Where Failure is an Option: San Diego’s Startup Culture as a Bay Area Annex

11/25/09Follow @bvbigelow

Not long ago, one of my Xconomy colleagues in Seattle posted a provocative piece about startup failures and suggested the startup culture in some cities—especially the San Francisco Bay Area—is far more tolerant of technology entrepreneurs who fail.

Greg found that many Seattle entrepreneurs say they feel stigmatized by startup failures in the Pacific Northwest (does all that winter drizzle make them more pessimistic?). Seattle VCs, on the other hand, take a milder view. In Boston, the startup culture apparently has an attitude, at least the way it’s described by Brad Feld, who has been investing nationally for the past 15 years (and who co-founded the TechStars seed-stage startup program and the Foundry Group in Boulder, CO). Feld says, “One of the reasons I think Boston has resurged as such an entrepreneurial community, in a good way, in the last couple of years, is it had a massive chip on its shoulder.”

In the Bay Area, the kingdom of heaven for venture capital, Greg heard (at least from outside) that failure is considered a badge of honor—which makes it sound like collecting an Eagle Scout badge for entrepreneurs.

San Diego’s startup culture, however, was largely unrepresented that day. So I conducted an informal survey of local VCs and entrepreneurs and discovered to my surprise that many view San Diego as a kind of venture annex of the Bay Area—especially as San Diego’s hometown venture firms have faded in recent years.

“I think San Diego is more like the Bay Area than Seattle,” says Jeanine Jacobson,” a San Diego-based partner of the Founder Institute’s startup incubator and mentoring program. “There is a quote that everyone can relate to: ‘Good judgment comes from experience, but experience comes from bad judgment’ and entrepreneurs are no exception to this rule. All one has to ask VCs is who would you rather invest in—a first time entrepreneur or an entrepreneur who has had a past failure?”

Marco Thompson, who founded Wind River Services (which was acquired earlier this year by Intel) and is managing director of San Diego-based Express Ventures, was among several who linked San Diego’s startup culture to the Bay Area. “Financing for San Diego technology companies comes principally from the Bay Area, and not at all from Seattle,” Thompson says. “So we are clearly infected with Bay Area attitudes, and are very tolerant of previous failures.” Thompson adds, “My attitude, and the attitude of many investors that I know, is that ‘an entrepreneur learns more in a failure than in a success.’”

Abi Barrow, who has years of experience with startup programs in both San Diego and Boston, says, “While I am not sure that failure was a badge of honor in San Diego, it was certainly accepted and not held against you if you … Next Page »

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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  • http://www.sandiegobusiness.org Julie Meier Wright

    Those that seek to emulate San Diego are focused on our incomparable research base — a diverse and densely concentrated powerhouse of knowledge. We do a good job of moving research into the private sector and potential commercialization. Mike Krenn does a great job of summarizing San Diego’s challenges. Some of our local organizations such as Biocom are doing a great job addressing the issue of capital. We also have our first real incubator, EvoNexus, thanks to Rory Moore at CommNexus. But at the end of the day it’s about accessing money to take a great idea to commercial success. And continuing to create awareness and “buzz” about San Diego as an innovation economy.

  • http://www.xconomy.com/author/bbigelow/ Bruce V. Bigelow

    All valid observations Julie, and thanks. It seems to me that building and maintaining a critical mass in various tech sectors is a key factor in sustaining a startup culture. It’s clear that San Diego has successfully maintained its critical mass in biotech. On the other hand, the bench doesn’t seem to be as deep as it once was in the networking technology sector and perhaps in Internet/web-based technologies. And then there’s the local VC issue.

  • http://www.none.com JB

    I don’t think you can separate the VC ‘xconomy’ out of the actual, real economy. They are related.

    San Diego (and California in general) economy is declining rapidly and profoundly. For example the research apparatus mentioned above as a competitive advantage, must be in jeopardy currently with the state gutting and permanently cutting higher education.

  • http://www.xconomy.com/author/bbigelow/ Bruce V. Bigelow

    Northern California is simply far more robust when it comes to moving promising R&D to commercial applications. Silicon Valley has by far the biggest concentration of venture capital, and the most VC investments quarter after quarter. I agree that the UC funding crisis poses a huge threat to the innovation economy—but I don’t think that threat has materialized yet (perhaps because UC San Diego, for example, has borrowed heavily to keep the wolf at bay).

  • http://www.daggerboardadvisors.com Dennis Clerke

    In the past two years at DaggerBoard Advisors(an advisory firm for emerging software companies), we have seen a real change in the So. CA technology landscape. San Diego’s software community has become much more concentrated at the early stage. Many of which are funded by friends & family and are still finalizing the fundamental business model. Connect, EvoNexus and others play a valuable role in helping companies at this stage.

    However after the early stage, there is a gap with limited local venture capital, few alliances and sparse talent. Inevitably, once the business model is defined and the firm starts to emerge, the companies spend a lot of time in Silicon Valley getting Venture funding, establishing technology alliances and recruiting teams. Many get acquired at a young age or establish affiliate offices in the Bay Area and the San Diego founding location becomes a satellite.

    The good news is that San Diego has a solid foundation of early stage resources and entrepreneurial activity, but the bad news is that it’s a short runway without a lot of flights to San Jose…