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Interview with Dave Eastman, Viterbi Startup Garage

For today's interview, we spoke to Dave Eastman, the Director of the Viterbi Startup Garage, a startup incubator that is run by the University of Southern California, out of its location in Marina Del Rey. Dave told us a bit more about the Viterbi Startup Garage and several other associated efforts there at USC centered around the startup ecosystem.

What is Viterbi Startup Garage?

Dave Eastman: Viterbi is the School of Engineering. Although most people think that most startups come from the Marshall School of Business, they come from the Engineering School as well. The Startup Garage is located physically in Marina Del Rey, in the twin tower on Admiralty. It's the older 11 to12 story, 1960's building. The primary tenant in one of those buildings is the Information Sciences Institute, which is part of the Viterbi School of Engineering, and we have some of their space. The Startup Garage is an incubator which gives preference to USC teams, or startups that are USC affiliated in some way, for example, alumni-led. It's not entirely exclusive, however. We have two annual cohorts, each of which has a 12 month residency period. Typically, we have 5-6 teams per cohort, who stay for a year. They are always overlapping, so in essence, we have a freshman and senior class, so teams can collaborate, and get the benefit of the peers before them. At any time we have ten to twelve teams, during normal times. Obviously, we closed in March of last year, just like the rest of USC, and we have been virtual since then. We're looking forward, as soon as USC allows us, to reopen. We're optimistic that will be with the new school year, in the September time frame.

How are you different from other startup incubators, etc?

Dave Eastman: For one thing, although we're not completely unique in this, is we don't take equity. We really focus on the mentorship, programming, and content, and the ability to access USC, and specifically its School of Engineering. There's a lot of interchange going back and forth between our resident teams and faculty and staff at USC. There are pretty significant resources there that standalone incubators don't have. We also have associate teams, which for the most part, are faculty associate teams. Those are faculty members who have a commercialization idea and want help with that. Those companies tend to be around for longer than one year, because of course our faculty are not working on those things full time, they're continuing to teach classes. Another differentiating factor of the Viterbi Startup Garage is we also are associated with the National Science Foundation (NSF) I-Corps program. The NSF determined eight to ten years ago that the Small Business Innovation Research (SBIR) grants they were funding to academic teams, to commercialize technology, they were losing, because not many academics had the background to understand how to go out and source customers, and did not know how to run a startup. They started the I-Corp—short for Innovation Corp—based on the methodology started by Steve Blank, who is a professor at Cal and also at Stanford, which is all about the lean startup methodology. There are 9 innovation nodes in the US associated with I-Corp, and one of those nodes is out of the Viterbi School of Engineering, with UCLA and Caltech partners in that. What we do, is regional customer discovery for teams, typically academic. We teach them how to determine their value proposition, how to identify and detail their customer targets. For the teams with NSF funding who perform well, there's also regional and national I-Corp training, including a pretty selective training program which goes over 7 weeks, where teams end up interviewing 100 customers to really identify who their customers are. I've been a part of the I-Corp instructor cohort, and I've seen that the results you see from those teams is pretty extraordinary.

What have you found there?

Dave Eastman: We've found that teams who started out unfocused and disorganized have graduated much more focused. We've even had teams decide, no, they were not going to move forward, because there was just no interest from the marketplace.

What's the link between the NSF I-Corp and the Viterbi Startup Garage?

Dave Eastman: There's a lot of interaction between the I-Corp innovation node in Los Angeles and the Startup Garage. Companies talk to one another, and there's a lot of back and forth. Plus, I'm also direction of the Innovation node here in Los Angeles, as well as the Managing Director fo the Viterbi Venture Fund, which is a fairly small fund, which makes passive investments in teams that are affiliated with USC. Unlike what I'm used to, we don't negotiate term sheets. We come in fairly small, with 50K to 100K as a syndicate member for rounds that are led by institutional investors. We don't have the resources to do typical diligence and assessment, so we just piggyback on other deals. The benefit companies get form having us on board, is having USC Viterbi on their cap table, and that seems to work out pretty well. We also will help others make investment in teams at the startup garage, because we understand the progress of those teams and where they are. The final thing, it we have a lot of mentors at the startup garage, who we call innovators-in-residence (IIRs), many of whom are VCs, which is actually how I ended up here, starting out as an innovator-in-residence. We also have executives who have built and sold companies, and have experience as entrepreneurs, who can help walk teams through the startup process, and save them from making the mistakes we have made building or growing our own companies. For example, we have a team working on providing interactive voice platforms for 5G networks, who are being helped by one of our IIRs, who started a telecom company after graduating from USC and eventually sold it for $100M; that relationship has allow him to make introductions for them into the carrier space. It's the mentorship, relationships, introductions, constantly monitoring them, providing them accountability, and helping them grow.

You mentioned this a bit, and we've seen it before on some of the difficulties universities have traditionally had getting their startups into the market. What are your thoughts there?

Dave Eastman: I think they are similar issues with any team of startup founders. The difference, if you're looking at faculty or grad students, is often you're looking at an idea which is led by the technology, rather than customer needs. That's different from someone who is already in business, or working for a company, and they see a need and create technology to fill it. That's one of the reasons we have the I-Corp program, which is to provide that customer discovery training. We also provide a lot of other training, such as here's how you form an entity, how equity works, etc., but the key thing is customer discovery. Often, if a faculty or grad student is leading with technology, they might not have the best sense of how this would be used in the outside world, if there is demand for it at all. That's actually not a problem at the Garage, because most of our resident teams are alums, people who already have been in industry, and have a real sense of demand in the marketplace they will be in. They're also familiar with traditional startup structure. Some of them have been around the startup world for decades, so it's much more of a natural thing.

What's the benefit for USC to run the Viterbi Startup Garage?

Dave Eastman: For one thing, this is part of a three legged stool. There's the Viterbi Startup Garage, the Viterbi Venture Fund, and the I-Corps node. Part of the purpose of the node is to encourage an enhance the entrepreneurial ecosystem in the geographical area, Los Angeles. USC manages that for the National Science Foundation. The other thing, is companies in Silicon Beach are already the largest target of recruiting for Viterbi graduates. Lots of our students want to go to startups here, and by having the Viterbi Startup Garage located in Marina Del Rey, rather than on campus, they get to be a part of the Silicon Beach ecosystem. They can be there geographically, our teams can get involved in the community, meet other teams, and in some ways we're raising the Viterbi flag and making sure we're there, increasing our engagement. Finally, if teams do really well, Viterbi makes money, through our investments we make through the Viterbi Venture Fund. If teams from the Startup Garage which we invest in through the venture fund do well, that goes back into our endowment.

Thanks!