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With A Little More Weird San Diego Can Become One of The Biggest Startup Hubs In The World

I moved to San Diego in the summer of 2016 because I saw a lot of unrealized potential. Cities like Austin (where I lived for 4.5 years), Miami, Las Vegas and Denver had become hotbeds of startup activity but Austin felt as if it was saturated and had already hit its peak. I needed a change and San Diego was it.

Reading The Launch Pad: Inside Y Combinator Silicon Valley’s Most Exclusive School For Startups¬†by Randall Stross, I came across an interesting section where Y Combinator’s Founder Paul Graham talks about startup hubs and how they are formed. “I think you only need two kinds of people to create a technology hub: rich people and nerds,” said Graham. “Nerds congregate in places that host a leading department of computer science and also places that tolerate oddness because smart people by definition have odd ideas.”

It suddenly made me think, with a little more weird (it worked for Austin) and increased attention on computer science programs at the colleges, San Diego could become a magnet for hackers. The result: a world class startup hub. Here are the reasons why I think San Diego can become one of the biggest startup hubs in the world:

1). The startup scene is growing fast

San Diego Startup Week¬†has grown at a rapid rate. With 2016’s event¬†attracting 3000+ attendees and hosting 150+ events over 5 days, 2017 will top this. Startup Week is from June 19th-23rd. Use #SDSW.¬†Startup Convergence is a mini startup week which takes place from January 24th-27th.¬†San Diego is known for biotech and the US Navy but its startup community (especially in tech) is growing fast. Co-working spaces, an exodus of entrepreneurs from San Francisco and more investors moving to the area are other factors that will aid in San Diego’s rise.

2). There are lots of rich people

California is an expensive state to live in and San Diego is one of the most expensive cities in the US. The result: lots of rich people congregating in the same area. When you realize that the rich rattle their jewelry instead of applauding, you know there’s startup capital up for grabs.

2). It is cheaper than San Francisco

A lot of tech startups are attracted to San Francisco but leave quickly when they realize they have to sell their house, car and soul just to get a studio apartment 10 miles from downtown.

3). There is less pollution than Los Angeles

Ever flown into LAX and thought there was a storm rolling in? That’s the smog caused from the never-ending traffic jams and congestion in the city. Breathe that in on a daily basis, and you’ll be dreaming about surfing in San Diego fast.

4). Tijuana is next door

About 10 years ago,”TJ” as locals call it, was not the safest place to go. Gang violence escalated and drug smuggling was at its peak. Well, Tijuana in 2017 is a different story. You will probably find the best tacos you have ever eaten south of the border, Avenida Revolucion is like the Gaslamp District on steroids and the people are super friendly.¬†If you want to pay a third of the price for everything and party like a king, TJ is the place for you. They also have a sports team that wins things (sorry Chargers and Padres!). Their soccer team – Club Tijuana Xoloitzcuintles de Caliente or “The Xolos” – play at Estadio Caliente and the atmosphere is electric. TJ’s startup scene is also blossoming and Tijuana is becoming attractive to early stage startups that cannot afford the high costs of web development in California. The MindHub tech incubator is in a great position to capitalize on this.¬†If you want to practice your Spanish, experience a completely different culture and keep an eye on your website or app, TJ is only 14 miles away and a quick stroll across the border crossing. Cross border initiatives are also trending so look out for San Diego/Tijuana partnerships coming soon.

5). The weather is so perfect, the weather presenters often talk about other stuff!

When the weather is sunny with blue skies and 75F for most of the year, you never have to worry about missing out on the great weather. If you are working on a startup, the hours can be grueling for the first 1-2 years and you spend a lot of time inside. Whenever you need a timeout or a weekend to recharge, get a dose of vitamin D courtesy of SD’s rays. Better than San Francisco’s chilly summers and fog!

6). There is weird. We just need more of it!

Hackers and startup people are weird. They think differently. They need to see things that are different not gentrified areas with dozens of Targets and Starbucks (more Dark Horse Coffee please!). There are areas around Balboa Park that could fall into the weird category (Normal Heights, North Park, Barrio Logan and Golden Hill). But we need more of it. Austin and Portland share taglines – “Keep Austin Weird” and “Keep Portland Weird”. Maybe we should “Keep San Diego Strange”.

7). With the vote against the Chargers stadium, can the $1.8 billion money be used to fund startups and create a hub?

As Y Combinator’s Founder Paul Graham notes, “for the price of a football stadium, any town that was decent to live in could make itself one of the biggest startup hubs in the world.” With the city of San Diego voting against the construction of the San Diego Chargers new stadium (which subsequently saw owner Alex Spanos finally move the team to LA), surely that kind of capital could be used to back startups and create a world class startup hub?

8). Our earthquakes are much weaker than up north

When tectonic plates get jiggy and seismic shifts happen, San Francisco and Los Angeles feel them the most. If you don’t like¬†the idea of losing your house because¬†you probably can’t get earthquake insurance, the mild tremors in San Diego might be for you.

Startup Lingo: A Glossary of Business Terms

Over the last few years, I have learned a lot about business. I always tell people my first startup (Uberpong) is my MBA. You frequently find yourself in situations where business people (who have probably got an actual MBA) use acronyms or lingo to either try and confuse you or make you think that they know what they are talking about. Due to these endless abbreviations and expressions, I decided I had to make a list of the ones that I see the most. I have also started a visual guide for startup lingo for my next startup Qwerky Coliving. You can see them on our Instagram channel. If there are any acronyms I missed, please add them in the comments so I can update the post. Enjoy.

A hub where startups are given mentorship, space to work on their ideas and sometimes seed capital.

Accredited Investor
The SEC (Securities and Exchange Commission )¬†defines an accredited investor as, ‚ÄúA natural person with income exceeding $200,000 in each of the two most recent years or joint income with spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or A natural person who has individual net worth, or joint net worth with the person‚Äôs spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person.‚ÄĚ In layman’s terms, it is a rich individual potentially interested in investing in your company.

Advertorials / Advertainment
Advertorials are paid content that is meant to look and feel like a true story or blog post. Companies are turning to these because display ad pricing has become less effective and viewers have become immune to them.

When one company or investment group buys another company.

Boot Strapping
One of the most common expressions in the startup world. A lot of people will quote “the Three Fs”: Friends, Family and Fools. These channels are often where you get your first cash to get things going. If you are using very little capital and proving your hypothesis, you are successfully boot strapping.

This means you offering a “Business To Business” product or service to other companies.

You offer your products or services to other consumers (Business To Consumer).

Describing an industry that does not realize that it might be overvalued and over-inflated. When a “tech bubble” bursts, it means that a lot of startups go bust and investors lose their money.¬†

Burn Rate

How fast you go through your cash. The majority of startups lose before they break even and then make a profit.

Cash Flow Positive 
Accountant speak meaning that more money is coming in than going out. When you deduct your expenses from your earnings, you have a positive amount in your bank account. Staying in the black, especially when you are self-funded is the name of the game!

Churn Rate
The annual percentage rate at which customers stop subscribing to a service or employees leave a job.

A cliff usually applies to vesting schedules (shares given to employees over time). Cliffs can be a device for the CEO to fire employees or let them leave without giving them stock within a limited period of time (usually 1 year). There are horror stories from Silicon Valley about early employees being cut just before they get to receive their equity stake. Cliffs are also used on CEOs by investors to make sure the CEO sticks around after getting the cash.

Usually used in the creative industry, copyrights protect your music, art and film. It allows the creator to have exclusive rights for its use and distribution.

Cottage Business/ Cottage Industry

A business that is never going to make millions or scale but can be a nice lifestyle business.

Using a site like Kickstarter to get a tribe of early fans together to give you money to help you get your product/site launched. You keep 100% of your company and only give away a % the total you raise to the crowdfunding portal.

Getting information for free from people on the internet or using a survey.

Deck (aka Pitch Deck) 
A presentation that covers all aspects of your business in a succinct and exciting way. If you ever need inspiration for a good deck, check out how Elon Musk uses his to demonstrate the TESLA Powerwall.

Frequently used in marketing to describe the age, gender, income, schooling and occupation of your ideal customers.

Digital Nomad 
Typically a web or app developer who travels the world while coding. There are forecasted to be $1 billion digital nomads by 2035.

Disruptive Technology

Any tech that takes an industry, forces consumers to think differently and then adopt that technology as the new norm. Examples include Uber, Lyft, Airbnb and JetSmarter.

Early Adopters 
The first users of your product. They will typically be key influencers and active on social media. They will give you your most honest and sometimes overly direct feedback. If you can identify these people effectively and have them interacting with your startup from an early stage, you can get lots of free exposure.

As with an ecosystem in nature, a startup ecosystem has its food chain. There are the hunters, the herd and the bottom feeders. Work out where you are and where you want to be then get involved in your startup ecosystem. If they city you are in doesn’t have incubators, accelerators, co-working spaces, mentors and investors, you should a). move to another city, or b). start your own ecosystem.

Equity Crowdfunding 
Just like regular crowdfunding but instead of getting money in return for a fee, you pay a fee to the crowdfunding site and a % of the company to investors.

Someone inside your organization who is your number one fan. They love your company so much that they often go above and beyond their expected role to help promote your company. If you find an evangelist, hire them!

Exit Strategy
How you plan to sell your company to give you and your investors a return on their investment. This ranges depending on the industry but a standard multiple with technology investments seems to be 10x.

FMA (First Mover Advantage) 
The first to market is not always the first to capitalize on the industry. One reason for this is that it can cost a fortune to educate potential users or customers. That said, if you are a company like Disney, you lead and by innovating you stay ahead of the pack.

You give your basic product away for free and then try to upsell other features to your customers. It is a common and proven technique to acquire more users.

If you “gamify” something, you add a game layer to your product¬†that encourages people to use it with rewards of various kinds. See Foursquare and how they used virtual badges and the “Mayor” badge to encourage people to use their app.

Growth Hacking 
Growth Hacking was a term first used by Sean Ellis (Dropbox) to describe a marketing technique that focuses on quickly finding scalable growth through non-traditional and inexpensive tactics such as the use of social media. Other companies that have effectively used this technique are Airbnb and Foundr.

Using your computer science degree and your entrepreneurial flare to create disruptive technology. Look out for “hacker houses” and “hackathons” if you want to join the tech community.

Hockey Stick
Used by investors to describe the shape of the growth curve they want to see in businesses they invest in. They want to see their startups grow quickly and at least double sales every year.

IP (Intellectual Property) 
This covers patents, trademarks and copyrights. It is a good way to protect your “secret sauce”. Generally I remember them like this:
Patents – the DNA of your product. They are typically used to protect your design.
Trademarks – they are used to protect your brand and depending on which one you register, you can add a “‚ĄĘ ” or “¬ģ” (Registered Trademark) next to your logo.
Copyright – they are used to protect your creative content (like film, music or art) and it allows you to use a “¬©” symbol on your content.

This means to try something, refine it, try again and keep trying using small steps until successful.

Users who join your movement or buy from you much later than other customers.

To start a company, website or app. It is the euphoric moment when you feel that the blood, sweat and tears was worth it. Companies can either have a “soft launch” (minimal press exposure and staying in beta) or celebrate with a “launch party” which can be at major startup events like CES or San Diego Startup Week.

Lean Startup
Launching a company with as little startup capital as possible while getting data that can be used to improve the product. Speed is the key factor here.

Using something to accelerate your growth or success. This is often found in the form of technology or partnerships. Think about a Formula One car getting in the slipstream of a car in front of it so it can be catapulted out at a faster speed and overtake it.

Loss Leader Pricing  
Using deliberately low pricing to gain market share. The key here is to tempt your users with the low price or free offer and once you have acquired them, focus on how you can get repeat business from them.

Low Hanging Fruit 
The things that can be identified to quickly bring cash in the door. Your first customers will keep you afloat and help you get to your cash cows (reliable and consistent revenue generators) and whales (your accounts that make you big bucks).

Market Penetration
You will frequently hear the line “how much of the pie are you trying to get?” from investors. What they mean is how much market share will be yours and in what time period?

When two companies join forces and become a joint entity.

How you make money. Do you sell online, offer consulting services or sell face to face? Without a way to monetize, most businesses die. The only exceptions are well funded tech startups where a bet has been made that the site will get enough users so that a monetization strategy can eventually be executed. This is highly risky but the reward is high.

MVP (Minimum Viable Product)
The simplest form of your product. This can be used to attract Beta users/early adopters or to pitch for funding.

OPM (Other People’s Money)
Funding your startup using the “Three Fs”: friends, family or fools.

A change in direction as a company. This is a key moment in the life of a startup and can make or break it. A well known pivot is when Fab went from being a gay social network to being an e-commerce curator.

PR (Public Relations) 
It is useful to have a PR firm if you have a marketing budget. If not, you might want to spend some time reaching out to your local and industry specific publications.

Ramen Profitable 
An expression frequently used by Paul Graham of Y Combinator, it means  you are making just enough money to be able to pay for basic living expenses.

Responsive Design 
A site that has been built to function well across all devices. Your site might appear completely differently on the web compared to mobile but as long as your end users are always considered, you will be fine.

ROI (Return On Investment) 
When an investor puts money into a company, he wants to know what he will get out. This is called the “Return on investment”. The investor(s) will also want to know how long it will take to get their ROI?

How long your cash will last and when you think it will run out. The key here is knowing when to start pitching for investment so you can time it to come in before you run out of cash.

SaaS (Software as a Service) 
A subscription that is sold so that your user can use your software.

How big your business can grow, how much market demand you have and which markets you can grow into.¬†A common question from investors is, “How scaleable is this opportunity?” If you cannot scale, you might fall under the “Cottage Industry” or “Lifestyle Business” category.

Serial Entrepreneur 
Someone who launches a number of businesses either simultaneously or one after another.

Sweat Equity 
Shares of your company given to early employees or contractors in place of cash. This is very common in the startup world before funding arrives. If you take a chance with a startup, your shares might become lucrative when the company sells.

Target Market 
You need to identify who will be buying your product, their demographic and their location. Once you have this data, you have your target market.

Term Sheet
When an investor makes you an offer to invest in your company, the term sheet is a document that outlines what they will get for what they put in ‚ÄĒ including % ownership and voting rights.

Proof that your executive summary (hypothesis) is working. People are actually buying your product or using your service. This is one of the most exciting times in a startup!

Thought Leader
Someone who is seen as being a leader in their field and who probably has done a TED talk.

A company that gets a $1 billion valuation. As with most unicorns, they are extremely rare.

UI (User Interface) 
How the user and computer system interact. If you hear someone say “they need a new UI guy”, it means the user has difficulty operating the product.

UX (User Experience) 
The process of enhancing user satisfaction with a product by improving the usability, accessibility, and pleasure provided in the interaction with the product. Think about any site or app you have opened. How did you feel? Was the site’s aesthetic appeal at the forefront of your mind when you used it? ¬†If so, their UX person has done a good job.

What your company is being valued at. ‚ÄúPre-money valuation‚ÄĚ is the value before you take investors‚Äô cash. ‚ÄúPost-money valuation‚ÄĚ is that amount plus the investment put in. I would definitely recommend speaking to other Founders and accountants about how to accurately get a valuation for your business. If you are selling your company, typically the Buyer is trying to get the lowest valuation so he can acquire your business for cheap. As the Seller, you have to establish a fair valuation (typically a fair multiple for your industry) with a slight margin. Example: if your net profit at the end of the year is $100k, it might be 2-3x ($200-300k) if the company has plateaued. If it is a tech business with rapid growth, the multiple might be 10x ($1 million).

Value Proposition
What makes your business uniquely attractive. Also known as USPs (Unique Selling Points).

VC (Venture Capitalist) 
If you are an entrepreneur, you might think of VCs as corporate, evil money hungry vultures. Some of them are and will screw you! Do your diligence on them (as they would on you and your startup) and make sure you have investors who align with your beliefs. Do they want to change the world like you (get them on board) or just want a steady return (yawn).

An entrepreneur who sees the change in the world before it has happened. Many say that these people have an ability to peer into their crystal balls and then develop something that we will eventually need. Famous examples of visionaries include Richard Branson, Elon Musk and Walt Disney.

Uberpong Kickstarter funded campaign success

How To Run A Successful Kickstarter Campaign

I had my lightbulb moment while I was working in a startup in London. Uberpong was going to combine ping pong with great graphic design. The aim was to make table tennis more fun and make it the most played sport in the US. I moved to Austin, TX from London, England at the end of February 2012 and promptly launched my first Kickstarter project in July. 30 days later, we had reached our goal and ended up on $10,390.

Here are a few things that worked for me:

1. Have a truly remarkable idea
There is so much noise on the web and a lot of excellent projects on Kickstarter. You will hear a lot of people telling you it is not the idea but rather the execution that will make you successful. This is true in some cases but I really believe on Kickstarter it is all about the idea. Go beyond your friends or family for opinions of your product or service. Ask complete strangers in your industry for their critical feedback. On Kickstarter, you can tell pretty quickly if your idea is a remarkable one or not.

2). Make a great video
As the bar rises on Kickstarter and more people add projects on the site, you have to stand out. A shaky iPhone video is not going to cut it. Viewers need to trust you and your message in less than 30 seconds. If the video is well made, edited with good music and has a clear message, it will be easier for people to decide whether they should back you. We used Moth to Flame and they did a great job.

3). Collaboration means more exposure
Kickstarter and Amazon payments don’t offer this service for nothing. They want to get paid. Between them, they take nearly 10% of the overall amount you raise. So if you can encourage collaboration in your project, this means more people will be talking about it, pledging and therefore your chance of being successfully funded goes up. We built a small design community for the Uberpong project and incentivized the designers by offering them 20% of the sales of their designs. It meant that most of them promoted this within their networks to ensure we hit our target and in doing so, they made revenue.

4). Solve a problem or change the world
When selling anything, you have to make the product exciting and satisfy a need or solve a problem. Alternatively, do something that changes the world. With Uberpong, we wanted to show people that what they had now was boring and colorless. The game of table tennis lacked aesthetics and we wanted to change this. We got a lot of support from the ping pong community and bloggers who identified with this.

5). Go for an achievable target
I have seen many campaigns fail on Kickstarter because the company asked for too much money. If you only need $5k, then ask for $5k. Remember, if you don’t hit the target, you get nothing so it is better to go slightly lower and exceed your target rather than the other way round.

6). Offer enticing rewards
Nobody wants a reward description to read: ‚ÄúOne ping pong paddle‚ÄĚ. They know that Kickstarter is the birthplace of many cool ideas so make it sound exclusive. ‚ÄúA first edition Uberpong ping pong paddle with the design of your choice (from 20 different designs from international artists)‚ÄĚ sounds a little more intriguing.

7). Have an existing community
As Seth Godin proved when he launched a book on Kickstarter, if you have an existing community when you launch your Kickstarter, you can immediately turn to them as early adopters of your product. This community alone can help you hit your target and any other pledges you get from the Kickstarter community is a bonus.

8). Use Kickstarter’s Analytics
Within a few days of launching Uberpong, I could see that Facebook was giving us the most pledges. After 30 days, the same was true. This is priceless information to have at your fingertips because you can identify which channels are working on focus on these. As a result of this approach, we got 51 pledges and a total of $2045 pledged.

9). Get into the local media
When you pitch to your local press, make it clear you are also local. They will typically get behind local businesses and help get your story out. We got into CultureMap and got four pledges in a day after the article went live.

10). Have good photos of your product
I was lucky enough to have a friend who was a photographer (Ryan Pollack) who took some great photos. We sent these out with press releases and these images were published in Australia, The Netherlands, Spain, England and Japan.

If you have any more questions about my experiences with Kickstarter, catch me at a EuroCircle Austin event or connect with me on twitter @davidjlowe.
Uberpong Kickstarter funded campaign success