Keeping the Faith in Silicon Valley

For months, Saeed Amidi has heard all the talk of doom and gloom in Silicon Valley. Layoffs are on the rise, venture capital investments are plunging, and tech startups are closing their doors. But Amidi doesn't see that pessimism in his own business, a Valley-based incubator called Plug and Play Tech Center. "People are really excited about starting new companies," says Amidi, co-founder and chief executive of the center. In June alone, some 30 startups moved in, bringing the total to more than 220 companies that have collectively raised more than $700 million in funding since Plug and Play began in 2006.

Despite the rough economic times, Plug and Play remains an oasis of entrepreneurs brimming with ideas for changing the world. Of course, bright-eyed entrepreneurs are congenital optimists, doubly so in the Valley. But in few places these days is the optimism as contagious as at Plug and Play, a three-year-old operation that provides startups with everything they need to get up and running quickly: office space, data and telecommunications services, networking events, recruiting services, and most of all, contact with fellow startups and potential investors. Amidi himself is among the investors. He and his family's venture arm, Amidzad Partners, put money into 16 startups last year, most them his tenants, and five so far this year.

The gregarious Amidi, 49, left Iran 30 years ago for Menlo College, a business school in the Valley, and then stayed. After the revolution, his parents followed. "He's the consummate networker," says Deepak Kamra, a general partner with Canaan Partners, a venture firm with two portfolio companies at Plug and Play. "He knows everybody, and he puts them together."

Entrepreneurs spy a kindred spirit in Amidi, too. After his father opened an Oriental rug store in Palo Alto, Calif., where the Amidis met well-heeled executives and venture capitalists, the younger Amidi started several businesses, including a bottled water company he still runs that now grosses more than $150 million annually. The seeds for his current venture were sown when he, his brother Rahim, and partner Pejman Nozad in 1988 bought a small office building in Palo Alto.

As the dot-com boom got going, the Amidis were looking to get in on the action. So when a startup called PayPal wanted a place to set up shop, they rented the company the building, which in 1999 had briefly housed Google (GOOG). After seeing the search company's rapid growth, they asked for a chance to invest in the online payments firm. When PayPal went public in 2002 and then was bought by eBay (EBAY) for $1.5 billion, the Amidis made millions—more than 30 times their investment. Amidi opened Plug and Play in 2006 in a 150,000-square-foot former research-and-development facility south of Palo Alto in Sunnyvale, making a major bet on this blend of real estate and venture capital.

One big appeal of Plug and Play is flexibility. Startups can rent a cubicle at a time for $500 a month with no yearly lease and add space as they need it. They don't have to commit big bucks before knowing how fast they're going to grow. They also can tap the various services, from data center space to catering, on a pay-as-you-go basis. Most of all, they like mixing with fellow startups. "The energy you feel in this building is something you don't feel in a typical office," says Renaud Laplanche, CEO of tenant Lending Club, which helps people lend small amounts of money to others online. The company found its first investor, Norwest Venture Partners, at one event held in the building, and lined up a deal to offer its services on Facebook at a similar gathering. Despite raising $30 million in venture capital and employing 29 people, Laplanche is staying put—for now.

The dynamic of Plug and Play was on display one recent Friday morning as some 25 investors and interested executives watched entrepreneurs give 10-minute presentations in hopes of attracting investors or partners. A Princeton student in sandals, T-shirt, shorts, and a backward-facing cap breezed through a PowerPoint presentation on a screen. His company, ExhiBytes, aims to enable buying and selling of art through Facebook by analyzing people's social connections as well as the artwork they mark as favorites on their Facebook profile page. "Favoriting is the key to virality," he said. That a guy in flip-flops can get serious attention from potential investors reveals that the recession has hardly vanquished the hopes of entrepreneurs and venture capitalists.

EXECUTIVE REPURPOSINGPlug and Play isn't immune to the recession. Tenants note more vacancies than during better times. But Amidi has managed to turn the poor economy to his advantage: The facility has become a way station for executives between jobs. "Executives in residence" also pay $500 a month for a cubicle and agree to meet at least 20 startups, some of which they mentor.

Most of the executives eventually find jobs, often with companies in the center. Former Yahoo! (YHOO) Vice-President Jitendra Kavathekar "felt like a kid in a candy store" before choosing to become CEO of Plug and Play tenant, which provides corporate collaboration services. He plans to keep the company there at least until its next round of funding.

Although Plug and Play's real estate revenues are flat, things may be picking up. Amidi says June was his best month ever, thanks to the addition of 30 new tenants. He's even expanding—a lot. In July he opened similar facilities in Los Angeles, where he already owns Hollywood production centers where Fear Factor, Deal or No Deal, and other TV shows have been filmed. He aims to have 50 tech and media startups there by yearend.

But Amidi's ambitions go beyond being a landlord and part-time investor. He wants to beef up his services so he can get more involved with the most promising startups. "The real estate part is good," he confides after one of Plug and Play's customary Friday afternoon barbecue lunches. "But the real money is if you can invest in the next Google or PayPal."

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