The Next Big Idea: A Guide To San Diego's Innovation Economy

>>> This is KPBS Midday Edition. I am Maureen Cavanaugh. Today is demo day in Senegal. It is the annual competition for people with promising ideas to make the big pitch to the start of committee. High-tech startups have a big impact on the San Diego economy. Connect finds that one quarter of the economic activity comes from them. Over the next several weeks, we will bring you the real world experiences, the successes and failures of startups. We will explore what makes a city a good home for these economic drivers. Today, Michael Lipkin speaks with Mike, the founder of the venture group which mentors San Diego startups. >> How do you compare with other cities? We get the sense everyone is behind that in Silicon Valley pick >> A lot of regions like Seattle and Denver and Boulder, they get publicity. That is despite the fact that San Diego actually outpaces those communities. Typically, we are fifth or sixth in the country. We do very well and get a late large share. >> What is your background? >> I've been helping startups raise money for the last 15 or 20 years. I was one of the founders of the Angels. And also venture platform that helps people raise money. Spec they come to you and your group with the idea for a company and you help them connect with people that will pay them to do that back >> Not necessarily but we work with companies, startups of all rages and give them advice and whether they could make intros to funding sources that are appropriate for that particular company. >> What does the lifecycle of a startup company look like? It is very different even if they are both in the technology field? Back it will start with one person and a idea. They will work on the initial concept pick they might booster the company with financing or they will raise money from friends and family. When they go further along, they will try to raise money from high net worth individuals. >> Wire they called angels? Back theoretically because they are getting into a company early, often before the traditional capitalist will and they will believe in the vision and the moxie of the founders and help them get to that level where they are ready for institutional capital. Spec they have and idea and they seek money to get off the ground. Maybe build it up from wealthy investors. Then, they try to grow quickly. >> There are different ways. People do not take institutional capital. They keep hitting milestones and maybe sell the company but if you need to raise a significant amount of capital, they will go to the venture capital world. >> It is it fair to say they are looking for startups that will eventually sell themselves and maybe go public? >> Absolutely. There always looking for that. Typically, being acquired. Oftentimes, companies like to go public and more companies are doing that these days with high visibility and a longer path to that. >> There is a startup called fairness. They claim they have a new way to test line with a little bit of blood. People were falling over themselves. They raised $700 million. The federal government said it was a massive fraud. Here is what I call Lewis wrote about quote they fake it until you make it. Should they face more scrutiny? Back they do. It is very hard to raise institutional capital. Every once in a while, complaints come with a scandal. That happens with startups and non-startups. I like to think see go companies are more ethically inclined. I think they are well grounded. There is an instance when you are pitching yourself and your company, you are in sales mode. Certainly you should not falsify information. Investors, it they need to do Jill Dylan is to make sure they can achieve what they are saying they will achieve. For the most part, investors are good at that. Saw him slip through the cracks. Most that we see are not faking it. They are really trying to build a sustainable business. They should want to build a good quality business and not build a company that they are willing to look and flip. >> San Diego does not have as much funds as ever Cisco does but it is not like they need to visit the offices. Why is that a stumbling block for the our local companies because there aren't as many firms here? Why is San Francisco hesitant to invest here? >> It is interesting. Most like to have various employees or partners meet every Monday morning. They like to meet and one particular office. There is a feeling that San Diego is close enough that you can manage it from LA or San Francisco. The reality is, we are far enough away. We have come in and we spend a lot of time in LA talking and selling San Diego. There are good deals and engineers do not move around from job to job and they are finding more deals. >> You opened an office in Silicon Valley called the beach head where local startups use this to help make it easier to get deals done with silicon valley investors. Has that help? Back yes. It was fun. We are the first city that has done anything like this. It made a good impression on the investment community and it is good for entrepreneurs to see how vibrant and what it is like to be in the Silicon Valley. >> Are you worried that local founders will go there and see that vibrance and get access to that capital and say, I am not going back? Back I think it is the let. They spend tear -- time there. It is good to have a toe and a water. There are distribution channels that you have access to. It is good to be there but if you were going to build the company and transitioning of employees is insane. The cost of living is insane. Our timing was good with opening the office but Silicon Valley has problems keeping people in town and companies there. It is more feasible to open a company in a satellite city in San Diego. We have good talent and good universities. It is coming together well. >> That was Mike speaking with Michael Lipkin. Next week, we will hear from a local founder who had the company crash, losing $30 million of investment money.