Jason Mendelson, the Elvis of Innovation, Offers Some Lessons for San Diego’s Tech Sector
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Padres-Giants game just after Labor Day. He founded TVC Capital as a boutique private equity fund that specializes in software investments, and he’s familiar with the local tech sector.
As I’ve previously reported, San Diego’s software industry accounts for the biggest workforce of any local technology sector, and more than a third of San Diego’s 5,900 private technology companies develop software.
Yet there is no center to San Diego’s software industry. We have a lot of companies in this region that are doing analytics and data mining—big data-crunching jobs for big customers. There are thousands of programmers developing embedded software systems for San Diego-based Qualcomm (NASDAQ: QCOM) and other hardware makers. And a lot of software engineers here work for Intuit (NASDAQ: INTU), and for dozens of government contractors like SAIC (NYSE: SAI), providing specialized IT services for intelligence and defense agencies like SPAWAR, the U.S. Navy’s Space and Naval Warfare Systems Command.
But software in San Diego is a scattered and disassociated industry. There is no critical mass, no synergy. For the software community, there is no here here.
As Spencer pointed out, the evaporation of San Diego’s rainmakers has only worsened the situation. With the exception of Avalon Ventures (also a Zynga investor), which raised $200 million for its ninth fund earlier this year, San Diego’s homegrown venture funds, including Enterprise Partners Venture Capital, Mission Ventures, and Shepherd Ventures, have largely depleted their tech funds.
Spencer’s TVC Capital specializes in software deals, but he’s focused on a specialized niche—small software companies with a mature, but under-valued business. JMI Equity, which ranks as San Diego’s biggest private equity fund (JMI raised $875 million for its seventh fund last November), has a similar narrow focus on even later-stage companies, often making substantial investments in well-established software companies with strong prospects for global expansion.
So it should come as no surprise that the young entrepreneurs who have started Web 2.0 and mobile app companies in San Diego have been operating mostly outside the region’s innovation establishment. They don’t see much point in … Next Page »