Last week Forbes  named San Diego the best place in the country to launch a startup.

There are many different ways to evaluate this claim, and the comments section for the article proves there are some skeptics. So, is San Diego really No. 1 for startups? Let’s take a deeper look.

The Case for No. 1

Eric Otterson thinks the label is deserved.

Blair-GiesenHe’s the man who has made it his mission to grow the startup community in San Diego.

“The momentum is amazing right now. The companies that are being created and funded are growing at a rapid pace,” he said.

Here are some of the highlights Otterson pointed out.

We Stand Up for You. Will You Stand Up for Us?

DivX, founded in San Diego, is a company whose former founders are now starting amazing companies.  These are the kinds of companies that create a healthy startup ecosystem. They’ve started SweetLabs, an app distribution and discovery platform, and Prima Cinema, a company that lets you watch movies from your home the day they are released.

LifeProof, known as the best smartphone case on the planet, was created in San Diego. It’s the second company founded by Gary Rayner, and it was purchased by the largest mobile phone accessories company because of its design dominance. It’s still headquartered in San Diego.

Albeit slowly even Qualcomm and Intuit are getting active and creating entrepreneurs with recently funded companies HouseCall, an app to help with home projects, Zenhavior, an app that monitors your driving and TaxJar, to help businesses with sales taxes.

Go a little further back in time and you’ll find WebSideStory, a San Diego powerhouse that practically invented the banner ad. They helped to create startups like Apmetrix, a mobile and video game analytics company, and Tealium, which has raised over $27 million.

Starting to get the picture?  San Diego is No. 1 for a reason.

But that doesn’t mean things here are perfect, as some of the criticisms of the Forbes pieces, and of San Diego’s tech scene in general, make clear.

Room for Improvement

I’ve already detailed some of the things that are lacking for startups in San Diego:

• Local companies don’t work together that often. …

• The investment dollars just aren’t here. Investors look more often to L.A. or Silicon Valley. There is a real understanding of how the ecosystem works in those areas, investors figure. It’s already built.

• Many startup entrepreneurs don’t realize how hard it truly is to start a company. This is San Diego, and there are way too many distractions.

• There are no real mentorship programs. …

• Where’s the tech hub in San Diego? The place where entrepreneurs, programmers and investors can talk about the amazing things they are building? Is it Sorrento Valley? UTC? Downtown? North County? If you figure it out, let me know.

These are still issues that should factor into any discussion of San Diego’s place in the startup ecosystem.

Others voiced more wariness in the comments section of the Forbes piece. Here’s one:

If you want to sell overpriced cupcakes or recycled skateboards then this is your market.

If you’re a tech company or any company that requires technically qualified individuals then you’ll struggle every day. Unless you can lure people down to SD from SF and pay them the bloated salaries that they get in the Bay Area and promise them amazing benefits.

For as large as a metropolitan area that SD is it has in my opinion the largest group of unqualified workers. Most workers want to move down here so they can kick back and have that plush easy-going San Diego lifestyle that we “advertise”.

San Diego has its challenges and there certainly is room for improvement.

But things are changing as we are starting to retain the talent from UCSD, “which is an absolute goldmine,” as Navid Alipour, a local investor, pointed out in the Forbes comments section.

How to Build from Here

So, what next?

You want to take advantage of what San Diego has to offer, but aren’t sure how do you accelerate your idea?

Founder Institute and CyberHive can help you develop your idea and turn it into reality. Hard Tech Labs and Fab Lab will help you build it with their cross boarder accelerator.

The month of March alone makes a good case for why San Diego is the place to be:

• On March 20, San Diego Venture Group is hosting 16 incubators and accelerators from all over San Diego County.

• Startups can apply to Plug and Play for financing and mentorship, the deadline for this round is March 28.

• Another one is this week’s Wearable Wednesday where you can learn about the state of the wearable tech economy and learn about those opportunities. Email me a question to ask. I’ll be moderating this one. I can’t wait to learn more about Qualcomm’s Toq smart watch.

• One of the biggest events of the year is March 26 at Stone Brewery in Liberty Station March Mingle. It’s a who’s who in business, tech and startups. March Mingle is a must-attend event that gives entrepreneurs the opportunity to connect and exchange ideas.

• The Social Media Examiner’s Social Media World is March 26-28 if you want to learn everything social media-related.

Two more, beyond March:

• There are also events that are attracting visitors from all over the U.S. Interactive Day San Diego, in May, is a digital marketing event. Whether you are a startup or an established company attendees can listen to experts in digital marketing and learn how to master it. Mitch Gruber, one of the organizers, tells me “start-ups compete for $5,000 in a real-time pitch off.”  The last two winners are still here in San Diego.

Startup Week is, you guessed it, an entire week dedicated to startups in San Diego. It’ll be held June 17-24 and is jam-packed with visits to local startup offices, demos of new products, mentor nights with founders, introductions to investors and great advice from people who are based in San Diego and an impact globally.

San Diego is no Silicon Valley. And that’s a good thing. It’s better.  For all of the same reasons that so many choose to live here over L.A., New York and other more densely populated cities. And now you can actually make a living, change the world and thrive here in San Diego.

    This article relates to: Business, News, Technology

    Written by Blair Giesen

    Blair Giesen is a VOSD contributor, serial entrepreneur and founder. Join the conversation by following him on Twitter or emailing him at

    Lisa Gorman
    Lisa Gorman

    Yes, San Diego is one of the business-friendly cities. However, there are also other good cities in the USA, where you can laugh your business and won’t regret about it. For instance, this article states that San Francisco one of the best places in the country to found a company.

    sandiegoian subscriber

    "Stone Brewing Co.", please! [not "Stone Brewery"]

    Mark Cafferty
    Mark Cafferty subscribermember

    Fascinating comments. I guess some people can only focus on the hurdles while others sail over them as they stay focused on the finish line.

    Great piece Blair. Bet fair assessment as well.

    Ultimately San Diego may or may not be the "best" place for tech start-ups, but it's exciting to see the energy that people like you, Kelly Abbott, Eric Otterson and other local tech entrepreneurs are bringing to the scene.

    And while Forbes may not register as a credible source to all the folks commenting here, I'll certainly take them ranking us as the "Most Inventive City in the Country" in 2013 and the "Best Place to Launch a Start-Up" in 2014.

    I'll also take MIT researchers ranking San Diego-based Illumina as the "Smartest Business in the World." And I've got no problem with National Geographic choosing San Diego as the one of eighteen global cities (and the only one in the US) to highlight in its upcoming "Smart Cities" documentary series.

    So we could spend the rest of the weekend defending San Diego and CA to those who spend most of their waking hours bashing both, or we can go out and enjoy some time in one of the most beautiful, innovative, diverse, entrepreneurial and smartest places on the planet. I think I know where I'm headed.

    See you around fellas.

    And to all the real tech/start-up entrepreneurs in this exchange...keep up the great work and thank you for all that you are doing in putting and keeping the SD tech scene on the map.

    Blair Giesen
    Blair Giesen author

    @Mark Cafferty  Thanks for the comments. San Diego IS a great place for business. We need to turn the corner and work together to improve the established programs that we have, build great companies that can add jobs and keep talent in San Diego. What is the EDC doing to improve the programs like SDVG, Connect or Commnexus and attracting more like TechStars, Plug and Play or Y-Combinator?

    Richard Rider
    Richard Rider subscribermember

    @Kelly Abbott  If I didn't like San Diego, I wouldn't live here.  But to pretend that this is finest place in America for a STARTUP company is beyond delusional.

    Kelly Abbott
    Kelly Abbott moderator memberadministrator

    @Richard Rider I don't buy your reasoning. Fear of taxes/fees is an absurd rationale for not starting a business. Avoiding taxes is not a wealth strategy. Innovation is. Add value, be successful. Simple. Spend zero energy complaining that taxes are unfair because it's a fool's errand. There's no competitive advantage on taxes that can't be out-performed by putting yourself in a creative environment with tons of talent and resources to bear. 

    That said, I also don't buy the premise the Forbes article was based on either. While not entirely vanity metrics, things like Percentage of Facebook Pages Set Up is a bit soft to conclude SD has the best startup climate. 

    My rationale for starting up in San Diego was simpler: San Diego! Who wouldn't want to put out their shingle here? We have it all, everything you could want for business and life. 

    Bonus: I have done business in several cities. Nowhere has it been easier to meet people who could help (as employees, customers or mentors) than here. 

    Richard Rider
    Richard Rider subscribermember

    @Kelly Abbott @Richard Rider  Here's some additional reasons not to prefer California or San Diego as a good place to start a business.

    CA public school teachers the 4th highest paid in the nation.
     Yet CA students rank 48th in math achievement, 49th in reading. page 36   and

    California’s real poverty rate (the new census bureau standard adjusted for COL) is by far the worst in the nation at 23.8%.We are 48.8% higher than the average for the other 49 states.Indeed, the CA poverty rate is 20.2% higher than 2nd place Nevada.    page 13

    California has 12% of the nation’s population, but 33% of the country’s TANF (“Temporary” Assistance for Needy Families) welfare recipients – more than the next 7 states combined. Unlike other states, this “temporary” assistance becomes much more permanent in CA.

    Average California firefighter paid 60% more than firefighters in other 49 states.  CA cops paid 56% more.   THEN we calculate the pensions off that inflated figure -- an unsustainable payout to our almost ALL our public employees -- state and local.

    California ranks 48th worst for credit card debt and 49th worst for percentage of home ownership.

    Richard Rider
    Richard Rider subscribermember

    @Kelly Abbott @Richard Rider  -- I realize that no amount of factual rebuttals will dissuade you (you're in "cheerleader" mode -- how come that makes you the "moderator"???). That being said, let me provide readers with some documented reasons -- including NON tax reasons --why most businesses (NOT all) should avoid CA.

    CA has the highest state sales tax rate in the nation.  7.5% (does not include local sales taxes). 

    CA has the nation’s highest gas tax at 71.6 cents/gallon (October, 2013).  National average is 49.5 cents.   (CA also has the nation’s 3rd highest diesel tax – 76.2 cents/gallon. National average 54.8 cents)

    CA has now instituted the highest “cap and trade” tax in the nation – indeed, the ONLY such U.S. tax. Even proponents concede that it will have zero impact on global warming.

    California is one of a handful of states (maybe four) that requires "tip" employees to also receive IN ADDITION the full minimum wage -- a "pass through" cost to consumers which inflates prices at restaurants, etc. And this cost is rising rapidly.

    The American Tort Reform Association ranks CA the “worst judicial hellhole” in U.S. for 2nd year in a row – most anti-business.  The U.S. Chamber of Commerce ranks CA higher – “only” the 4th worst state (unfortunately, sliding from 7th worst in 2008).    

    CA driving tickets are incredibly high. Red-light camera ticket $490. Next highest state is $250.  Most are around $100.

    CA has 2nd highest annual cost for owning a car – $3,966. $765 higher than the national average.

    Richard Rider
    Richard Rider subscribermember

    @Kelly Abbott @Richard Rider  The fun never stops . . . .

    California is now ranked as the worst state to retire in.  Easily the lowest percentage of people over age 65. We “beat” ’em all – NY, NJ, etc.  Might be a factor if you plan to market to seniors.

    Southern California has a remarkably unreliable water supply.  In addition, a 2011 survey of home water bills for the 20 largest U.S. cities found that for 200 gallons a day usage, San Diego was the highest cost.  At 400 gal/day, San Diego was third highest.

    Richard Rider
    Richard Rider subscribermember

    @Kelly Abbott @Richard Rider  -- Consider California’s net domestic migration (migration between states). From 2000 through 2009, California lost a NET 1.5 million people. Net departures slowed in 2008 only because people couldn’t sell their homes. But more people still leave each year -- in 2011 and again in 2012, we lost about 100,000 net people to domestic out-migration. Again, note that this is NET loss.     

    These are not likely the welfare kings and queens departing.
    They are primarily the young, the educated, the productive, the ambitious, the wealthy (such as Tiger Woods) – and retirees seeking to make their nest-eggs provide more bang for the buck.


    Kelly Abbott
    Kelly Abbott moderator memberadministrator

    @Richard Rider If I can boil your arguments into a single phrase, it's this: California costs more. 

    Is that it? I won't disagree. On any of it. But costing more isn't the same as having a pool of energetic, talented producers and consumers to build with and sell to. That's what San Diego and California has in spades. 

    The next big thing won't be built by tax-dodgers. 

    Richard Rider
    Richard Rider subscribermember

    @Kelly Abbott @Richard Rider  Sorry, you've oversimplified.  Perhaps you posted prematurely.

    Taxes is only ONE factor.  The anti-business regulatory climate is FAR more important.  As is the anti-business litigation climate (documented in another of my comments). 

    Utility costs and reliability are also important factors to any business trying to manufacture something (I presume you're in a high rise or office park, not getting your hands dirty).  

    Then there's the departing businesses and more affluent population -- customers (you DO have customers, right?).

    California has much to offer, but it's NOT a good place for a startup. If high tech, CA IS better than many places (at least in SD and Silicon Valley).  But there are other more enticing choices -- starting with Austin, Texas.

    And BTW, taxes ARE important -- there's a pretty consistent migration of wealth and businesses from high tax states to low tax states. You may not LIKE that, but it's true.

    Kelly Abbott
    Kelly Abbott moderator memberadministrator

    @Richard Rider @Kelly Abbott  By your logic, the best place to start a business is the lowest cost, lowest regulated places on earth. Hello, Afghanistan. There are other factors to consider than cost. [Beats head against the wall.]

    Richard Rider
    Richard Rider subscribermember

    @Kelly Abbott @Richard Rider  OF COURSE there are other factors -- you continue to post straw man arguments -- perhaps the result of too often banging your head against the wall (just hope CalOSHA doesn't hear about your edgy proclivity).

    But you seem to deny that taxes and regulation have any meaningful effect on where is best to establish a business. 

    BTW, it may surprise you to know that many states are SAFER than California.  

    I'm not addressing CA vs. other COUNTRIES -- I'm addressing what the "study" addresses -- CA and its cities vs.. the cities in the OTHER states.  You should do the same!

    Kelly Abbott
    Kelly Abbott moderator memberadministrator

    @Richard Rider There's no straw in my arguments. I just don't understand how anyone can honestly look at their new big idea and determine that they won't do it because they have to do it here. The upside to building a new, new thing (here) is much greater than the downsides you're outlining. Sorry, but you're never going to convince me that invention is stymied here. 

    Kelly Abbott
    Kelly Abbott moderator memberadministrator

    @Jim Jones Now we agree on something. VC drying up is a problem WRT attracting new startups. My straw man applauds you.

    Blair Giesen
    Blair Giesen author

    @Richard Rider @Kelly Abbott  Sure their are a lot of negative aspects. As Kelly said there are places that might beat all your article links like Afghanistan.  The opportunity in San Diego and California is like NO other. Where can you grow up with future rock stars and future business leaders or meet them very easily if you just moved here. The opportunities are all around you in California. California is NOT a save your way to riches place. It's an opportunities place. If you can't take advantage of them. Try somewhere else or better yet, reinvent yourself. California and San Diego welcome it.

    SDGIS subscribermember

    @Kelly Abbott @Jim Jones @Eric Spoerner  I am the owner of a small 3 person business. We work across the US for some of the largest companies in the world. The reason they hire us is because we provide tools which allow them to complete their core business quicker, faster and better.

    California has been and and will continue to be the home to the most innovative companies in the world. Apple, Google and Qualcomm have drastically changed the way we do business and live our lives. The tools they provide make us more effective at what we do every day. This isn't a legacy. Facebook and Twitter chose to be here also. Any of these companies could move or open somewhere else, but they don't.

    Those of us focused on disruptive technologies (the foundation of most startups) realize that taxes aren't going to make or break our businesses. Sure, if you want to open a McDonalds or a widget factory then yes Texas has a better taxation and regulatory climate, but if you are interested in innovation then there is no where better place in the world than California. California's only challengers are from Seattle (Microsoft, Amazon) and South Korea (Samsung).

    Some attitudes expressed in the comments are toxic. It is just too easy to sit on the sidelines and complain about taxes. As a small business owner, I expect my employees to understand and overcome obstacles-not point out how big they are. This attitude isn't welcome in my office.

    “As California goes, so goes the county” has been true for some time, especially with regard to technology. The argument that innovation is fueled by lower taxes and regulation is a red herring. California is and will continue to be the indisputable worldwide innovation champion and it is either silly or misinformed to suggest otherwise.

    Kelly Abbott
    Kelly Abbott moderator memberadministrator

    @Ari Isaak  Agree. Not only "silly to suggest" but downright irresponsible to assert. You can't claim our regional standing in the world is anything but strong. 

    Richard Rider
    Richard Rider subscribermember

    There are many reasons why a (sane) entrepreneur might want to think twice about picking San Diego (or any California city) for their startup.

    Income tax, for instance (assuming you are in business to make a pile of money).


    Prior to Prop 30 passing in Nov. 2012, CA already had the 3rd worst state income tax rate in the nation. Our 9.3% tax bracket started at $48,942 for people filing as individuals. 10.3% started at $1 million. Now our retroactive (to 1/1/2012) “millionaires’ tax” rate is 13.3% – including capital gains (California’s total capital gains rate is now the 2nd highest in the civilized world! Denmark is #1.). 10+% taxes now start at $250K.

    CA now has by far the nation’s highest state income tax rate. We are 21% higher than 2nd place Hawaii, 34% higher than Oregon, 47.8% higher than the next 2 states, and a heck of a lot higher than all the rest – including 7 states with zero state income tax.

    CA is so bad, we also have the 2nd highest state income tax bracket. AND the 3rd. Plus the 5th and 7th. Table #12


    One “rule” to remember if you want to start a business in California. Never, EVER think of making something tangible. This state is EXTREMELY anti-manufacturing. Manufacturing = byproducts = dirty business = drive ‘em out of the state. Consider:

    From 2007 through 2010, 10,763 manufacturing facilities were built or expanded across the country — but only 176 of those were in CA. So with roughly 12% of the nation’s population, CA got 1.6% of the built or expanded manufacturing facilities. Stated differently, adjusted for population, the other 49 states averaged 8.4 times more manufacturing growth than did California. — prepared by California Manufacturers and Technology Association

    Richard Rider
    Richard Rider subscribermember

    On the off-chance that your California startup survives and start making good profits, remember this:

    CA corporate income tax rate (8.84%) is the highest west of the Mississippi (our economic competitors) except for Alaska. Table #1 – we are 5th highest in nation in per capita corporate tax collections.


    While a small startup is QUITE different from a major corporation, it's instructive to see what the big boys (with all their lobbying power) think of the California:

    736 top U.S. CEO’s surveyed rank California “the worst state in which to do business” for the 9th straight year (May, 2013). 24/7 Wall St. ranks CA the “worst run state” for 3rd yr. 


    If you move to SF, San Jose, or San Diego to start a business, bring a bundle of cash for housing. SF has the nation’s MOST EXPENSIVE housing market. San Diego is 5th. San Jose’ is 6th. The size of a median affordable middle class home in San Diego? — 1,056 sq. ft.

    Richard Rider
    Richard Rider subscribermember

    CA is NOT a very business friendly state:

    CA needlessly licenses more occupations than any state – 177. Second worst state is Connecticut at 155. The average state is 92.

    Starting a business that hires employees? Check out the CA worker compensation rates:
    CA has the 3rd highest state workers compensation rates, up from 5th in 2010. CA had a 3.4% rate increase in 2013.

    San Diego/California has high taxes. But the FEES are far worse — especially for a startup. Plus overlapping and sometimes contradicting agencies from which approval is needed all too often (with fees levied for getting the approval, of course).

    Perhaps the "Golden State" sets the example with it’s onerous corporate franchise tax “fee.”
    California has a nasty anti-small business $800 minimum corporate income tax, even if no profit is earned, and even for many nonprofits. Next highest state is Oregon at $150. A few others under $100, with most at zero.

    Richard Rider
    Richard Rider subscribermember

    The truth is, this "survey" is the most bogus nonsense I've seen in a legitimate publication. It might as well use as criteria the number of ping pong tables the startup has in its office.

    But in fairness, it's just the gonzo opinion of a blogger columnist -- NOT the ranking by Forbes itself.  It appears to be an infomercial for the survey company.


    Most of the "criteria" for this startup business survey uses truly bizarre data:

    1. "Percentage of small businesses that accept credit cards."
    2. "Percentage of small businesses with Facebook pages and websites." 
    3. "Percentage of businesses with online reviews."

    Richard Rider
    Richard Rider subscribermember

    It’s great that 3 of the top 12 startup-friendly cities are (supposedly) based in California. But gee, that must mean the REST of California must be even worse than the studies indicate. Consider:

    California small businesses failed in 2011 at a rate 69% higher than the national average — the worst state in the nation. (based on Dunn & Bradstreet study)

    In 2012, our supply of California businesses shrunk 5.2%. In ONE year. NOTE: That’s a NET figure – 5.2% fewer businesses in CA in 2012 than were here in 2011. Indeed, in 2012, CA lost businesses at a 67.7% higher rate than the 2nd worst state!

    Richard Rider
    Richard Rider subscribermember

    Know the best way to have a successful small business in San Diego [Kalifornia]? Start with a successful LARGE business!


    Eric Spoerner
    Eric Spoerner subscriber

    "For all of the same reasons that so many choose to live here over L.A., New York and other more densely populated cities. And now you can actually make a living, change the world and thrive here in San Diego."

    People are not choosing San Diego over other metros.  At least, young people aren't.  San Diego's been shedding more Millennials by raw number than any metros except New York and LA since the recession began (given our relative lack of population compared to these two metros, the raw numbers are shocking).  Young people make startups go - they're the ones who will work the appalling hours for limited (intiial) pay.

    If San Diego is serious about having a culture hospitable to startups, it needs to also be serious about having a culture that appeals to luring and keeping Millennials.  That means, above all, walkable/bikeable infrastructure, affordable housing, and public transportation.

    Eric Spoerner
    Eric Spoerner subscriber

    @Jim Jones @Eric Spoerner Stop referring to bicyclists as "hobbyists".  Bicycling is not a hobby for many people these days.  It is increasingly a preferred method of transportation for people.  The notion that a $200 device is somehow a "hobby" while a car is not is patently absurd.  Get out to North Park one of these days and tell me how many of the people on bikes there look like "hobbyists."  Or better yet, ask them.

    Additionally, note that I'm not talking about the entrepreneurs themselves - I'm talking about people with the energy, relative lack of familial obligations, and drive to work brutal hours to help someone else's idea get off the ground.  These are typically millennials.

    Additionally, note that Boomers are starting to express the same preferences for high density and alternatives to cars that Millennials are.

    Alison Moss
    Alison Moss subscribermember

    Spot on, Eric. Thanks!

    Kelly Abbott
    Kelly Abbott moderator memberadministrator

    For our startup, proximity to but not emersion in both LA and San Francisco made it easier to focus and win. We would dip in when necessary which was inexpensive and convenient. Otherise we stayed heads down building a great product and team.

    Important to also note that San Diego is tops in some things that make it attractive to startups: lifestyle, weather, great networking, smart creative class in abundance, military presence, regular influx of tourists, rents are relatively low, great beer. Good stuff, Blair. Thanks for raising the banner for us continuously.

    Blair Giesen
    Blair Giesen author

    @Kelly Abbott  thanks for the comment Kelly. It's going to take everyone. I'd like to have the leaders of the tech startup community to spot talking about what we don't have and start asking for what we need.

    Eric Otterson
    Eric Otterson subscribermember

    Thanks Blair. Worth pointing out the real people that get credit for making San Diego a great place for starting a company are the many entrepreneurs and mentors - whether they support via CONNECT, CommNexus, EvoNexus, SDVG, BIoCom, Startup San Diego (my favorite), any of the many incubators, accelerators or co-working space, OR those taking the risk to start companies. There are great things happening here.  I'd also add, thanks to Cooley LLP for their generous support of my work. 

    Blair Giesen
    Blair Giesen author

    @Eric Otterson  It takes everyone getting involved and working together. I think there should be a way for all the incubators to work together as a complete process that leads to success. FI or CyberHive then to EvoNexus or Connect then to Plug and Play or HardTechLabs. Also getting the established companies to look to these startups as their own technology R & D lab but for a fraction of the price they would spend with no corporate structure to destroy the product.

    Kelly Abbott
    Kelly Abbott moderator memberadministrator

    @rolandal @Blair Giesen @Eric Otterson  This sentence? 

    "Also getting the established companies to look to these startups as their own technology R & D lab but for a fraction of the price they would spend with no corporate structure to destroy the product."

    rolandal subscriber

    @Blair Giesen @Eric Otterson  Your last sentence is a very interesting and valid point. Probably deserves more attention explaining because I think it's very powerful!