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Derek Smith, Founder Connect South Los AngelesHe grew up in South Los Angeles and saw first-hand the frustration caused by the lack of economic development. That’s why he decided to return home in 2015, after spending the first part of his career in New York City, to start a startup incubator in his old neighborhood.
He wanted to help aspiring entrepreneurs learn the ropes of creating a startup, and hoped that building these companies would help bring higher-paying jobs to the region.
Smith already knew that founders from historically underrepresented groups face a greater challenge when it comes to obtaining funding. Funding for Black founders fell for the third year in a row to a historic low in 2023 — and it was pretty paltry to begin with. Last year, black founders accounted for just 0.48% of total venture funds, or just $661 million out of $136 billion allocated, per Crunchbase data.
This represents a major institutional barrier. That’s why Smith’s ultimate goal for Plug In South LA is to pave the way for black and brown entrepreneurs who are looking to create tech startups and need help and mentoring. This can help them become not only successful companies, but also people who help build wealth and create jobs in areas that startup ecosystems often lag behind.
“We really want to support founders and entrepreneurs who can build businesses that can scale at scale,” Smith told TechCrunch.
As with many startup incubators, people who come through Plug In participate in a 12-week program, which includes about five hours a week outside of their day jobs running their companies. Programming includes weekly workshops along with more industry-specific groups and tips from people in the tech community who work with each group on things like pitch critiques, the importance of storytelling, financial planning, etc. The program concludes with a demo day for investors.
Smith sees a pool of untapped talent in areas like South Los Angeles. He hopes that by helping to incubate these companies, as they expand and succeed, they share his broader vision of giving back by creating jobs and supporting talent in underserved or neglected communities. For him, the philosophy behind his company is economic development and building a network of entrepreneurs, rather than relying on external forces for help.
“Politicians don’t want to do this work [big tech] Companies don’t want to do this work. Business people should do that. That’s why we have to find entrepreneurs who align with this broader vision.
Von Bleck, a partner at Blue Bear Ventures, says he met Smith right after he launched Plug In South LA and was asked to participate on a panel during one of its first beta days. “Once I realized what Derek was up to, and realized the need for this kind of organization and mentorship here in Los Angeles, I was happy to get involved,” Blake told TechCrunch.
It took Smith some time to build the organization. For the first several years, before Plug In South LA’s first official cohort in 2020, he ran monthly and quarterly programs focused on helping diverse founders who were in the early stages of building a startup. These programs eventually evolved into the more formal accelerator program that exists today, according to Smith. He is currently in the process of recruiting the incubator’s fifth cohort, which will take place later this year with 12-15 participants, depending on the number of companies he selects.
One of the most successful companies to come out of the incubator so far is Help the charger, a platform aimed at helping field technicians troubleshoot malfunctioning electric vehicle charging stations. The founders underwent Smith’s accelerator program in 2020 shortly after launching the company.
Camille Terry, co-founder and CEO of ChargerHelp, says the experience has been invaluable, providing her with specific help with things like improving her pitch. She at least partially credits her time in the incubator with landing her $17.5 million Series A round. To date, the company has raised more than $20 million per year. Crunchbase data.
As part of the broader goal of creating jobs in the community, ChargerHelp is succeeding at that as well, going from about a dozen employees when the company entered the program to approximately 45 employees today.
Terry says one benefit of the program is having a network of people of color, all facing the same challenges, that continues to grow and help participants long after they leave the program. “This program is interesting because I can find people with a similar living experience, where I can get help and provide assistance. It’s a really cool thing to be a part of,” she said.
In addition to ChargerHelp, some other companies that have spun out of the program include: SwayBrands, a platform designed to help connect diverse content creators with agencies and brands. The startup has raised nearly $2 million, according to Smith. Another is ThriveLink, which has created a product that uses artificial intelligence to help underserved patients find and apply for the social services they need. Smith says the company has launched pilots with several major health insurance companies.
Until recently, Smith did not directly invest in companies that came through the program due to a lack of funds, but that is changing with future combinations as the company moves from a free to equity-based model.
“We are looking at a capital solution with an adjacent fund that we are launching that will invest in our groups going forward, and we will have a 5% equity ownership in the companies with a subsequent investment on top of that,” Smith said.
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