San Diego Tech News Weekly – April 1, 2022

Startups get the party. Startups get the party started. Startups get the party. Startups get the party started. You want tech and tacos? Tacos and tech, you know we got tacos and tech is all smashed Border green guacamole keeper captains counting beans Contador Quentan three holies founders trying to raise some queso Be the San Diego school of rappy rapping Fire tortillas round jalapenos in these modern times a craft beer and coffee my coating yoga posse body origami we be serving coronado eating tacos el gordo the tacos stand in puesto lucha libre and sombrero got a shout out Tacos angels by the ocean watch the sunset La Hoya shores Entrepreneurs trying to get funded when San Diego Startup Week is popping in the summer Oceanside, the Tea Iuana St. Be full of hustlers from couch surfing to penthouses right on the beach Tech leaders who believe stars are within reach we interview and founders who be shooting for the Moon SD TechOS with your host, Neil Bloom. Startups get the party. Startups get the party started.

Welcome to the Talk. Hello. Hello, everybody. Hey, everybody. Happy Friday. Give me some emojis if you can hear me because I'm in a space where I don't know if I've got good service.

You sound good to me.

Okay, you were supposed to give me a thumbs up during the music. All right, well, thanks, everyone. Jonah, good to see you. How are you?

I'm good, I'm good. Maybe a little lag, though.

Oh, okay.

But let's. How's this sound? Now I'm getting. I'm finding myself a new place. I'm getting some new Internet.

Okay, everyone else, you can hear us.

Okay.

All right, thanks, James. Appreciate that. And Matt, good to have you here on our Fridays. If you're not listening to this on a Friday, it's because you're listening to the recording of it. So thanks for tuning in later as well, which we do put this out every week. Well, we try to. When I remember to hit record on Twitter, request to Twitter. Just auto record everything, you know. And also another while we're talking about requests, find an easier way to get us the file. But in either case, we're really stoked to have you here. I am myself, parked and perched in Torrey Pines golf course parking lot, getting ready to play some holes with a bunch of entrepreneurs here in San Diego this afternoon. It's a beautiful day. I'm excited about it. I've never actually played a full 18 holes of golf, and I don't think I will today either. I don't have the attention span, so we'll see how it goes. But, Joni, you golfing this weekend? The weather's there for it. We might be experiencing some lag.

Hey, I think my Internet just crashed. Are we back?

Okay. Hey, can you hear me?

Wow. Yeah, you sound good. We're just having a lovely Friday.

Yeah, it's Friday for sure. We don't want to be here on Twitter. We want to be outside. Right. Something else I got going on this weekend. Might as well just tell you my whole schedule. I'm running the. The La Jolla half tomorrow, so I'll actually be running right through Torrey Pines all over again, starting in Del Mar, ending in downtown La Jolla. If you're along the route, come out and, you know, tell me to run faster, because I definitely know I could use the encouragement. So if anyone else is running the La Jolla Half Marathon, I'll see you out there. It's a fun one. Start at Del Mar Fairgrounds and in downtown La Jolla. So lots going on this weekend. Let's jump into our stories. I'm an entrepreneur, investor, community builder. I didn't even give my intro here. Sorry. But I think some of you know us, we tell the tech news on Fridays. We do it in, you know, kind of a back and forth way between me and Jonah. If you'd like to join in, just raise your hand. Happy to have you. The wind chimes are telling us it's time for. For Jonah to give his background.

Yeah. What's up? Hey. I was just climbing. I was climbing up to take the wind chimes down. I was like. I was like, oh, this is getting crazy. I've had a couple experiences where people think that their phone is buzzing. Anyways, yeah, Jonah Peake here, friends with Neil. We kind of linked up during the pandemic and just started throwing tech news around. And so backgrounds is, you know, on demand tech. We've got some in the background. And then, you know, then went a little bit smaller with some early seed stage companies, and now just going headfirst into crypto. I love the San Diego crypto scene. I love Ethan SD's new logo. What's up, guys? And, you know, we're looking big and small tech in all corners of San Diego. And actually we've got some sort of a fun slice of what's going on in the city here with the stories that we gathered this week.

Yeah, let's jump into it. The first one, one of our favorite topics to cover is the diabetes tech space of San Diego. We love the diabetes tech space not just because Jonah is a member and also the president, but because there's such a density of it here of just diabetes tech. And so 9am health just raising a fresh clean 16 million is in a series A for a virtual health clinic. It's kind of a subscription plan to help those with diabetes or those soon to have it kind of the pre diabetes which is tens of millions of people. You want to take us through this one because I know it's near and dear to your heart.

And one thing that we really love about this type of tech and kind of diabetes space is it sort of touches our biotech industry and it touches our hardware industry a lot and, and kind of marries the two. So they're really focused heavily on type 2 diabetes. I'm super familiar with type 1, I live with type 1. So there's the sort of, the regiments are a little bit different. It's kind of like you know, take, take insulin with meals or in some cases, you know, we've got fun, fun pumps that we're wearing, things of that nature. But when sometimes with you can see with type 2 and that's what we're seeing with 9am is that there's a lot of different ways that you can treat barely medication related. So with type one it's kind of like you're insulin dependent, you just need insulin. With type 2 you're a little more resistant so you can change your habits. If you add diet, exercise, some medications, you're not necessarily taking insulin and you're not necessarily needing, you know, that type of regimen which can be a little bit more complex to manage because one person might benefit from exercise, one might need to change their diet and one might need some medication. So that's what's really cool about what 9am Health is doing. They're bringing lab tests to people's homes. They're actually able to ship and send medications. But they're doing kind of another piece that's kind of cool and that's in the telemedicine angle so that you can actually get some live support too. So you're kind of hitting all these different pieces and the advantage I think potentially of diet and your exercise in, in check and you can really focus heavily. You know, you can, you can kind of, I don't necessarily want to use the word cure yourself, but you can bounce right back and kind of if you will. So that's what's really cool about what they're doing is they're actually able to really help new clever way. So I think Neil, you, you know them from the, from previous companies. I think the founder's been in the space for, for a while. Is that right?

Yeah, yeah. Serial entrepreneur who has type 1 diabetes as well, built and sold a previous diabetes company I think called My Sugar, I think was his company. I may be confusing that with someone else. So Frank Westerman, who's also joined Analog Capital as well. So we're close to him and separately we've found we've both invested in some diabetes tech deals, including Luna Diabetes, a stealth mode company here in the diabetes space. So yeah, he's got a lot of veins in the diabetes tech world here. He moved here from Europe to Encinitas during the pandemic, I believe. Super cool. His company is in, I think they're in Leucadia or at least Encinitas area is where 9am is headquartered. And you know, it's super cool to see him going and doing another, another diabetes tech play and it's not this one. You know, like we said, it's a little bit more software focused in that regard too. Software and services based. So super cool to see them growing and doing well here. A lot of good talent to experienced talent to pool offer. So Frank, congrats on the continued growth.

Yeah. And one thing that maybe this is kind of a testament to a founder knowing their industry so incredibly well when they move into it. You know, he's built the company, sold it and started another. You know, this isn't really an example of I'm going into this business because the market's huge. Yeah, maybe it is. But you know, they know it intimately well. Or he knows it intimately well. That's why he's, you know, he's seen the success there. And so I just like to call that out for, for anyone who's kind of like looking to say, hey, I want to start a business, I want to get into something, you see if you can know it a little bit more intimately. Really is hugely helpful.

Totally agree with that. Why don't we jump into our next story. This is a great story around some trends for micro business owners. So San Diego came out ranking number one in women owned micro businesses being started over the past year. This is super cool. I love that we are doing well in this space. I have often felt that the female entrepreneur resource community is significant in San Diego compared to what I've seen in other communities. And it's hard to Measure that typically because there's so many companies out there that are spun up that it's hard to track them all down. But in this scenario, GoDaddy Venture Forward did a really great study tracking online micro businesses. And so we've got some great data out of this. Do you want to share some of that as we dive in?

Yeah, this was really, really cool. So they're going to be able to have a really good picture on, on the businesses being started and growing and looks like they, they went through 20 million online micro businesses and micro, you know, kind of small earlier state but they, through that data they found 54.3% of the new businesses were, were women founded which is a 10% jump versus pre pandemic level. So really kind of shifting in a positive way. You know, if you can find silver linings in the pandemic, this is one of them. And it's really cool to see that San Diego's at the top. You know, it's a, I not necessarily would have guessed it. It's kind of hard to tell. You know, a lot of these businesses are like they said micro so it's 12 people running them. But you know, we're the, we're one of the only, you know, top tier cities that's, that's on the list and obviously leading the list. But you know, behind us you have St. Louis at the top. And what we sometimes forget is it's like because there's one or two people, that doesn't mean it can't grow into be a massive business either. Many businesses that are successful start pretty small and intimate. But this also kind of goes outside of the realm of tech. There's some ice cream shops in there and some other businesses. But what's even cooler is their research found that for every, you know, everyday entrepreneur they call them two plus jobs are created. So the more businesses that are being founded, regardless of the size, the more jobs that come out of it. And so, you know, if we keep staying at the top, you know, economically we're going to be doing incredibly well. As businesses start, people need to get hired and then people get a taste of startups, they can understand kind of what it takes to build them and maybe that trickles down and we kind of continue to build even more and more. So this was super cool to see. I love, I love that we're leading this.

Totally agree. And I would say, you know, it's not by accident potentially in San Diego. Right? Not a knock to the fact that our entrepreneurs are fantastic here. But you know, by design, there's a lot of resources obviously focused on specific areas. Like the city of San Diego has the Jacobs Connect, all at the Jacobs center focus on entrepreneurship in specific, like zip codes, literally. So that's by design to make sure that we're helping people who maybe have an area that wouldn't get to see entrepreneurship and then, you know, be able to measure it and say, you know, if we put some inputs in now, we can see some outputs. It's a really big deal. So a few of those related to that startup San Diego, which is focused to have a lot of diversity on its board and organizing volunteer group because of that, has seen almost near gender parity in terms of attendance at its yearly San Diego Startup Week for four years in a row now. I think we were averaging about 44% of attendees at Startup Week were women, which at a normal tech conference is usually about 10%. So almost a 4x increase because of the kinds of speakers, the messaging and the outreach, I believe was more conducive to inclusive of our community as well. The same thing around female focused entrepreneurship incubators, accelerators, angel syndicates. So these are, I'm talking ad, Astra, Stella Labs and Crescent Ridge Ventures. These are all focused on making sure we're, we're doing better in areas where we weren't before. So it's super cool to see that, you know, now we're seeing some output from it and we're not done here. We're really only beginning to make sure that we're leveling the playing field for everyone.

And you know what, it's amazing to see micro businesses starting up like this. A lot of times it doesn't take mega capital to really get going, which I'm attempting to segue us into the next one, which is a good thing because it seems like we're not hitting that sort of last year's level of funding, at least up to this point. I don't know. Do you want to take us through some of those stats that you're seeing?

Yeah, and we touched on this a few weeks ago, but Mike Freeman put out an even better updated story in the Union Tribune this week. A pretty Steep decline in Q1 venture funding inflow in San Diego a year ago, which by the way is not the normal, I would say was a high, high watermark so far. To date. A year ago, there was 3 billion just in Q1 alone invested in San Diego companies. You know, that was through before three years ago. That was the total year's amount that San Diego was doing and that we did that in a whole quarter compared to this quarter, Q1, 2022 we only did to 970 million. But honestly that is a, that was a pretty good quarter for us pre2021 as well too. So yes, big drop off from that. Now I will say looking at 1/4 alone, isolated is not great practice in venture capital because from when companies actually raise money to when it gets reported to when it's recorded on these databases, it's pretty wishy washy, especially in Q1. Like a deal may have closed on December 31st and it showed up in Q4 but wasn't announced until March, honestly, or even April sometimes. So I like to see two to three quarters in a row to really see trend lines because just the Q4 to Q1 nature really that in its own regard is weird as well as people coming back from vacations and taking longer to close deals could end up closing in Q2. So yeah, I would say not to be alarmed yet, but it is representative of what is happening in the world right now where the IPO market has really kind of closed because the stock market's down, especially both in tech and biotech, both not doing great stock wise. Which just gives a general scare to everyone that opens up their brokerage account in the morning is like, oh man, a bad day, red day. I'm going to be a little more conservative in my decision making today. Now investors in general, we're long term thinkers, we're ten year out thinkers. So we're not worried about what the stock market's doing today for a seed investment. Right. Because we're like this is not going to exit for 10 years. We can't allow that to decide if we're going to make the investment or not. But it does seep into all areas. And I'm talking about from the institutional money, these are pension funds that are deploying capital into venture funds. If the rest of their portfolio is down, they're being a little more conservative. They're writing Instead of a $500 million check to, you know, to a softbank, they're writing a hundred million dollar check which that could have really changed the fund size and that trickles all the way down to your entrepreneur who's trying to raise today. So you know, market conditions are real. The other area that it's affecting us is because the stock market's down, not as many companies are going public. Right. And so that also means two things. One, if you were about to go public, you're waiting now, which means you need more private funding to stay alive before you access public funds. And it also means that investors aren't getting that exit as soon as they're planning, which means they aren't going to deploy as much capital because they've been expecting an exit that now may take another year or two as well too. So all those things happen. Like, it's really like the chaos theory, a butterflies wing flapping, you know, in Japan can Chris, Tsunami in, in San Diego. So it's real and we're seeing the effects of it.

That is true. And maybe the analogy would be butterfly in Ukraine. But you know, I think, I think, I think that's a factor as well. And, and you know, people just the uneasiness, I think people like you said, I mean you said that investors are typically long term thinkers, which is super important. But then you also need to realize you're locking up your funds for, for the long term. And so in the short term, if it's, if it's a little sketchier out there economically, you might want to, you know, you might do a little extra due diligence or wait a little bit longer. So it'd be interesting to see. And like you said, you know, Q2 might be different than 3. And so I think we just need to keep an eye on it. But I think one thing that you did point out which is super important is this isn't like a San Diego specific trend. It seems to be across the board. And so maybe, you know, maybe it's, I wouldn't necessarily say that, you know, we're all that worried about our city, but it would be nice for the whole, you know, economy to come back.

Yeah, well, actually, let's talk through that a little bit because certain cities actually saw a positive gain quarter over year over year in the same quarter. So cities like DC, Austin, Miami, actually from Q1 2021 to 2022 actually saw a positive gain in venture capital inflow. But still, like I said, it's hard to compare Q1 because some of those could be Q4s or Q2s that did or didn't get reported at the right time. But and some of those cities have been low in general. Like Miami actually has a pretty low. They're about, I do about a third, if not a fourth, the venture capital that San Diego does. So you know, they could still be just kind of on the rise while we're having a down quarter because of our nature as well. There largely our biggest deals were biotech deals of Q1 and the One thing I will say is that while we had a third of the venture capital, it wasn't a third third. Like it wasn't a 66% decrease in the number of companies that got funded. So, for example, 117 firms raised money in Q1, 2021 in San Diego, and 67 companies raised money in Q1 of 2022 in San Diego. So a lot. So more companies got funded volume wise, but dollar amount, you know, was down. So maybe that means more early stage companies got funded. Right. Which are small checks. And maybe a year ago they were all big checks. So they're all like later stage rounds too. So these are all pieces that we're looking at. You know, this is why you hire us here on Friday to dissect the news. We go in and we put a fine tooth comb to it. So yeah, we'll keep an eye on this Q2, we'll do the same thing, look at where we're at and see if there's any trends we can pull from it. But in the one thing that we can see, we saw a trend is that while M and A is a little quieter for our companies getting acquired, our local companies are acquiring other companies. And so there's in this next story, Halozyme Therapeutics, public company here is buying Antares Pharma for nearly a billion in straight cash. And so you'd love to see that happening, those kinds of big transactions happening. You want to take us through a little bit of this acquisition, Jonah?

Yeah, that's awesome and thanks. There's like a whole class, I think that needs to be taken for how to read biotech names. So thanks for knocking that out of the way. I think that's amazing. So, yeah, Hallowzyne, Big, big biopharmaceutical company. I hadn't heard of them before this, which is funny because I think that's not. That's pretty typical of some of these companies. They're massive and you just kind of, you just like. They fly under the radar. But what they do is they help companies deploy quickly and easily patent drugs, which is interesting. The company they're buying is out of New Jersey. They make generic EpiPens, which you might have heard of. Quick shot, big shot. And they also have a testosterone replacement therapy. So those kind of seem like slightly different things because halazyne is a little bit more, you know, they develop the drugs, but what this sort of combination does, which is interesting, is gives them the development and the, this sort of method to deploy the medication. So when they roll in sort of these, these Penn Injection types. They can kind of start to really build out what they are as a company. But they did try themselves to develop an oncology drug, Halazine, and it didn't actually go that well. It was focused on pancreatic cancer, kind of bombed and it ended up resulting in a number of layoffs. But they're saying, hey, why don't we move into the space through an acquisition? So they shifted their focus and said, hey, why don't we make a technology that is reducing the treatment time from hours to minutes. And so what they've done is instead of using sort of the drip technology that you've seen, you might have seen they're actually able to do this through the skin using a technique that has to do with sugars. I'm not super sure how this works, but essentially instead of sitting there for hours getting the drug deployed into your body, you can deploy it pretty quickly, giving a lot more freedom to patients. But really what they do is they make a ton of money by partnering with some of the big guys, the Roche, the Pfizers of the world, for royalties on their deployment methods. And by rolling in terrorists, they're able to actually kind of improve their suite of sort of deployment methods using that BPEN technology. Pretty cool stuff.

Super cool. Interesting to see. Great to see, you know, San Diego companies flexing their wings like this. Speaking of butterflies and you know I haven't checked out their stock in a bit. I know biotechs are down worth might looking at a adding to the, the San Diego biotech watcher that we've got and actually that's a good shout out. We actually have a public facing spreadsheet that is all the San Diego public companies. Jonah did some good legwork on it where it actually is updating in real time it's stock price but we've got some legacy data on it around market cap when they went public, amount they raised when they went public. We've been using it for some indexing which is kind of cool to see. So let us know if you want to see it. I'm sure you can find actually it's linked in our 2021 annual review article that we did on freshbrewtech.com so type in on search, go to 2021 Review. You'll actually see a link to our SD public spreadsheet if that is of interest to you.

Pretty cool. And one thing that's fun to do depending if you're investing or not, it's just fun to See some of the big companies that are in this city that you might not have realized. So there's, there's a ton on there. It's worth poking through, so I definitely recommend it.

A quick view of Halloween real quick. Which is Halo. Nice, nice, nice ticker. You know, they're up Halo.

Love that.

They're up 233% over five years. They're down 9% over the last year, but they're up nearly 21% over the last three months, which I would say is unique for a biotech in this environment right now. So cool to see go Halo.

Hey, let's wrap it up with a few shout outs.

Yeah, yeah, definitely some shout outs. So real quick on the fundraising side, we'll go to that one first. A company close to our community here is Mosaic Tech, a financial dashboard and forecasting platform. Raised a solid series B of 25 million from founders Fund, Peter Thiel's group. This is a cool group of guys. Bijan and Joe, who we had on the podcast previously moved to San Diego just before the pandemic and were out of Palantir. Actually, they were both Palantir guys and then both were finance guys at Palantir and other tech companies in the bay and built a platform off of their own pains. So great to see Mosaic Tech raising Joe and Bij. Congrats, guys, and keep up the good work. You got a shout out here to how San Diegans are helping themselves during this housing craziness that's going on.

Yeah. So obviously the housing is getting crazy in San Diego, but we're, we're sort of increasingly, I guess, dissolving the border, Southern border. It looks like more San Diegans are moving to Mexico to save money on housing. So there, you know, there's a story where, you know, you can get waterfront homes in TJ for, you know, two to 600amonth, whereas that would get you a bedroom in A. In A2, 1 and in Chula Vista or East Lake area. And now that the border is getting a little bit easier to cross through, you know, we're seeing, or. And you know, actual physical place maybe doesn't matter quite as much. I mean, it sounds, it sounds pretty enticing to head down there and then, you know, maybe zip south a little bit for some wine and buy it. So we're seeing a little bit of a trend here. I'm sure we all have co workers that commute in from tj, but it's cool to see that sort of international flavor that we're we're having there, and unfortunately it's driven by, you know, some of the housing prices, but it sounds like there's some pretty cool spots you can get down there. So a few of my friends have actually move down there and commute in when they need to. So super, super fun to see. Yeah, totally, totally cool. So I love seeing that.

We had, you know, I don't know if you remember, we did have a few members of Startup San Diego who were doing that. Leandro, who was a. Was a San Diego Startup San Diego volunteer and also TCA analyst, was living, I know, at the beach in TJ and coming up. So that's another example too. And then he moved to Chicago. We missed Leandro, but we know he's doing some good work investing in a Midwest focused venture fund.

That's right.

But yeah, if you've thought about moving across the border, give us a shout and tell us how and why you made the decision and what's it like. And hopefully we'll get Startup Week to do its opening day again back in Tijuana. We've done that the last three years pre pandemic. We would love to, like you said, reduce that border between our two communities and really show the two ecosystems are one, even living there now too. So super cool to see. Yeah. And that's a show. That's a wrap.

That's it.

Thank you all for joining in again. Happy Friday, or whatever day it is that you practice listening in to this week in San Diego Tech. We know it's a holiday weekend for a lot of people, so. So enjoy the holiday weekend and share this recording. Once we hit stop here, it will be live on Twitter so you can share the recording with others. And we will put this out on the Tacos and Tech podcast network, probably this weekend as well too. Send us stories you want us to cover and wish you all well. Jonah, have a good weekend. And to all you as well too.

Hey, you too. You know, we're out of here, but Twitter never closes. Find us online. What? We'd love to chat.

Absolutely. Cheers, everyone. See you next Friday, 12:30. See ya.