San Diego start-ups navigate mixed venture capital landscape in … – The San Diego Union-Tribune

San Diego start-ups raised a solid amount of venture capital in the second quarter this year compared with a year earlier signaling a good but not great fundraising environment for local entrepreneurs.

Two reports out this week the PitchBook/National Venture Capital Association Venture Monitor study and the PricewaterhouseCoopers/CB Insights MoneyTree report showed that more San Diego County start-ups raised money in the second quarter than in same quarter the prior year.

But even though more firms took in capital, the overall amount raised locally fell short of totals from the second quarter of 2016.

The PitchBook report found 61 local companies raised $406 million, compared with 42 companies netting $411 million a year earlier.

MoneyTree pegged a similar trend, with 24 companies raising $287 million in the second quarter, compared with 22 firms pulling in $389 million a year ago.

San Diego venture capital climate last quarter bucked the nationwide trend of not only fewer deals but also less dollars for start-ups compared with 2016.

I think it is encouraging to see the number of deals at a reasonable level. Thats a good sign, said Ryan Spencer, a partner with PricewaterhouseCoopers in San Diego. In terms of dollars, when you are comparing year over year, we had a couple of mega-deals in the first half of 2016 that we havent seen this year.

In the second quarter last year, genomics biotech Human Longevity raised $220 million.

In San Diego, there is a growing convergence between the regions traditional biotech/pharmaceutical industries and its software/technology firms, said Spencer.

Edico Genome, for example, is a technology company that makes a high speed computer processing platform. But its product is tailored to speed up delivery of gene sequencing data in healthcare.

There are three companies in the top 10 deals that we think are best classified as software or internet, but those companies are related in some way to life sciences, said Spencer.

The PitchBook/NVCA Venture Monitor and MoneyTree reports contain differences for several reasons, including that PitchBook captures money raised by start-ups from angel investors.

There is plenty of capital available for start-ups, as venture capital funds have raised $130 billion since 2014, according to PitchBook.

The story over the last couple of years has been deal flow continued to decline, said Nizar Tarhuni, analytics manager for Seattle-based PitchBook. The bulk of that decline has been isolated at the angel and seed level, where we have seen those rounds fall off. But across Series A and up to later stage rounds, it has actually remained fairly steady.

For some angel backed start-ups, it has been difficult to make the jump from individual investors to their first round of institutional venture capital, said Tarhuni.

That has resulted in angel investors being a bit more careful in how they deploy capital (in companies) to make sure they make the cut in a very competitive market looking for investment at the Series A or Series B level.

Nationwide, PitchBooks Venture Monitor had 1,958 companies raising $21.78 billion in the second quarter. Thats down from 2,162 companies raising $23 billion in the same quarter last year.

In the quarter, mega-deals for more established companies led the way, according to PitchBook. Thirty-four companies raised at least $100 million in the quarter. None were based in San Diego.

The MoneyTree report found 1,152 companies raised $18.4 billion in the quarter nationwide again down from 1,495 firms taking in $21 billion a year earlier.

One of the strongest industries this quarter nationally was digital health, which recorded 113 deals for $2.7 billion, according to the MoneyTree report. Six digital health companies rung up six mega-rounds of $100 million or more in the quarter.

mike.freeman@sduniontribune.com;

Twitter:@TechDiego

760-529-4973

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San Diego start-ups navigate mixed venture capital landscape in ... - The San Diego Union-Tribune