San Diego’s Q1 VC Activity Might Not Be So Bad After All

4/25/11Follow @bvbigelow

The MoneyTree snapshot of first-quarter venture activity that we reported 10 days ago showed a dire decline in venture investments in the San Diego region so far this year. But the local picture looks a lot better in data for the same period that came in recently from Dow Jones VentureSource.

The information from Dow Jones VentureSource shows that VC activity remained fairly stable in San Diego during the first three months of 2011, with $213.9 million invested in 26 deals here. That represents a 3 percent decline in capital invested and a 7.6 percent increase in deal count from the $207.2 million and 24 deals that Dow Jones counted in San Diego for the same quarter in 2010.

“The data we are seeing is basically flat investment on a year-over-year basis, both as it relates to the deal flow and dollars,” says Dan Kleeburg, an audit partner in the San Diego office of Ernst & Young, which is aligned with Dow Jones VentureSource in producing the report.

But according to MoneyTree, venture capital invested in the San Diego region during the first quarter fell by 55 percent—to just over $100 million—and the 22 deals that MoneyTree counted represented a 29 percent decline in deals from the same quarter last year. The MoneyTree Report comes from the National Venture Capital Association, PricewaterhouseCoopers, and Thomson Reuters.

Ernst & Young’s Kleeburg adds, “As it relates to stand-out sectors during the first quarter of 2011, I think there is no surprise there. San Diego continues to perform well in the biotech, cleantech, and software sectors. On a combined basis those industries represent approximately 75 percent of the investments coming into San Diego.

“In the current environment, it remains very difficult to close a round of financing, the negotiations and complexity of the deal terms are expanding,” Kleeburg says. “We continue to see a few large deals close, those in excess of $25 million; however, the bulk of the deals that are closing are closer to the $5 million range. Most of these smaller rounds are going to later stage investments where the VC’s are several rounds into the company.”

Each rival maintains its data is the most authoritative, and that their numbers vary because of differences in the way each counts and categorizes venture deals. So what one firm counts as a cleantech deal in the first quarter might be counted in a different quarter by the other—or in a different category, such as energy or IT. Still, it’s pretty ridiculous to see such huge disparities.

Who should we believe? Who do you want to believe?

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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