Derek Smith, the founder of Plug In South LA, grew up in southern Los Angeles and saw first-hand the frustration that stems from lack of economic development. That’s why he decided to come home in 2015, after spending the first part of his career in NYC, to start a startup incubator in his old neighborhood.
He wanted to help aspiring entrepreneurs learn the ropes of growing a startup, and hoped that in the process, building these businesses could help bring higher-paying jobs to the area.
Smith already knew that founders from historically underrepresented groups face a bigger challenge when it comes to getting funding. Funding for Black founders fell for the third straight year to a historical low in 2023 — and it was pretty paltry to begin with. Black founders last year accounted for just 0.48% of total venture money, a mere $661 million out of $136 billion allocated, per Crunchbase data.
That’s a substantial institutional roadblock. And it’s why Smith’s ultimate goal for Plug In South LA is to smooth the way for Black and brown entrepreneurs looking to build tech startups and need help and guidance. That could help them become not just successful businesses, but people who help build wealth and create jobs in areas often left behind by startup ecosystems.
“We really want to support those founders and entrepreneurs who can build businesses that can scale broadly,” Smith told TechCrunch.
As with many startup incubators, the people who come through Plug In participate in a 12-week program, which involves about five hours per week outside of their day jobs running their companies. The programming includes weekly workshops along with more industry-specific groups and advice from people in the tech community who work with each cohort on things like pitch deck critiques, the importance of storytelling, financial planning and so forth. The program concludes with a demo day for investors.
Smith sees a bevy of underutilized talent in areas like South LA. He hopes that by helping to incubate these companies, as they scale and become successful, that they share his broader vision of giving back by creating jobs and supporting talent in underserved or overlooked communities. For him, the philosophy behind his firm comes down to economic development and building a network of entrepreneurs, instead of relying on outside forces to help.
“The politicians don’t want to do the work. The [big tech] companies don’t want to do the work. The entrepreneurs have to do it. And this is why we have to find entrepreneurs that are in alignment with this broader vision,” he said.
Vaughn Blake, 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 the early demo days. “Once I realized what Derek was up to, and recognizing the need for that type of organization and mentorship here in Los Angeles, I’ve been happy to participate,” Blake told TechCrunch.
Smith took some time to build up the organization. For the first several years, prior to the first official Plug In South LA cohort in 2020, he ran monthly and quarterly programs focused on helping diverse founders who were in the early stages of building a startup. Those programs eventually evolved into the more formal accelerator program that exists today, according to Smith. Currently, he’s in the process of recruiting the incubator’s fifth cohort, which will take place later this year with 12-15 participants, depending on how many companies he chooses.
One of the more successful companies to emerge so far from the incubator is ChargerHelp, a platform aimed at helping field technicians troubleshoot and fix broken EV charging stations. The founders went through Smith’s accelerator program in 2020 shortly after launching the company.
ChargerHelp co-founder and CEO Kameale Terry says the experience was invaluable, giving her specific help with things like refining her pitch. She credits at least in part the time spent in the incubator with her landing a $17.5 million Series A. To date, the company has raised over $20 million, per Crunchbase data.
As part of the broader goal to create jobs in the community, ChargerHelp is succeeding at that, too, going from about a dozen employees when the company entered the program to close to 45 today.
Terry says one of the advantages of the program is that there is a network made up 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 folks that have a similar lived experience, where I can get help and offer help. And it’s something really cool to be a part of,” she said.
In addition to ChargerHelp, some other companies that have emerged from the program include SwayBrands, a platform designed to help connect diverse creators with agencies and brands. The startup has raised almost $2 million, according to Smith. Another is ThriveLink, which has created a product that uses AI to help underserved patients find and apply to the social services they need. Smith says the company has launched pilots with several major health insurers.
Until recently, Smith was not investing directly in the companies that came through the program because of a lack of funds, but that is changing with future cohorts as the firm moves from a free model to one based on equity.
“We’re looking at a capital solution piece with an adjacent fund that we are rolling out that will invest in our cohorts moving forward, and we will take a 5% equity ownership in the companies with a follow-on investment on top of that equity,” Smith said.