Avalon’s Kinsella Says San Diego, Like Any Robust Startup Ecosystem, Needs Local VCs

5/14/10Follow @bvbigelow

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than 75 startups. He was the founding chairman of Aurora Biosciences, which was started in 1995 and was acquired by Cambridge, MA-based Vertex Pharmaceuticals in 2001 for $592 million. He also invested in Illumina (NASDAQ: ILMN), Onyx Pharmaceuticals (NASDAQ: ONXX), Sequana Therapeutics (now part of Celera Genomics), and Pharmacopeia, (acquired by Ligand Pharmaceuticals). Among his latest deals are investments in Avelas, which Luke recently profiled, AnaptysBio, Amira, InCode, and Sirion.

Yet Kinsella’s star wasn’t always shining so brightly. His first fund was just $400,000, raised in 1983 from two friends, and he basically labored alone for years in the vineyards of life sciences venture capital as he slowly gained credibility and recognition. For many of the past 25 years, in fact, the two biggest players in San Diego’s life sciences venture community were Enterprise Partners Venture Capital and Forward Ventures. Yet neither firm has raised a new fund in years, and both have significantly curtailed their operations—along with several other homegrown VCs.

So how does Kinsella view the situation?

“I think it’s inarguable fact that there are a number of venture funds that are just not continuing in town, although I don’t want to necessarily say who they are,” Kinsella says, in deference to the sensitivities of his fellow San Diego VCs. “There’s a certain diminution of investable capital through various fronts here.”

But is it important to San Diego’s startup community to have homegrown VCs?

“I think it is, because a proper ecosystem that is fertile for startup companies requires local venture capital. I frankly can’t think of an example of a robust, startup-friendly ecosystem anywhere else in the country, let alone the world, where they don’t have a significant contingent of local venture funds.”

Kinsella says the evaporation of local venture capital, however, has not been a significant issue for Avalon Ventures. “From our standpoint, we are pretty autarchic at the early stages, meaning we don’t really feel the need for validation from our confreres in the … Next Page »

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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  • http://www.actseed.com Bill Attinger

    Good article. Confirms what we all know. Lots of good mechanics and car parts (metaphorically speaking), but no gas for the tank.

    Avalon appears to have started in bootstrap mode almost 3 decades ago with $400,000. Is this the model for seeding new local funds? I’d be interested in understanding if most of Avalon’s deals were local or if a large portion of the capital was invested outside of the San Diego area.

    Also, I hear of friction related to encroachment from outside capital coming into the San Diego market to fund our local entrepreneurs. I don’t think the friction is from external funds, but that the startups leave the San Diego area as a condition of funding (often heading to the Bay Area). Is this a real problem? If so, what can we do to become attractive as a local venue to fund businesses that don’t have to move?

    Also, is angel / venture capital as local as it used to be? …or are seed stage deals becoming more independent of geography? …or have they been that way, but not very noticeable? I know many wealthy San Diegans that apply their wealth across the country and globe, even as we often hear that “venture is local”.

    Anyway, great article, and I’m glad to see Avalon back in the market for yet another fund, even if some of the former perennial powers are dissipating.