Company Formation, Venture Capital Remain Concerns in Data for San Diego’s Innovation Economy
The economic indicators in San Diego’s innovation economy are flashing mixed signals for the first quarter of 2010, based on data released by Connect, the nonprofit group for technology and entrepreneurship. The Connect Innovation Report can be found online here, and my roundup of the latest data follows:
—Flashing Red: New company formation fell by 21 percent during the first three months of 2010, with just 51 startups established, compared with 66 startups that formed during the same period in 2009, according to the Connect report on San Diego’s innovation economy. New company formation also declined about 31 percent from the fourth quarter of 2009, when 74 companies started in the San Diego area. “This is most likely a seasonal variation due in part to potentially higher tax liabilities incurred in establishing a new business in the first quarter,” says Economist Kelly Cunningham, a senior fellow at the National University System Institute for Policy Research, in the Connect report. One ominous note: The formation of technology startups throughout California was down by 37 percent.
—Flashing Green: There were 46 M&A deals in the San Diego area that totaled over $845 million during the first quarter, a 9 percent increase over the same quarter in 2009 and a nearly 59 percent gain over the fourth quarter of 2009. Over 30 percent of all M&A deals that closed during the quarter in Southern California involved San Diego companies.
—Flashing Yellow: Venture Capital investments in San Diego companies declined by 27 percent, to $222 million in 29 deals from $305 million in 31 deals during the previous quarter (Fourth quarter of 2009), according to data from the MoneyTree Report prepared by PricewaterhouseCoopers and the National Venture Capital Association. That’s less than half the $576 million that VCs invested during the first quarter of 2007, but still represents a 242 percent increase from the same quarter in 2009, when a paltry $92 million was invested in just 16 companies in the San Diego area. As we previously reported, about 64 percent of the first-quarter VC funding was invested in life sciences startups. About 42 percent went to startups and early stage companies.
—Flashing Yellow: New data shows that tech companies now account for just 6 percent of the employers in the San Diego area. Yet the tech sector represents about 11 percent of all jobs and more than 25 percent of the payrolls. Average pay among tech firms is $85,800, which Cunningham found is more than 80 percent higher than San Diego’s overall average of $47,400 per job. Average pay was highest among communications and equipment manufacturers ($101,900) and computer and electronics ($98,000). That might seem encouraging, but as The San Diego Union-Tribune recently reported, overall unemployment in San Diego fell to 10 percent in May—its lowest point in 11 months—although much of that hiring was due to temporary hiring by the government for the 2010 census.
—Flashing Green: San Diego received $33 million in funding from the National Science Foundation during the first quarter, a 4 percent increase from the nearly $31.3 million the NSF awarded in the fourth quarter of 2009. Southern California as a region got more than $121 million in NSF funding during the quarter.
—Flashing Green: The report found 838 patents were granted to San Diego-based inventors during the quarter, a 23 percent compared to the 730 granted during previous quarter. San Diego accounted for 16 percent of all patents filed statewide and 12 percent of patents granted during the quarter.
The Connect Innovation Report also listed the same first-quarter top 10 investments in San Diego companies that I reported in April, based on data from the MoneyTree survey: Tandem Diabetes ($31 million); PatientSafe Solutions ($30 million); Tioga Pharmaceuticals ($18 million); Sotera Wireless ($17.5 million); Genomatica ($15 million); Elevation Pharmaceuticals ($15 million); EMN8 ($14.5 million); VentiRx Pharmaceuticals ($12.5 million); Tragara Pharmaceuticals ($10 million); Avaak ($10 million); AwarePoint ($10 million). I also had reported that VentiRx raised $12.5 million during the quarter, and got a note from CEO Michael Kamdar saying that number is wrong; VentiRx raised $25 million.