MoneyTree Shows Drop in San Diego VC Funding, and Top 15 Deals

At a time when venture capital investments hit $17.5 billion nationwide—the highest quarterly level in 15 years—VCs invested only about $141.5 million in the San Diego region, according to MoneyTree data released today.

Second-quarter venture funding in San Diego was down about 48 percent from the previous quarter, when the MoneyTree Report found that venture firms invested over $270.6 million here. It also was down 38 percent from the second quarter of 2014, when VCs sank $227.5 million in San Diego.

The MoneyTree Report is prepared each quarter by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters.

VCs invested in 23 deals in San Diego during the second quarter—about 20 percent more than the 19 deals in the first quarter, and about 17 percent lower than the 27 companies that got venture funding in the same quarter last year.

Eight biotech companies accounted for $55 million of the total invested in San Diego, while five software companies got $62.5 million.

The software deals included a $20.5 million round that closed in early June for Nervana Systems, a San Diego startup that specializes in “deep learning” technology, a form of artificial intelligence that attempts to identify meaningful information from patterns in large data fields.

Deep learning technology “is intended to think about computation in a whole new way,” Nervana Systems CEO Naveen Rao said yesterday afternoon. Rao said he founded Nervana Systems in early 2014, after leaving Qualcomm’s neuromorphic research group with two co-founders, Amir Khosrowshahi and Arjun Bansal. They raised $600,000 in initial funding, and in August, Nervana raised another $3.3 million in a round led by Draper Fisher Jurvetson.

Nervana intends to apply its technology in multiple markets, including the Internet of Things, finance, agriculture, the oil and gas industry, and retail, Rao said. The company currently has 28 employees.

The San Francisco venture fund Data Collective led Nervana’s latest round, which was joined by AME Cloud Ventures, Allen & Co, DFJ, Fuel Capital Management, Lux Capital, the Omidyar Network, and an undisclosed investor.

Asked about the climate for venture capital funding in San Diego, Rao said, “We really wanted to be connected with the local startup scene and venture capital in San Diego, but we found that it moved at a pretty glacial pace. Folks in San Diego literally wanted to do a two-to-three month process.”

The top 15 deals in San Diego, according to MoneyTree, are:

Kyriba: Corporate treasury management software, $21.1M
Nervana Systems: Deep learning software and hardware, $20.5M
Classy: Online fund-raising platform for charitable causes, $18M
Adrenergics: Diagnostic biotechnology, $10M
Cadherx Therapeutics: Biotechnology, $10M
Calporta Therapeutics: Biotechnology, $10M
Ankasa Regenerative Therapeutics: Biotechnology, $8.5M
Hera Therapeutics: Biotechnology, $6.5M
MOGL Loyalty Services: Web-based customer loyalty program, $5.2M
RuiYi: Biotechnologies,  $5M
MicroPower Technologies: Security and surveillance electronics, $4.7M
Omniome: Healthcare services, $3.9M
Metacrine: Biotechnology, $3.5M
OneRoof Energy: Renewable (solar) energy, $3M
ScoreStream: Web-based software for recreational sports and games, $2.9M

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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