By Fostering Innovation, San Diego Will Pull Venture Capital From Everywhere

6/10/09

Against the backdrop of a broad decline in venture investing nationwide, some concerns have been raised about San Diego’s hometown VCs and whether they are continuing to actively invest. But San Diego remains a vibrant community for venture capitalists to invest.

We enjoy diverse industries including biotech, wireless, software, cleantech, and more. Good money follows good deals. Great companies find a way of getting funded. Recently the San Diego Venture Group hosted a cleantech panel that consisted of three eminent venture capital partners located in the Bay Area and Los Angeles who are investing in clean technology. Each one oversees a portfolio that includes promising companies in our region. They were astounded at the 600 people who registered for the San Diego event, and the quality of some of the entrepreneurs they spoke with afterward.

Currently, we simply face limited liquidity in our markets. As a result, many venture capital firms are focused on nurturing the existing companies in their portfolio so they can survive this challenging funding cycle. Those firms that have the capacity to invest are finding it’s a great time to do so, with valuations being more realistic.

I have a greater concern about fostering innovation in our region. We need an efficient technology transfer process in our university system to commercialize some of the exceptional intellectual property we have in this region. Stanford University has mastered this process. Innovation is one of the most critical components to economic recovery in our country. Improvements that drive productivity are critical, and technological innovation will play a major role in putting the financial stability of the nation back on the right track. History indicates that the countries and companies that invest in innovation and research and development during an economic downturn will be best positioned to benefit when the economy recovers. Innovation has been one of the leading drivers of economic growth for the past few generations. Technological advancements have helped create a global economy, raise average incomes in many countries and lifted millions of people into the middle class.

The Obama administration has an opportunity to boost U.S. economic competitiveness and spur broad-based economic growth through targeted reforms of our country’s patent system, scientific research-and-development, and workforce development programs. Our patent system and today’s federal programs were designed to address 20th-century problems, not the new challenges posed by globalization and worldwide economic distress.

Today, VC firms outside San Diego are funding the majority of new venture deals in the region. Many are delighted to come here to work with innovative companies. Our regional challenge is not necessarily the VC’s who live and work in San Diego. Our challenge is to stimulate more innovation that can be commercialized out of our IP-rich universities, companies and DoD environs. Highly innovative companies solving real problems with a large market opportunity will attract money. Money follows great deals.

Carrie Stone, a board member of the San Diego Venture Group, heads San Diego-based cStone & Associates Executive Search and has been engaged as a board member, interim CEO, consultant, recruiter, advisor, coach, and mentor. Follow @

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