Connect’s Innovation Report Highlights Higher Federal Spending

A comprehensive snapshot of San Diego’s innovation economy shows a slowdown in new company formation, with 78 technology startups created during the three months that ended in September. But federal grants for basic research jumped to new highs, with funding awarded by the National Institutes of Health (NIH) up 44 percent and funding from the National Science Foundation (NSF) doubling over the previous quarter.

The total of 78 technology companies started during the third quarter is down about 24 percent from the 102 startups launched in the previous quarter, and is down about the same amount from the 103 companies created during the third quarter of 2008, according to the report released yesterday by Connect, a San Diego nonprofit group that promotes technology innovation and entrepreneurship.

Among other things, Connect’s innovation report compares innovation-related business activity in San Diego with the rest of California. So, for example, of the 78 companies launched in the San Diego area during the third quarter, 29 were life sciences companies and accounted for 21 percent of the 138 life sciences startups statewide—the most for any county in the state. Connect also counted 26 new software companies during the quarter (13.5 percent of 192 statewide), a modest uptick from the 22 launched in San Diego during the second quarter, and nine communications startups (8.7 percent of 103 statewide), compared with 14 in the previous quarter.

If nothing else, the report suggests that increased federal funding has helped to mitigate the pullback of private capital over the past year. The total venture capital invested in San Diego during the first nine months this year, $580 million in 75 deals, is well behind the pace of 2008, when $1.2 billion was invested in 126 deals here over the year. NIH grants to San Diego biomedical researchers climbed to $383 million during the third quarter, a 44 percent gain over the $265 million awarded in the second quarter. Funding from the NSF also increased to $114.5 million during the quarter, from $56.3 million in the previous quarter.

Venture capital funding in the region, as we reported here, increased

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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.