.”
Those three tiers of involvement that Startup Circle offers are, first, monthly networking and educational events for people just learning about the group or those who simply want to connect. Then there are weekly meetings for people who want to become more engaged members of the community, where entrepreneurs collaborate to solve problems the companies are facing.
Startup Circle also has what it calls “portfolio companies” that it devotes a lot of time and energy to helping grow through business development advice or helping recruit talent. In most cases, Startup Circle invests monetarily in these startups in some way as well.
Reyes said there are 15 portfolio companies working with Startup Circle, and he hopes to increase that to 100 by the end of next year. Since the organization’s founding in 2007, he estimates it has engaged with at least 200 San Diego companies.
Back in 2007, Reyes took the helm of a fledgling young professionals networking group that would attract maybe 15 to 20 people at its monthly events. He saw the need to expand on this concept and remove the “young” criteria, and evolved the group into Startup Circle in 2008, which now has a community of about 5,000 entrepreneurs and startups.
One of the group’s biggest advantages is its relation to Mexico, and its international focus. Startup Circle works closely with the French and Swedish Chambers of Commerce, and emphasizes the manufacturing benefits of neighboring Baja California.
“It’s a huge advantage to our companies to be 30 minutes from the border,” Reyes said. “They don’t need China. In Baja California they’ve been doing manufacturing for multinationals for years — aerospace, drone manufacturing, biotech, medical devices.”
Even closer to home, Dow said that the city of San Diego is taking steps to be more conducive to startup growth, though there remains much to be done.
“Filner launched the Office of Civic Imagination and Neighborhood Projects, which has $1 million in funding,” Dow said. “Its office and programs are going to take up the fourth floor of City Hall.”
The office will serve as a sort of incubator for the city, which still moves too slowly on common sense modernization efforts, she said.
“I helped launch an e-government firm in Rancho Bernardo, and met with the city of San Diego then, in 2000,” Dow said. “We encouraged them to do online permitting, payments, etcetera, but it didn’t take off in San Diego. It’s been implemented in Oceanside, Houston, Hawaii, hundreds of cities everywhere, but not San Diego.”
Dow said she doesn’t think Filner’s personal issues are aiding the cause any.
“Now we have a huge derailment for his personal issues, which has people wondering if they want to engage with the city of San Diego,” she said. “That’s unfortunate, and I count myself among those people.”
Regardless, Startup Circle has big plans for the future. Among its five five-year goals are to achieve $1 billion of valuation growth and $100 million of investment, and support 200 student entrepreneurs to create 50 startups.
Reyes said the key to this growth is for all of the startup organizations in the area, namely Connect and EvoNexus, to work together as one community toward a common goal.
“We just need to work together to build businesses and entrepreneurs,” he said. “As long as that mindset evolves in San Diego, we’re going to be OK. A lot of people are creating camps within San Diego for entrepreneurship. Forget camps; we’re all in it to just bring what we all have to help entrepreneurs.”