San Francisco sees influx of tech incubators

Fledgling Web 2.0 companies that rent the red-wheeled desks at SOMAcentral's cavernous Pier 38 space don't do it just for the flexibility and low cost, nor for the funky decor or even the almost daily Thai, Chinese or Mexican lunches.

They do it for the cross-fertilization with other entrepreneurs.

"It's a hub for innovation," said Ken Thom, managing director of SOMAcentral, which rents out space to tech startups at what he calls a "quasi-incubator."

After filling Pier 38 with about 40 small companies that pay about $500 a month per desk, Thom is now tripling his space by adding the top floor of a nearby Townsend Street office building.

A stone's throw away in South Beach, an incubator called Kicklabs opened its doors last week with about eight startups in place and room for about a dozen more. Backed by a real estate group and a venture capital firm, it will house and support early-stage tech companies in exchange for a slice of equity in their firms.

As young, entrepreneurial companies stage a comeback in San Francisco, technology incubators that combine space and services are emerging to serve them.

"We're seeing many variations on the traditional incubator facility sprouting up all over San Francisco," said Kelly Pretzer, director of new media IT in Mayor Gavin Newsom's office of economic and workforce development. "In just the past six months, we've seen an incredible uptick in that activity."

Dedicated space

Incubators provide dedicated space for early-stage companies, usually along with a range of support services and access to industry experts. San Francisco's new generation of tech incubators each offer a slightly different twist on the model, although all provide the basics: desks, Internet, printing, shared conference rooms and coffee.

Unlike drop-in co-working spaces - which also are proliferating throughout the city - incubators provide dedicated space for clients.

The resurgence bodes well for the economy. Companies housed in incubators have an 87 percent success rate, according to the National Business Incubation Association.

"The influx of incubators means an influx of entrepreneurs taking on the risk to start their own companies, which signals that the entrepreneurial environment is favorable," said Liz Hart, a senior associate with real estate broker Cornish & Carey Commercial. "Early-stage entrepreneurs are clustering their companies near the action ... driven by transportation, access to talent and amenities."

Chris Redlitz, a partner at TransMedia Capital, the VC firm behind Kicklabs, said its theme is online media - advertising, marketing, social media.

"We've seen a proliferation in tech recently," he said. "There is a lot of appetite for working in an open, collaborative environment."

Kicklabs will provide benefits both tangible and intangible, he said. "Obviously if we have a vested interest in these companies, we will do whatever we can to help them grow," he said. Besides taking a single-digit equity piece of companies, TransMedia is setting up a fund to invest capital in them, he said.

Over in the Mission District, I/O Ventures is preparing for a summer opening of a 7,000-square-foot space that combines aspects of an incubator with the flexibility of co-working, said Ashwin Navin, a partner in the venture.

The partners will screen the clients to create "a tight-knit community of people helping each other out," he said.

Connections

Navin, who founded BitTorrent, and his partners are all successful tech entrepreneurs themselves and would be open to investing in some of the companies. A network of advisers, VCs and angel investors will also be involved, providing more opportunities for investors and companies to connect.

"There is a certain camaraderie that entrepreneurs have," he said. "We're doing this to surround ourselves with people who are ambitious and have great ideas."

VC firm Polaris Venture Partners sponsors an incubator called Dogpatch Labs in one section of SOMAcentral's Pier 38 space, housing companies for about six months at a stretch. It has similar Dogpatch incubators in New York and Massachusetts.

"In the course of a year, it allows us to get to know as many people as possible," said Ryan Spoon, a principal at Polaris.

There is no commitment on either side for an investment, although Polaris has invested in several of the startups.

Spoon said the space lends itself to collaboration.

"About half are engineers, half are business folks. We purposefully have them seated in a layered layout (at long tables), which forces teams to be open and transparent," he said. "Having that proximity means you see folks literally turn around and act as each others' peers and partners. They might say, 'I'll give you an hour a day if you give me an hour a day.' "

Shared experience

Mission-Social, located in a former sewing factory on Mission Street, brings together "social enterprises" to share office space, infrastructure and experience.

Kristin Peterson, founder of Inveneo, which develops technologies such as solar-powered PCs for organizations working in Africa, said the space evolved earlier this year after Inveneo brought in a couple of subtenants.

"It worked out so well, we thought, why don't we take this whole floor and create a place where new and growing social enterprises can have an affordable space, be located with other social enterprises and collaborate on a day-to-day basis," she said.

The space, which is about 60 percent full, now hosts nine enterprises, with interests ranging from wind energy in Nicaragua to outsourcing infrastructure for Cambodia.

"We all have a social mission of some sort but operate like businesses," she said.

Taking a break from the Apple Worldwide Development Conference last week, Karl Adam and Kalani Kordus toured the SOMAcentral Townsend space as a potential home for their startup, Smudgeproof, which creates mobile, entertainment and utility applications. After seeing the space, the partners gave it an instant thumbs-up and asked how quickly they could move in.

"We've been working remotely at random coffee shops and clients' offices," Kordus said. "We need a space bad. A space like this lends itself to serendipity, discovery, meeting people."

E-mail Carolyn Said at csaid@sfchronicle.com.

This article appeared on page D - 1 of the San Francisco Chronicle