Investments in clean-tech firm, life sciences lead way
San Diego startup companies hauled in more venture capital in the first quarter than the prior year, bucking the national trend of declining funding for young firms.
Two reports released today showed that San Diego’s good first quarter was led by a large investment in clean-tech firm Sapphire Energy, as well as continued funding for life sciences companies.
The reports came from Dow Jones VentureSource/Ernst & Young and the National Venture Capital Association/Pricewaterhouse- Coopers. While the numbers differ slightly, both reports agree on the rise in funding in San Diego and the decline nationally.
The National Venture Capital Association/PricewaterhouseCoopers reported that venture capitalists invested $357 million in 22 companies in San Diego during the first quarter, up from $156 million in 30 deals for the same quarter last year.
“We’re seeing much the same trends that we have been seeing, but the numbers are bigger,” said Bill Molloie, a partner with PricewaterhouseCoopers in San Diego. “We’re seeing strong early stage investment concentrated in the life sciences.”
Dow Jones/Ernst & Young found that 21 local firms received $467 million, up from 29 companies with $219 million in funding the prior year.
Sapphire Energy, which is trying to improve yields in algae production, got the biggest investment by far at $144 million for the quarter. Sapphire aims to prove algae is a viable biofuel alternative to crude oil.
But even subtracting out the unusually large Sapphire deal, local companies still received more money in the quarter, with life science firms getting the bulk of the funding.
Excluding Sapphire, 84 percent of the dollars invested locally in the quarter went to life sciences companies, said Molloie.
Nationally, venture capital investments fell 13 percent compared with the prior year, with $5.8 billion invested in 758 deals. A year ago, $6.7 billion was invested in 861 deals, according to the National Venture Capital Association/PricewaterhouseCoopers.
Mark Sogomian, a partner with Ernst & Young in Los Angeles, said the first quarter is usually the smallest of the year for venture funding, and it’s hard to draw conclusions from one quarter of data.
But he noted that the pipeline of young companies filing to go public is on the rise, and there have been more large companies buying smaller firms recently. So there is optimism among venture capitalists about their ability to cash in on their investments as the year progresses.
“There never has been more cash sitting on the sidelines of the top 15 largest technology companies as there is at this point in time,” said Maria Cirino of .406 Ventures in Boston. “And we believe some of that cash will be used to make acquisitions.