startup presentations short, eliminating questions and critiques—and by maximizing the opportunity for investors and entrepreneurs to meet and socialize in a casual way. Eric Otterson, a senior vice president for business development at the Cooley law firm, offered to host the inaugural event.
Local investors tend to steer clear of established events because they hold little value for them and are heavily attended by service providers seeking new business, Spencer says.
The idea for Swarm came out of conversations Spencer had with Brant Cooper, author of “The Lean Entrepreneur,” and other startup founders. While Cooper has helped build support for San Diego’s startup community through grassroots organizations like Startup San Diego, he says relatively few investors attend the meetups and demo nights he has organized. Spencer embodies the added dimension that has been missing.
“It’s not about investors trying to poke holes in startup business models,” Cooper says. “It’s about forming relationships—that’s actually how investing gets done. There doesn’t have to be this wall between investors and entrepreneurs, because the world has changed.”
To stimulate more interactions, Spencer created a Swarm website, where tech founders can apply to present their startups at Swarm investor events. He wants to hold between three and five Swarm events in San Diego each year.
Another impetus, Spencer said, was data that shows a tepid growth rate in San Diego’s software-funding deals over the past nine years, lagging in comparison to the rate of deals in similar-size cities like Austin, TX, and Phoenix, AZ. “Our deal volume has grown in San Diego,” says Kris Beible, who prepared the chart for San Diego’s Software Equity Group. “It just isn’t growing at the same clip as the deal volume in Austin and Phoenix.”
Spencer also cited broader concerns about the established software companies in San Diego that are being acquired and relocated out of town.
As Xconomy reported in December, the private equity firm Vista Equity Partners has begun to relocate three of San Diego’s biggest software companies—Websense, Omnitracs, and The Active Network—to Texas, after paying a total of $2.8 billion to acquire them last year. Vista Equity, which has offices in San Francisco, Austin, and Chicago, has not responded to several requests for comment.
ServiceNow, another software giant founded in San Diego, moved its headquarters to Santa Clara, CA, over a year ago. In an interview in January, ServiceNow CEO Frank Slootman told me: “The ecosystem of relevant software companies getting started isn’t that large in San Diego. The net effect is that we’re fishing in a small pond, and companies can quickly exhaust categories of talent that are already in high demand.”
Since the economic downturn in 2008, Spencer says, “We have been seeing a tremendous drop-off in the volume of business plans coming through TVC.” The boutique private equity firm, which raised $75 million for its second fund in 2012, invests in software companies that are profitable and generate at least $2.5 million in annual revenue.
On the Swarm website, he adds that “software has been an important business cluster in San Diego for over 20 years and we need to make sure this remains the case.”
“My hope is that I can use the relationships we have with all the establishments in San Diego, and just provide a forum with a significant number of investors in the room,” Spencer says. “It’s an experiment to tell you the truth. But I have to say the response, to be candid, is bordering on overwhelming.”
