Plug and Play Tech Center: Where Startups Come to Make Connections

12/13/12Follow @wroush

If you’re looking for the place in Silicon Valley with the most startups per square foot, it’s probably the huge two-story office building at 440 N. Wolfe Road in Sunnyvale, headquarters of Plug and Play Tech Center. While Plug and Play runs smaller startup communities in Redwood City and Palo Alto, the bulk of its members reside in Sunnyvale, in a former Philips Semiconductors complex that’s been divided into innumerable cubicles, each housing an early stage tech company hoping to hit the big time.

With some kind of startup event going on at the facility two or three days per week, there’s plenty of opportunity for networking. And with more than 40 percent of Plug and Play’s 300 companies hailing from other countries, the lobby is a veritable United Nations, with startup employees and visitors streaming in and out all day.

Plug and Play is an interesting beast—part coworking facility, part business incubator, part investing operation. It is largely the creation of one man, founder and CEO Saeed Amidi (pictured above), an Iranian exile who leads a sprawling empire of businesses spanning bottled water, plastics and packaging, construction, real estate, and even handmade Persian and Oriental rugs. Though Plug and Play brands itself as a startup accelerator, it’s not a competitive, time-limited, mentorship-based program in the same sense as Y Combinator, 500 Startups, or TechStars. It’s more like a garden for startups, where almost any company can put down roots but only the most promising seedlings are selected for special attention, business development assistance, and, sometimes, direct investment by Amidi’s personal investment fund, Amidzad.

After numerous visits to Plug and Play for startup interviews and events, I recently made a point of speaking with Amidi and some of his resident entrepreneurs about Plug and Play itself. I wanted to hear the backstory to this unusual organization, and to find out why the place is such a popular destination for companies making their first forays into Silicon Valley.

David Parpart is the founder of Socially Relevant, a startup building cloud and mobile apps that can, among other things, remind patients to take their medications on time. He says “the energy and the environment” are what he really likes about Plug and Play. “We have an office at another shared space in Oakland which is not nearly as useful or productive,” he says. “There is really a strong community here and an opportunity to plug into a lot of resources and people.”

Just down the hall from Socially Relevant’s cubicle, for example, is another desk rented by Omron, a medical device maker that manufacturers half of the world’s blood pressure cuffs. “It was great to be able to walk a few yards to their cubicle and say ‘We should chat, we’re in the same space,’” Parpart says. Even if Socially Relevant expanded to 50 or 100 employees, Parpart says he would still want to rent at least one cubicle at Plug and Play, the better to “participate in the events and be part of the community.”

Jordi Torras is a co-founder of Inbenta, a startup based in Barcelona, Spain, that’s using natural language technology to help big consumer-facing companies improve the search features of their websites. When the 30-employee company decided it wanted to go after the U.S. market, it decided to use Plug and Play as its beachhead. “The United States is a huge market, but it is also the most competitive market in the world,” Torras says. “We wanted to be here to talk to investors and learn from companies who might be partners, and in that respect the return has been immediate. We are closing deals already. It’s been very successful for us.”

Lately, Amidi has been ramping up Amidzad’s investment activity, and setting up formal relationships with companies inside and outside Silicon Valley, including many in Europe. He’s pitching Plug and Play as a place for these companies to tap the creativity of hot young Silicon Valley startups. Just days before my visit with Amidi in late October, for instance, Plug and Play had unveiled a partnership with Volkswagen; the giant German automaker plans to back up to 10 Plug and Play startups at a time as part of a new accelerator program designed to transfer ideas “from the nonautomotive domain into the automotive domain,” to quote a VW exec interviewed by the Silicon Valley Business Journal.

Here’s an edited summary of my conversation with Amidi.

Xconomy: Say you were speaking to an audience who had never heard of Plug and Play. How do you describe it?

Saeed Amidi: I believe that Plug and Play is a microcosm of Silicon Valley. It embraces what Silicon Valley has to offer. There are a lot of charismatic, energetic entrepreneurs who never get a chance to build their dream. I believe that if an entrepreneur comes to California, to Silicon Valley, and builds up confidence and guts to take their first step and initiate a startup, then the whole Valley sort of helps them along with advice, seed funding, corporate funding, venture funding, and event that both educate them and increase their changes of success. We’re part of that.

X: Is Plug and Play a real estate play, an investing play, or both?

SA: Initially, when we started this back in 2006, our idea was that it would be a great platform to meet more startups and make better investments. In the process, it would also be a good real estate play, where we got this building and so far we have had 1,200 companies go through it. So it’s not either/or—we wanted to achieve both at the same time. Then again, I kind of got overtaken by how exciting it is to be part of the journey of these entrepreneurs and make a lot of small bets and enjoy the ride, even if we lose money along the way.

X: How many companies are in residence here at any one time?

SA: Every year about 150 new companies come here from the U.S., and approximately 120 companies from the rest of the world, as far away as Jordan or Turkey but more commonly we recruit from Germany, Spain, Canada, Chile, Brazil.

But the next focus of our attention is the Plug and Play Accelerator or startup camp, through which we are pre-seed-funding 30 or 40 companies a year. Again, the majority are from California, but we just launched the Plug and Play Accelerator Calgary, where we have four startups. We just launched in Spain where we have five startups, and in November we will launch Plug and Play Accelerator Moscow.

Then we look to invest or co-invest in 20 companies a year, usually in the Series A round. We feel that is where we can actually add the most value—helping to identify great ideas, and getting to live and work with the entrepreneurs.

X: Do you only invest in companies that are in residence at Plug and Play? Do you have limited partners in the investment fund, or is it exclusively your fund?

SA: No, approximately 50 percent of the companies at one point or another are residents of Plug and Play. But close to 50 percent of them are just part of our community and our contacts. All of our investments are out of Amidzad, a personal investing vehicle. We have not raised outside money.

X: It sounds like Plug and Play, as a provider of office space and services to startups, is in one sense a big funnel for your investment operation. How does a company go from renting a desk here to winning an investment?

SA: We have a very low hurdle—as long as you are a product company building your dream, and we feel that you fit the community, you can rent office space here. However, the level of our engagement as well as investment—as well as what we call corporate development—depends on our due diligence three months, six months after the residents are here. We could just end up providing office space, or we could become an investor, help them build their business development connections with the corporate world, and help them build relationships with the venture capital world, depending on how exciting we think the opportunity is.

But again, we sometimes invest in community members that may never have been physically at Plug and Play. A good example of this is Zoosk, which we feel is one of our best investments. We have played a big part in their journey, but they where never physically here. Another good example is Lending Club. They started here in Sunnyvale, and for two years they were in our building in Redwood City, then as they became more of a financial company they moved the majority of their team to San Francisco.

X: What do companies get out of being based here at Plug and Play, and how can they best take advantage of their time here?

SA: I think the best feedback I have heard is that when they are part of Plug and Play, they feel like they are on a campus, like Google or Facebook. They feel they are part of a bigger thing than just their own small startup. They join our events, and our connections are open to them for funding, for corporate development. They automatically meet other entrepreneurs. It’s almost like going to the same university together. I tell [new residents] that first, they should meet a number of Plug and Play personnel and a number of Plug and Play residents who have been here for a year or two and see what the community has to offer.

X: There’s a booming business right now in coworking spaces for startups—here at Xconomy we’ve counted at least 30 of them around the Bay Area. Do you see other coworking spaces as competition, and if so, how are you different?

SA: I believe the coworking spaces actually fill a void. You can move in quickly and have an easy lease without a long-term obligation. But that is the least of the benefits you get as the communities develop. For example, at Plug and Play we have 120 events a year. We have 180 venture capital partners coming here to meet out startups. We have about 150 corporate partners that come here to collaborate with our startups. These are the extra services and contacts that you can build on top of a coworking space. I think the space represents about 10 percent of the value, and 90 percent of it is the “soft services” or connections. It’s hard to put a quantitative value on it, because we have entrepreneurs who take incredible advantage of the community, and others who could just as well be working in their own garage.

X: You’ve got locations in Sunnyvale, Palo Alto, and Redwood City, but not San Francisco proper, which is obviously an increasingly dense startup hub. Have you looked at opening a San Francisco location?

SA: Yes, we’ve considered it a few times. I think San Francisco is really going through a boom. But right now, for both residential and commercial [property], the cost is reaching really high.

X: How do you spend your time? There’s still a larger real estate business here, right?

SA: We are still involved in real estate. For example, we have an operation in LA called the Hollywood Production Center, which is similar to Plug and Play but caters to the Hollywood film industry. We have a project in LA called TenTen Wilshire that we call a “lifestyle” place where you can work, live, and have fun.

So yes, Plug and Play originally started as a real estate business, but it soon deepened to much more than I never imagined. It’s the point now that I think 10 percent of our activity is in real estate, 30 percent is acceleration of startups, 30 percent is corporate innovation and building a bridge between the startup world and the corporate world, and the last 30 percent is our international bridges with Belgium, Germany, Japan, Austria, Australia, et cetera.

Up until about a year ago, I spent a lot of time in my international activities. I feel there is a considerable amount of talent and great ideas to be tapped from all around the world. But quite frankly, it is a lot harder than I ever imagined. So in the last year and in the future, I am refocusing my attention to early stage startups out of the best universities in California and America. Today I am spending 70 percent of my time finding good investments, mostly in California but a little bit overseas.

X: Say a little more about “corporate innovation” and these bridges you spoke of between startups and corporations.

SA: We have gone through a great boom of social networks and B2C businesses, but I feel that in general, B2B is coming back as social and mobile move into the corporate world. We feel there is a great opportunity to collaborate and partner, and that our entrepreneurs can have the inside track to build products and innovate, with great brands like Audi or Volkswagen.

We just announced Volkswagen Plug and Play Acceleration Program. If you could pilot a project with a company like VW, it would confirm that the technology is really interesting and has a lot of excitement around it. That is where we feel corporate innovation could be interesting. There have been a lot of corporate incubators, or what they used to call incubators, but really I think if you try to innovate inside the corporation, you fall hostage to the corporate structure. With our Silicon Valley bridge, we feel we can play a part in the relationship between the enterprise/corporate world [and the startup world]. It becomes a valuable platform for [startups] to execute their ideas, and get funding and connections from the corporate world.

GM is a member with us, VW was originally a member, Mercedes is a corporate member. They want to scout new ideas to take back to their automotive design people. Especially the information systems part of the automobile, the connected car.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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