What a difference a megadeal (or two) can make.
After the national MoneyTree Report was released last week, PricewaterhouseCoopers partner Ryan Spencer said he spent time on a call with Thomson Reuters, which provides the raw data, trying to figure out a change in the numbers for venture capital activity in San Diego.
PricewaterhouseCoopers and the National Venture Capital Association use the Thomson Reuters data to prepare the MoneyTree Report on venture capital activity every quarter. But the San Diego data was off.
The problem wasn’t in the second-quarter data. For the three months that ended June 30, the regional data showed that venture capital firms had invested $350.5 million in 19 companies in San Diego. That was OK, Spencer said.
The problem was a big change in the preceding quarter, which (erroneously) showed $361.5 million invested in 23 San Diego companies. When the first-quarter MoneyTree Report came out in April, it showed that venture firms had invested only $253.2 million in 21 San Diego startups.
It’s not that unusual to see revisions in prior quarters as more deals get reported, Spencer said. Still, the addition of two deals had increased total funding in the first quarter data by $108 million—or more than 42 percent.
The answer: One of the two deals added since mid-April was a $100 million “megadeal” (i.e. $100 million or more in venture funding). It was Grail, the liquid biopsy startup founded in January with initial funding from Illumina, Arch Venture Partners, Bezos Expeditions, Bill Gates, and Sutter Hill Ventures.
Grail (aka Grail Bio) was spun out of San Diego-based Illumina (NASDAQ: [[ticker:ILMN]]), but Grail is based in Redwood City, CA. The $100 million “megadeal” was misreported, Spencer said. It should have been included in the MoneyTree data for Silicon Valley, and should be deleted from San Diego’s first-quarter data. “We’re going to have to restate the quarter,” he quipped, with an auditor’s twinge of regret in his voice.
The second deal involved Dauntless 1, a specialty drug developer founded under the auspices of San Diego’s Dauntless Pharmaceuticals. Dauntless 1 raised $8 million during the first quarter from an unnamed venture firm, which wasn’t officially reported until the second quarter, when the startup raised an additional $4 million, according to MoneyTree data. “It was an appropriate adjustment that was not previously reported” by the semi-stealthy company, Spencer said.
With both deals properly accounted for, first-quarter venture funding in San Diego totaled $261.5 million (in 22 companies). So the $350.5 million that VCs invested here during the second quarter represents a 34 percent increase over the prior quarter (instead of a 3 percent decline).
But here again, the picture is distorted by another megadeal.
Of the $350.5 million that VCs invested in San Diego during the second quarter, most of it came from a $220 million megadeal for Human Longevity, the precision medicine startup founded by human genome pioneer J. Craig Venter. In fact, the Human Longevity megadeal represents the single biggest VC deal ever in San Diego, according to MoneyTree data that dates to 1995. The investors included Illumina, Celgene, and GE Ventures.
(A better comparison for the recent quarter might be the second-quarter of 2015, when VCs invested almost $134 million in 23 San Diego deals, according to the latest MoneyTree data. By this measure, total venture funding jumped by more than 161 percent.)
“Overall, it was a pretty good quarter,” Spencer said.
Dow Jones VentureSource, which also tracks quarterly venture capital activity, had lower second-quarter numbers for San Diego—with 20 companies raising a total of almost $104.2 million. The Human Longevity megadeal, however, was not included in the Dow Jones VentureSource data. VentureSource had already pulled Human Longevity’s funding into its total for San Diego’s first-quarter data.
The top 10 San Diego deals, based on MoneyTree data, are:
| Human Longevity | San Diego | Biotech | $220 million |
| Seismic | Solana Beach | Software | $40 million |
| Suneva Medical | San Diego | Consumer | $25 million |
| Obalon Therapeutics | Carlsbad | Medical Device | $15.8 million |
| Ostendo Technologies | Carlsbad | Media | $9.9 million |
| Omniome | San Diego | Medical Device | $8.4 million |
| AnaBios | San Diego | Biotech | $5.1 million |
| AristaMD | San Diego | Software | $5 million |
| SlantRange | San Diego | Software | $5 million |
| Dauntless 1 | San Diego | Biotech | $4 million |
