A couple of weeks ago, twelve companies moved into the new downtown San Diego, EvoNexus incubator--which is run by CommNexus. Running that effort is Kevin Hell, the founder of DivX, who we caught up with to learn more about EvoNexus and how the group is trying to help grow technology startups in San Diego.
We'd love to learn about EvoNexus and what you are doing - can you talk about the program a little bit?
Kevin Hell: What makes EvoNexus unique, is that it is--as far as we know--the only completely free, no-strings-attached incubator in the nation. When companies come into our incubator, we take no equity, we take no stake in the company, it's completely free for the participant. That's through the generosity of the Irvine Company. They've provided a completely free facility, furniture, Internet access, mentoring, sponsorship--all of those things are provided for free. It's a unique, community supported model. The company is interested in helping the San Diego region and economy grow. We're providing a very unique benefit, which is an entrepreneur-friendly incubator. We've had tremendous success so far, with six graduations, with $55 million in early stage capital raised by those companies coming through the incubator after only two years of operations. So far, those results are very good, and we're really excited about it. We've now added a second location downtown, with twelve additional companies, so we now have twenty total companies in the incubator.
Is there a screening process or criteria for firms to use the facilities?
Kevin Hell: Yes, we have a selection committee, comprised of folks who are venture capitalists and also have been in the investment arm of large companies. They screen and score companies based on their application, and if that looks good, they come in for a face-to-face interview. They get to meet the team, we do some due diligence, and have them talk to functional experts. Once they pass that, they get into the incubator. It's quite a great group--I think it would actually make a great reality TV show.
How did CommNexus manage to put together not just one space, but two for companies?
Kevin Hell: We have a floor at the UTC, which has eight companies in it. We were operating at a point where that was reaching capacity. The Irvine Company said--how about, based on the success at UTC, we put a second location downtown? We though that because of the demographic and the excitement level, that would be a great idea. It's a slightly different formula from the first location, as it is focused on early stage mobile apps and Internet. That's earlier than at the UTC. We're bringing those companies to the downtown location, which we also think will help re-energize downtown, and take advantage of the natural demographics here. We now have twelve companies that have come in downtown, and we have almost 15,000 square feet. We're continuing to add good, high quality companies who meet the high bar to get in, to continue our success rate.
After your success at DivX, what led you to get involved here?
Kevin Hell: When I was CEO of DivX, I also was on the board of CommNexus. CommNexus is the parent organization for EvoNexus. That group is comprised of the list of the major tech companies here--Qualcomm, Sony, DivX, and so on. After the sale, Rory [Editor's note: Rory Moore] asked me if I wanted to take this to the next level. I was at the right point in my career to take the pro-bono role, and give back to the community and to help San Diego to drive innovation, create jobs, and create new businesses. I jumped in at the end of 2010, just as the majority of investments happened--I think $50M to $52M came in 2011. That led to the expansion to the second location. It's been a great ride and a lot of fun.
Have you been able to apply what you learned through the DivX experience to the incubator?
Kevin Hell: There's a huge list of things I've been able to draw upon from that experience. Like, how do you come up with the right market, what's the right message, how do you boil down your key differentiation, how to focus, how to hire and motivate a team, how to create the right incentive structure or right equity structure. How to do fundraising, how to pitch a deal, how to think about managing your product, or managing your development team. There are all kinds of issues, even thinking about how to structure yourself for continued growth, how to put the right plan in place from an organization perspective, how to make sure you keep your costs modest, while at the same time not missing opportunities to grow. Those are all things I learned from my years at DivX, and before at Palm, and other companies. I'm now applying that with the startups, and lending my expertise to these young companies.
What do you think is the most valuable thing startups are getting out of EvoNexus, aside from the space?
Kevin Hell: You can't underestimate the space itself, because that's the foundation to get things going, based on the generous support of the Irvine Company. You should come down and see our new location downtown--it's a dream location for entrepreneurs. It's designed to be very open, and basically foster collaboration and working together. Irvine Company spared no expense in creating a showcase for San Diego. So, that't the foundation. On top of that, there is mentoring companies get from the community, and the executive we pull in. I meet with each company at least once a month, and we have a mentoring program where we assign a unique mentor for each company. There are also others who help, so there's no lack of people to help with operational issues. What's increasingly important in their time through the incubator, is getting access to capital, introductions, to VCs, angels, and strategic investors. We help on that end as well. I think that's most beneficial to companies right now, particularly given the lack of funding available now in San Diego, especially compared with the Bay Area. Some of the angels that have gotten to know the incubator have made more than one investment, and that network is starting to build. Also, many of the companies in CommNexus have made strategic investments in the companies here, and I go up to Silicon Valley with Rory Moore and we are pitching our portfolio to venture capitalists on Sand Hill Road. We're able to show the entire portfolio all at one time, giving them access to all these companies, to see what might interest them and help encourage followup. That's been a tremendous value to companies in the incubator. Getting into the incubator is a tough process--only one of every companies that applies gets in, but once they do, we provide them a tremendous amount of support to make sure they're successful.
Thanks, and good luck!