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

Money Tree

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

Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.