Come April 1, Stan Eyler won’t have time for fooling around.
That day, the San Diego tech entrepreneur will be launching his Web site , artichok.com , with the help of a new local high-tech incubator.
Artichok.com is one of a handful of companies that already occupy VenturePlex, a 30,000-square-foot incubator located in the San Diego Tech Center in Sorrento Valley.
The company is modeling itself after trend-setting incubators such as Pasadena-based idealab!
San Diego is home to only a couple of incubators, including the nonprofit San Diego Technology Incubator at San Diego City College and Venture Catalyst, a publicly traded firm in Rancho Bernardo.
Another incubator, IdeaEDGE Ventures, is scheduled to launch in San Diego in April.
VenturePlex, which plans to be a multimillion-dollar-a-year operation, will focus on grooming telecommunications, E-business and life sciences entrepreneurs. The incubator, which occupies a building left vacant when Finnish cell phone manufacturer Nokia moved to its new site in Sabre Springs along Interstate 15, provides wide-band Internet access, administrative resources, and marketing and distribution relationships for its tenants. A 100-seat conference room is also being constructed.
VenturePlex’s first resident was Hamilton Technology Ventures LP, a new venture capital company focused on seed and early-stage investments. Hamilton expects to have more than $90 million under management by June.
Virtual Gallery
Eyler, who left an 18-year career in a family-owned manufacturing business in San Diego to start artichok.com, hopes to net additional funding in six to nine months, with a planned initial public offering within 18 months. He launched the company with about $150,000 in family money.
Eyler compares artichok.com to La Jolla-based digital music company MP3.com, which allows artists to sell their own CDs online.
Artichok.com will create a Web community for painters and photographers to sell their work through virtual galleries.
“I want to empower the artists to put artworks up so they don’t have to put up with the shenanigans of some art galleries,” Eyler said.
Artichok.com will also offer canvas reproductions of photographs and other works of art.
Eyler operates in a small, one-person office right now, while his three employees work from their homes. He plans to have three offices at VenturePlex within a month.
Eyler said VenturePlex is a great place for an entrepreneur like him.
“I’m centrally located. This is a dot-com area. The building’s already wired, so I have Internet connection for free. And it’s a T-1 line. I was going to have to pay $150 per month for a 56K connection in Carlsbad.”
Most VenturePlex tenants will pay between $600 and $800 a month in rent. VenturePlex will allow some companies to reside in the facility for free in exchange for a percentage of the company.
Paul Bouchard, chairman of VenturePlex, said the company is trying to make it as inexpensive for entrepreneurs as possible.
“We’ve beaten up everyone from the Coca-Cola people to the copy people,” he said. “We have everything from 39-cent color copies to 55-cent drinks.”
Bouchard began working on the VenturePlex concept about 1 & #733; years ago. He wanted to start a venture capital firm, but also wanted to do more than just write checks to promising entrepreneurs. He pointed out companies that receive capital usually spend 40 percent to 60 percent of it on infrastructure.
“We thought for dramatically less money we could provide one infrastructure to these companies,” said Bouchard, who has more than 30 years under his belt in developing, financing and operating emerging businesses.
Overlooked Companies
Over the last five years, he said, venture capitalists have moved further up the food chain, financing larger deals.
Only about $127 million worth of venture capital money went into San Diego-based telecommunications firms in the fourth quarter of 1999, according to the accounting firm PricewaterhouseCoopers LLP. The entire region received about $398 million in venture capital during that time.
Bouchard said tech incubators have become so popular because there are several promising tech companies that are overlooked by some venture capitalists.
Tech incubators are so hot they’re popping up all over the place, said Ed Black, senior vice president of the Aberdeen Group, a Palo Alto-based consulting marketing research firm that is putting together a report examining the emerging tech incubator market.
“We’re getting notified of two or more incubators a week opening internationally,” he said, pointing to places like Israel, Canada, Europe, Silicon Valley, Boston, Atlanta and Los Angeles. “I expect to find six of them in Austin not too long from now.”
Black said incubators help reduce the investment risk of fledgling start-ups.
Improving The Odds
“If you look at common wisdom, one in 10 companies is going to hit. The incubators are trying to move that to three in 10. That’s an enormous push.”
Black said most incubators today are focused on funding and grooming business-to-business E-commerce companies.
A lot of venture capital dollars are also going to Internet-based companies. Venture capitalists invested a record $12.6 billion in 1,763 companies in the first half of 1999, according to a September 1999 issue of Venture Capital Journal. Nearly half of that amount, $6.1 billion, went to Internet companies, mostly content, E-commerce and services firms.
“Commerce sites are hot right now,” Black said. “Those are the ones that are getting the biggest spotlight.”
That’s what Ignacio Hernandez, another VenturePlex tenant, wants to hear.
Hernandez is CEO of San Diego-based Mexgrocer.com LLC, an E-commerce site that plans to offer authentic Mexican foods, as well as Mexican cookbooks, through the World Wide Web.
The site, scheduled to launch on Cinco de Mayo, will also sell American-Mexican food brands such as La Victoria and Rosarita.
Hernandez, who has been in the food industry for more than three decades, decided to launch Mexgrocer.com because he saw a niche for selling authentic Mexican foods in cyberspace.
“The market I’m targeting is worth $500 million,” said the former CEO of Authentic Specialty Foods, the multibillion-dollar owner of La Victoria salsa. “There are 20 million Mexicans in the United States.”
Working On Strengths
Hernandez, who has been in San Diego for 17 years, said the region is the door to the Hispanic market.
He is not only happy to launch his E-business firm here but also to have found VenturePlex.
“They understand online business and online shopping. They are going to help me get an investor and get up and running,” he said about VenturePlex. “I understand the Hispanic market, and I understand the marketing of consumer products. On the technological side, they are pointing me to the right people to complement my business plan.
“They will help me focus on what I’m good at, which is marketing, instead of making it complicated for me on the technological side.”
VenturePlex’s Bouchard said the incubator will be looking for not only E-business firms but also those with proprietary technology or technology that can be licensed.
He said VenturePlex is willing to take risks by nurturing companies that won’t necessarily become big dot-coms like MP3.com or Amazon.com.
“We want to have our share of home runs but we intend to have a couple singles, doubles and triples. The notion of looking at 100 business plans and funding only one leaves a lot of good ideas on the table.”
