San Diego Tech News Weekly – July 24, 2023

Foreign. Good to hear you all. This is Neil Bloom. Fred Greer here coming to you live or whenever you're listening to this recording for this week in San Diego Tech news. My name is Neil Bloom. I have both a tech blog and podcast, Fresh Brew, Tech tacos and tech podcast, and an investment fund full of operators and founders called Interlock Capital. And this is my co host, Fred. Hey, Fred.

Hello. Hello. I'm Fred Greer, journalist and author of SD Fowler Substack. I've been covering the tech ecosystem here in San Diego for over three years, covering the ins and outs of the startup world and much of that time breaking news on ipo, fundraising rounds and M and A. Happy to be here.

Great to have you here. And let's kick right into your latest Q2VC report that you put out on SD founders.subsect.com you crunch the numbers of the fundings, but also the acquisitions that happened last quarter. You want to take us through some of that data?

Yes. So essentially this is a Q2 report looking at tech deals, life science deals, consumer deals. So for Q2, we saw 1.1 billion invested into San Diego companies. And then we looked at kind of the top companies from tech, life science and consumer. Some of those were platform science, which raised 100 million, measurable raised 93 million. And we also had some top biotech and consumer deals. So for biotech, we had Avenzo therapeutic, they raised 196 million, which is like a growth round. Boundless Bio is a mid stage Biotech company, raised 100 million. We also had some really unique consumer deals. There was one that, you know, stuck out to me, which was Ashland Hard Seltzer. They had to raise a, you know, a measly 2.2 million funding round. But what's cool about that, they raised, you know, you know, money from over 30 celebrities, actors and athletes. And so across the board, we saw, you know, a lot of different companies. It was just healthy to see that not only it wasn't just biotech, it wasn't just tech, it was spread across the board from the three sectors.

Yeah, Ashlyn, if you don't know Ashlyn, we got to do a separate issue on that. Ashland founder Josh Landon. This is not his first rodeo, his whole, this is maybe his third alcohol investment company or alcohol company that he's raised from. And his whole style is getting celebrities involved. So his first was Saint Archer, the brewery he built and sold to Morrison Molson Coors. So this is a deeper story worth talking about. So glad you calling out consumers separately.

On that yeah, and the data was all pulled from the Connect San Diego Venture Group. They tracked the funding from the, from the SEC and other other trackers like Crunchbase. And so this is, these numbers are, you know, estimated. So we could have raised a little bit more than 1.1, but I would say this is pretty healthy compared to other ecosystems. You know, San Diego is behind San Francisco, Boston and LA, but not too far behind. You know, Washington D.C. raised 1.3 billion for the second quarter. LA had 1.9 billion and then Boston 4.5 and San Francisco 16.1 billion. So still San Diego is in a top 10 tech hub and you know, it's not slowing down. You know, some, some ecosystems are struggling and San Diego hasn't.

No, to, to be right there actually with any of those ones you mentioned, which are top five is consistent where we are. We have pretty much been for four years now always sixth or seventh in the top 10. So I, even beyond, I Ivy always looked even deeper than just top 10 because we've been top 10 for four or five years. I always look like, are we ever nudging into the top five and is anyone else coming up lower in the 10 or beyond 10 coming up? I know there's an online conversation on LinkedIn with, with a Austin transplant, San Diegan that we've been talking and sharing, sharing numbers on. Did you end up seeing where we landed compared to Austin on the quarter?

Yeah, so it looks like Austin are, are not on par with where they are where they were pre pandemic. And you know, I actually did exchange some, some messages and just share that, you know, we are kind of on par with our pre pandemic levels, but Austin's not too far far from behind us. And you know, largely the, the, the, the, the funding has been impacted by, you know, raising rising interest rates and investors, you know, not making as many deals. And so we'll look and see if it picks up in the second half of 2023. But you know, I think, you know, the, the message here is the ecosystem remains strong and Austin is not too far behind San Diego.

Yeah, makes sense. Yeah, I mean, I, I think what we're seeing in total numbers like 2021 was just this crazy year. 2022 was obviously down from that, but not too far different from 2020. And I think we're going to probably going to end up similarly like 2019 and 2020 are going to be still good benchmarks or baselines for venture funding, which is way up for San Diego compared to where we were 10 and five years ago. So it's good to hyper focus in sure quarter by quarter. But you know, the yearly five year average, if you will, is still pretty good for San Diego in that regard.

I agree. I hope to see more awareness on what's happening in San Diego. Carta puts out great data and starting to include San Diego in that data set. We'd love to see others follow suit and we will continue to bring local coverage on this. In the meantime.

Yeah, something that happened just into Q2 or Q3, so we'll be on the next report is a massive exit on the life sciences side. DTX Pharma San Diego based pharmaceutical company recently acquired. I think it was announced a week ago or it was announced, you know, Friday, July 14th I believe. But the news really started to trickle out this week of what does that mean for everyone. It was a billion dollar acquisition, but in chunks. 500 million up front and 500 million in milestone based earnouts. A significant number of local investors involved from the angel level from new Fund or Tecos Angels, how it was named, when it was full, when it was funded a few years ago. And I've got some interesting data points around that. But anything you want to add there around the acquisition? Fred?

Yeah, I would say this is a huge home run. I remember covering them at the Business Journal 2021 when they had raised, you know, a couple million from angels and VCs and to see them get acquired two years later for half a billion dollars and with incentives that it can even bring to a billion dollar deal, it's just pretty impressive to see that a local biotech company here that was spun up under 5 years ago get acquired for such a large amount.

Yeah, so they're an XRNA platform kind of focused on in the neuroscience world on I think unique and rare diseases is kind of the focus of their potential therapies. And they were acquired by Novartis, a European company who is not their foray into San Diego acquisitions here at all. So big bio buying startup bio is kind of the bread and butter of the biotech world and why our world here in Senegal on the life sciences side is so, you know, recyclable, meaning exits happen and the same talent, same and same capital goes into creating the next one. And a great example of that is finally kind of being at the seat of it. I'm a LP in New Fund Ventures. We put out an annual fund every year that is raised from members. So each year they raise a bit, invest that fully exhausted and then raise a new Fund which is unique for a fund per se. And so this is I'll share just some kind of internal messaging between us as LPs that has been shared that you know this is the first deal that we invested in that is actually returning the full fund amount. So that's a big deal to get one investment to return our permit our whole fund raise. And what's great about it is that a local or a member is the one who found the deal. Knew already knew the founder knew Artie. The CEO and founder Jeff Friedman who heads up Life Science Diligence did the work of assembling the Life Science team to dive in on the diligence and and get both the new fund 2019 fund and individual angels to invest as well. So ultimately Jeff Friedman actually became a full time employee of the company. Felt so compelled and so much conviction came a CEO came became the COO of this early stage preclinical drug discovery. So quite the conviction there. And we're seeing between the earnouts we're seeing first chunk would be 6 to 8x return on multiple of the 500 million and upwards of 15 to 17x return with the with if the second 500 million cash is in one of the members in within new fund did some back of the envelope math to determine what the total dollar amount would be. Let's say the full billion is actualized or realized and there is $100 million would be coming back to just new fund members alone between the fund and the individual angel checks. That is, that is significant. That is money that is, you know is going to be recycled back into the community through other investments. So to see that big of an ownership chunk is a pretty big deal and we're pretty proud to see that. And that's why we talk about Life Science as being such a mature area field because this happens and we need to now bring fill the gap on the same side of the tech side we need the tech exits but we need to be investing in a bunch of tech locally in our own tech so that when the exits happen the same thing will happen. We will reinvest into founders there as well too. So I'm pretty excited to get a return from this personally and I'm going to be taking this Life Science win and putting the money into tech deals and hopefully you know, in 10 years or less see returns as well here. So pretty cool thing to see. Well congrats to DTX and everyone involved a few things. Let's talk about some events we can do a little. So recently Last weekend we had SDX Hackathon, a two day AI hackathon. I went and joined the last day and saw the pitches. They had a few hundred people participate where they were submitting ideas, hacking and then there was workshops going on all day. One, day two was starting to flush some of these ideas and start presenting them to judges and mentors and start to see, you know, down select who, who has something ready to present to the group. And by the end of the day I think they took 17 submissions and brought that down to the top nine and pitched that to a panel of 10 experts from a variety areas of AI. Experts like Arjun Bonsal, you know, a serial AI founder and investor was on the judging team as well as Andy White from Keshe Ventures who helped spin up this group as well. So the event was awesome. It was so cool to see from students to, you know, serial founders here, serial product managers out crunching either on their own or built a team, recruited other just attendees to kind of join. I ran into some people from LA who came down for this, including the guy who runs AILA nonprofit there came down Todd for the day, recruited was cool to see. So and they'd actually asked, they asked the room, hey, who here is not from San Diego? And there was probably a third of the room who came in just for this weekend AI Hackathon. So I know the team was really excited how it all happened, played out. They had Qualcomm sponsor both financially and give access to their platform to build on top of which was cool to see and I know this team is ready to go do this again. So we'll expect another SDX event before the end of the year and really cool to see. You can see more online if you go to SDX Community on any of their social handles. You can see a lot of people posting and retrospectives from it. Anything comments on that Fred, or talk about some of the things coming up.

That's great to see. Congrats to SDX AI and love to see their community building in the AI community. Yeah, I just wanted to call out September 14th is Innovation Day, which is Connect San Diego's you know, flagship event. There's going to be hundreds of startup folks, VCs and tech professionals gathering at America's finest ballpark, Petco Park. I will be there and it's a great networking opportunity and get exposure to the ecosystem. So tickets are now live I think. Neil.

Yeah. Go to connect.org look for Innovation Day 2023 and you can now get tickets to that which is awesome. Before then, we are doing our Ag Next Ag tech gathering on September 17th. Actually moved it in a week. So look@freshbrewedtech.com events and you can find links to that. And the week now, the week after September 24th is the Nucleate Summit, which is an entrepreneurial PhD program globally that really tries to get people who are in PhDs or postdoc programs to expose them to entrepreneurship. So the global summit for that is happening in San Diego and we're actually going to do a whole ag tech lounge where you can go and get anyone who's focused on actually interlock specifically and I'll bring a whole crew of people there to kind of help mentor any of the PhD or postdocs who are starting to think down this path. So excited to bring kind of this agtech world and the investment and experience founder world together with obviously the world's renowned scientist there as well too. So if you are interested in seeing that code, look for Nucleate Summit San Diego on August 24th. Without further ado, thank you all very much for tuning in. Try to do this weekly. Share this with someone you know and make sure you check out Fred's substack@sdfounders.subsect.com and for other tech news locally, fresh BrewTech.com for our podcast as well. Thank you all very much. Take care, Fred.

Thanks Neil. See you next time.

Definitely.