South Park Commons founded by early Facebook and Dropbox engineers, continues to grow in popularity
South Park Commons, a self-described "anti-incubator" founded by early Facebook and Dropbox engineers, continues to grow in popularity
It took a year for the South Park Commons (SPC), a community of dozens of engineers in San Francisco's South Park neighborhood, to gain widespread attention, thanks to a profile in the New York Times a year after it was established.
Aiming to create the technological equivalent of the Bloomsbury Set or Benjamin Franklin's Junto club, SPC was founded by Ruchi Sanghvi, the first female engineer at Facebook. Her vision for SPC was to create a space where people could discuss their individual and shared experiences and, hopefully, come up with new ideas along the way.
In 2018, it appears that the experiment has been a success for SPC, which has since raised a $55 million venture capital fund to support community-based projects. 450 people in the San Francisco Bay Area and around the world are now members of the organization. In addition to participation from technology luminaries and institutional investors, the company recently closed a new $150 million fund.
Aside from that, it claims to have a substantial portfolio of investments. Compound Labs is an open-source platform for decentralized lending whose tokens were distributed to early shareholders, according to Sanghvi. As a result, according to Sanghvi, SPC's debut fund has already returned investors' capital — and then some — thanks to Compound Labs. Sanghvi goes on to say that SPC also owns 10 to 12 other "unicorns," as he puts it.
We spoke with Sanghvi and her husband and business partner, Aditya Agarwal, earlier today. Aditya Agarwal was also an early engineer at Facebook before cofounding a startup with Sanghvi that was reportedly purchased by Dropbox in 2012. For the past two years, Sanghvi has served as Dropbox's VP of Operations, and Agarwal has worked for the company since 2015, when he was promoted to CTO, before joining Sanghvi at South Park Commons in 2018.
While discussing how the SPC community evolved from a physical space to a highly structured virtual society during the pandemic, we also discussed how the community remains very focused on bringing people together in person.
Rather than limiting themselves to a single location in San Francisco, Sanghvi and Agarwal are currently developing a second location in New York and hinting at the possibility of opening additional locations in Seattle and even Southeast Asia in the future.
According to Sanghvi, approximately 70% of SPC members are "technical," with the remaining 30% being "domain experts, operational experts, or even academics." That particular arrangement was done on purpose. As Sanghvi observes, "It's funny because every time you speak with a great entrepreneur and ask if they'd like to hang out with another great entrepreneur the answer is always 'no.'" "They want to socialize with the expert who defeated the Stanford team in a competition involving an artificial intelligence algorithm, which is why having operational experts in the community is extremely advantageous."
Apparently, the connections lead to more than just new friendships and ideas in the long run. According to Agarwal, upwards of 50% of the organization's members are cofounders or founding employees, highlighting yet another way in which South Park Commons sees itself as distinct from other organizations in the area. The SPC claims that, in contrast to Y Combinator, which meets with fledgling teams, or venture capitalists who monitor operational executives at large corporations, it is focused on capturing individuals who are clearly talented and likely in high demand but who, after leaving their previous job, are unsure of their next move and mostly just want some time to mull it over.
Those whose next move, as squishy as it may sound, is simply to freely explore ideas are being sought by the organization. In Agarwal's words, "we're more like a learning community that assists individuals in the 'negative one to zero phase' of their lives in order to advance to the point where they can start a business." If any startups emerge from this process, the fund will invest in them.
Additionally, members typically collaborate closely within the community for nine months before "graduating," which means they've raised more than a million dollars for a new startup concept, hired more than four full-time employees, or accepted a job offer from another organization. (While idea exploration can lead to the formation of businesses, it is not always the case.)
When a member of the community begins the fundraising process, one of the first agreements made is to grant SPC the right of first refusal. Each member is also encouraged to make investments in SPC funds, which many members take advantage of.) In addition, according to Sanghvi, SPC's new $150 million fund has attracted the participation of 100 members.
It's safe to say that those investments take on a fairly conventional shape. According to Agarwal, SPC typically invests between $700,000 and $2 million in a business in exchange for a 7 percent to 10 percent ownership stake. Moreover, because SPC's network is so valuable, he asserts that, when venture capital firms make subsequent investments, they will typically allow SPC to retain its percentage ownership rather than diluting it for their own short-term gain.
Indisputable evidence indicates that the formula is currently in operation. Compound Labs is just one of the startups that have passed through South Park Commons' (physical and virtual) corridors, which also includes The Graph, a blockchain data indexing protocol that has received the public support of Ethereum founder Vitalik Buterin; Pilot, a maker of bookkeeping software that has received funding from Sequoia Capital and Index Ventures and is now valued at $1.2 billion; and Unit21, a no-code software startup that assists businesses in monitoring fraudulent transactions.
In addition to Sanghvi and Agarwal, SPC investors include Mitra Lohrasbpour, who previously served as vice president of revenue analytics and international expansion at Dropbox, and Finn Meeks, who previously served as Sanghvi's chief of staff for two years before joining the company.
Despite the fact that the new SPC fund is three times the size of its predecessor, Agarwal does not anticipate the team investing more aggressively as a result of this increase in size.
Quality is more important to us than quantity, he states emphatically. When quality occurs quickly, it is wonderful, but that is not the case when the high-order play occurs.
