San Diego Startups Dominate VC Numbers with Record Breaking Inflows

San Diego Startups Dominate VC Numbers with Record Breaking Inflows

San Diego startups saw record-breaking inflows of cash this quarter — surpassing even the go-go days of the dot-com era — with local biotechs hauling in the lion’s share. 

Those big dollars are coming in fewer packages, however, as the number of total deals continues to shrink. That’s according to fresh data from Pricewaterhouse Coopers and CB Insights, which published its third quarter venture capital numbers Tuesday.

Local companies raised $907 million from venture capitalists, the largest third quarter on record going back to 1995. The big jump was largely due to two massive biotech deals: $438 million raised by anti-aging biotech Samumed, and $230 million raised by Gossamer Bio, the drugmaker founded by ex-Receptos executives after their $7.2 billion sale to Celgene.

The jump put San Diego on the map this quarter, topping investment totals for the Los Angeles/Orange County region ($825 million), along with all of Colorado ($419 million) and Texas ($346 million), among other regions.

Still, powerhouse sectors in San Francisco and New England continued to rule the VC charts this quarter, pulling in $7.9 billion and $2.4 billion respectively. Although the cash came in big chunks, the third quarter had relatively few deals: 23, down from 34 in the same period last year.

Hornsten said it’s hard to pinpoint the reason for this, but speculates that early stage startups may not be going to VCs as often as they used to. Instead, he said, it’s possible entrepreneurs are getting early stage capital from angels, crowdfunding and other new sources of capital. So far this year, San Diego has seen 77 deals.
This time last year, that figure was 98. Still, the cash totals are record-breaking in more ways than one. San Diego companies have already raised over $1.8 billion this year. That means by year-end it could be the best year on record since 2000, when San Diego companies raised $2.4 billion.

Shortly after, of course, the dot-com bubble burst and venture capital investments gradually began to shrink — hitting a low of $734 million in 2003. When asked if there are red flags in the record-high figures, which mirror the Internet boom numbers a decade prior, Hornsten said “maybe.”

“It’s probably a sign that we’re closer to a top than a bottom, and that’s the least controversial thing I’ve said all day,” Hornsten said. “That doesn’t mean there’s not room to run. There’s plenty of deals still in the pipeline. It can continue, but for how long … I don’t know.”

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