This Week in San Diego Tech - January 9, 2025

Hello. Hello everyone. Neil and Fred, your San Diego tech besties back with you. Fred, how you doing?

Doing pretty good, Neil, how are you doing? Happy New Year.

Thanks. Happy New Year to you too. Yeah, doing well. I feel like we can keep saying that for like another week or two and then it'll be played out. But I'm excited for we had a few weeks of like get back into the head space of the year and then events are about to start next week like Big Time Techcon, SoCal and Happy Hours of that. But you're about to jump off into a big trip overseas. Can you tell us where you're headed for the next few weeks?

Yeah, so I'm actually headed to Japan for 10 days, going to Hong Kong and Tokyo. We were actually talking before starting the podcast. You actually been nailed to Japan. How was your experience there?

I've been to Hong Kong, haven't been in Japan yet. I would love to do it. Hong Kong's amazing. I don't know the tech scene there at all. And I was there pre post like Hong Kong splitting off or reunifying with China kind of thing. So I'm interested to hear what you think when you see it. But I think you're going to have like these are the two biggest, densest cities on the planet. So I am excited to hear your takebacks on the food, on the people, on just like everything. So can't wait to hear what it's like and safe travels.

Thank you. Yeah, I'm super excited and definitely a busy time. You know there's JP Morgan's going on right now, Cesar Tech on SoCal is coming up and when I come back it's going to be, you know, hitting the ground running for sure. But yeah, I'm excited to, to share more when I get back.

Yeah, well you we let's dive into it here with we've got a full plate of stuff to talk through from all over the map here. You put out or let's do our intros real quick. Neil Bloom here with fresh brew, tech tacos and tech podcast and analog capital. And this is my co host Fred.

And I'm Fred Greer, business journalist here in San Diego. I've been covering the ins and outs of the startup world, IPOs and M& A news for San Diego for the last five years. And yeah, happy to be back talking about the biggest headlines in San Diego news.

Yeah and you had a great piece on your sub stack earlier this week on 5 VC take on what's to come in 2025. These are VCs who I think are going to be all speaking at TechCon SoCal. So, so it's a good piece to hear ahead of time kind of what to, what to expect of what they are going to be talking about. But did they have some predictions for the year that you could share?

Yeah, so we'll link it in the show notes. But basically this was a collaboration with Techcon SoCal which is happening this month, January 17th and 18th at SDSU. Highly recommend getting your tickets if you haven't bought those just yet. But yeah, we, I partnered with about five VC firms. Six some are based in SoCal, some were in SF, LA and we asked about their hot takes and predictions going to the new year. We will link the piece for you to look into it. But I think that some of the themes that stood out was with the new administration. We will see probably more M and A activity and more IPO activity in the second half of this year. Also defense tech, hard tech is kind of a big theme going in this year and that wasn't really the case 10 years ago. And LA is really leading the front of that. There's a real deep tech, hard tech scene down there and San Diego is also in the running for that. We also talk to social leverage. They are formerly based in San Diego. I talked to Gary Bennett who's a general partner there. He said they are based now in Arizona but they do live in San Diego and they are always looking for companies to invest in. And yeah, it's a great piece kind of foreshadowing what's to come but really no one really knows, you know, how things are going to go. These are kind of just hot takes and predictions. But I do, you know, from my experience talking to different investors, people seem to be cautiously, cautiously optimistic. And we also are hosting an event in February, a panel event to kind of get, you know, real time insights from vc. So stay tuned for those details too.

Yeah, good call outs there, I think. Interesting that we've looked at Cartadata over the last year, which I think has been really good to plot out where San Diego sits in the ecosystem of things nationwide. On venture capital, it really spells out, you know, life sciences and deep tech and specifically hard tech hardware. Kind of like our two strong suits of where a lot of capital tends to go of the 6 billion plus that that comes into San Diego. And so therefore at techcon you're going to see a lot of that. Like I, I think we have seven talks on deep tech alone that are very, very different. From each other. There's like fission and nuclear, there's land, sea and air drones. There's advanced manufacturing of like from prototype to full, you know, building the planes and there's the future of food which is kind of the mix of like cell bio meets food bio kind of thing. And I think what you'll you'll see those conversations in real time of like what's really working and where's the density and where is the funding going around those. So good call outs in those predictions as well as come hear them at tech on SoCal as well too. I had a few predictions I want to share related to that as well. We talked on the last episode around how I I, I publicly bet Luke Soos on where the IPO market will be. We both I believe it will be better than last year, the year before. I don't think it's me gangbusters but that's me being a little conservative because honestly who before January 20th of the inauguration I literally have no one of us have any idea of what's going to happen. Like we're going to be suddenly the United States of Canada and America and like literally could be anything at this point. So. But I do think things will be better than last year. I don't think it'll be twice as much as better than last year on the IPO market but I do think M&As will be actually happening this year for a few reasons. One, I think there's going to be consolidation in a few areas like in AI I think there's going to be some stronger, clearer winners in big tech that come out that say we either need to acquire teams to catch up in certain capabilities or something. And in the last administration, the Biden administration M and A was kind of locked out because of Lina Khan at the Federal Trade Commission. So I think that unlocking will happen and therefore big tech will get back to buying little tech which is good for vc. Right. We, we need exits so that we can return capital to then reinvest in the next thing. And while we saw a lot of that in life sciences world, we did not see any M and a real activity in the tech, software and hardware world. And so I think that will unlock this year or start to and then continue down. But the part that I think San Diego might will be interesting to see at is that the new administration has promised to slash spending big time. Right. And 1/4 of San Diego's GDP is military related. I don't know what that means for us. So therefore you know if you are a service provider to the military or to the government, I, I feel like that is in question if that, you know it, maybe companies should go dual use now and find a commercial customer and a government customer because it's good chance that the military and the government, federal government, is going to be reducing spend and so startups may struggle if that's your only customer. So to be determined on that in San Diego, how that, how that plays out. I think though I have noticed and we talked about this last podcast, more fundings are happening each quarter right now and I think that trend will continue into this year, which is good volume wise. We need more fundings, especially at the earlier stages to fund the next kind of wave of pre seed, seed and Series A companies. Series A has been really hard for companies to find right now. There's just this huge hurdle because it's downstream. There's no exits coming at M and A and IPO. So if that unlocks, I think VCs will start writing Series A checks again because they can see the path towards or know how to value companies again. You kind of haven't figured out what the reset is of valuing companies. So I think more fundings are coming too. I also think the in person of work is coming a bit more to a head here as well. We've had a lot of people holding out on getting back to the office. I think it's coming back felt like a, it's felt like a trickle. But more big tech is coming back to the office and I think more companies, I'm hearing of more even two person startups who are like, I'm looking for a place for us to work from. That's a good sign that people want to be in person. So I see more of that coming here. In the year we've already seen the events have done really well in person and now that startups want to be in person, I think hopefully that for Sano, the next thing that we need is a physical year round hub where we all coexist. So I'm manifesting that this year little by little. And that will be another prediction that we get back to a physical gathering, rallying spot here in San Diego. You got any you want to share of your own, friend?

I think you hit the nail on the head. Yeah, I mean it's kind of hard to predict what's going to happen in 2025. What I like to do is talk to people who are kind of living and breathing on the ground, experiencing the day to day, the best Thing to understand. The best way to understand what's going on is talking to founders and investors who are actually in the field, in the trenches. So I really appreciate your your perspective Neil, not only on the IPO market but also the funding environment and also the return to in person.

I agree. Yeah, I mean you're seeing it all of a sudden, the spaces and the subleases and you know, the places that people have been kind of kicking the can on on moving to a New Orleans subleasing or something like that. So throughout the year it'd be great to continue to hear your insight there as well. We happen let's dive right into some of our stories. We've got a great M and a story a long time San Diego startup course key San Diego State founders Evo Nexus company Teal Fellows raised multiple rounds of capital. This is a vertical SaaS company that had a majority investment, potentially buyout if you will of all like early investors and employees. PSG is doing a buyout of Corski so happen to be, you know, close friends here in the community with Luke and Fatty and Mark and the rest of the team there. Congrats guys because I man they have ridden a long wave of where they've come. When they started, remember when they got into EVO Nexus they were like an attendance taker for universities like at SDSU and others. And then I think they also had a little hack of how to book classes sooner or quicker or something like that which got blocked and got them like kicked off campus. A lot of good stories that Luke has told over the years. Eventually they found their way as being a vertical SaaS platform for the trade schools, you know with like your, you know, barber schools like Paul Mitchell and stuff like that where they power pretty much the whole back end the experience all the way from payments of how they take, you know, payment and tuition to everything else of how they run the school. They became a vertical SaaS platform for that. And so PSG is actually building a trade school vertical SaaS platform by buying a few companies and boxing them together and Cors key is is part of powering that. So congrats team. That's it's a great one. A lot of local capital that invested I think from Teos Angels new fund to local Angels. So that is great that hopefully the capital's returning and we'll go back out in other angels investments down the road here you have a little scoop here too Fred.

Yeah, just add on to that. Yeah, just some facts. They were founded in 2015. Yeah. Luke was participating in the field Fellows program and I was doing some research on some of the early investors. Looks like former Qualcomm CEO Paul Jacobs. Not, I think, I don't know if I think it was Paul Jacobs and Steve Altman were early investors and I think one of their advisory boards was Andrew who was a co founder of Blackbird and which is another edtech company. So they have a lot of smart folks involved in this. I think we're going to see more. Some of these like later stage, mid stage companies either have an exit via acquisition or strategic investment from our PE firm. I think this will be a continued trend. And Luke is someone who is, you know, scrappy entrepreneur who's been, you know, in the ecosystem in San Diego for a long time, contributing. I'd be curious if he's going to stay with the firm or is he going to start something new shortly after this strategic investment. So stay tuned for that.

Totally. He's got a great Twitter following too. He's probably become a bit of like the, one of the main voices on vertical SaaS. So definitely if you're in that, that, that realm, follow him on Twitter. I think he also advises a startup studio, Atomic as well. So yeah, be very curious to see what, what the team does next. Another deal, kind of an update. We, we had an update or a. A few pods ago we talked about Poseida Therapeutics getting acquired for a billion dollars based on closing stock price. Well the price actually. Well the deal just closed and the price actually went up which is great to see. Even better deal for everyone. You got a little bit of info here.

Yeah, I mean it's a great piece. I think it was in the Union Tribune also another publication of routers did a piece on them with these deals are interesting. We saw I think five or six of these similar deals were, you know, Big Pharma came in, offered a billion dollar deal. I mean DTX Farmer was one of those two years ago where they offered $1 billion but they bought 500 million upfront and then you know, might be another 500 million if certain milestones are met. This was a similar deal but there, this was, you know, fell in their favor. They had an even a bigger exit than they were written. And the fact that this was closed, some of these acquisitions, you know, they have a headline of hey, this company's buying this company for this amount of money. Sometimes that number isn't always accurate or correct. So it's great to see that some local capital will hopefully be coming and flowing into the Life science ecosystem following this exit.

Totally.

Yeah.

And this company was already public and actually had, I think Mark Gergen on the podcast a number of years ago. At the time I think he was coo. Then he became CEO and then I think he's most recently chairman. So you could go back and listen to some of the early stories of Poseida. I'll post a link in the show notes from an interview we did a few years ago. But congrats to see this exit. And like we've seen other exits, expect to see some recycle of capital and recycle of founders into the next thing. Let's go into some funding. You've got some great news here. Widespread from a variety of sectors. You want to take us through some of these?

Yeah. So there's been some tech funding, some gaming funding and also like Diagnostic and Lifestyle and Life Sciences. The first one on the list is Simulation theory. They raised a 2 million seed funding round. I need to get more details, but at a high level, this is a gaming startup. Venture VentureBeat did a piece on them. They're working to create tech for gaming companies to better utilize CPUs. And this guy seems like to be a veteran in the gaming industry. Worked on Xbox360 and he recruited another gaming veteran. So they raised some seed funding and we have more to follow on that company. The next one was Crop Diagnostics.

Real quick, let me just.

Real quick.

Yeah, just from a gaming perspective, I honestly think we're going to see a lot gaming meets technology. The hardware side, I mean, Nvidia's original whole use case was for gaming. Right. Or at least for video cards. Right. And now that you see Nvidia massively using for compute and AI, I think we're probably going to find even more use cases for GPUs in this course. This is good to see that San Diego is taking advantage of that. Gaming has one of the biggest compute loads and needs in that regard. And so, yeah, it's cool to see that the tech and the consumer side are coming to life here in San Diego, especially with a community that has deep gaming roots.

Yeah, if you're listening to it and you're new to San Diego, people might think, oh, there's gaming companies in San Diego. Yes, there is. Amazon Studios is based here. Sony has a gaming presence here and there's a lot of gaming development startups. I think there was a pretty big exit in the soccer soccer space. Digital digital game that was sold for a couple hundred million.

Psionics sold to Epic. Yeah, that's the one we're talking about. And then a lot of major gaming studios have studios here. Like Warner Brothers has a studio here, Zanga has a studio here. High Moon Studios here was acquired by Blizzard which was then acquired by ea. So all in north county by the way. It's like deep, deep gaming roots and the people in gaming stay in gaming. So it's a very deep talent pool population. We recently did a gaming tech dinner in December and I think we're going to be doing another one in February. So just kind of exploring that world as well here too.

Cool.

Take us to the next one.

That's awesome. Yeah. Connect San Diego is a non profit supporting startups. They have a great startup tracker and so I tend to check that out every week. And yeah, they found some news from an SEC filing. Crop diagnostics raised at 3.5 million seed round. Looks like they're still kind of in stealth mode. They're looking to create some technology to use RNA sequencing with or something around plants. So stay tuned for that. It's great to see some some local funding in that space as well. And to wrap up funding news is Deep Vector they raised a 1.5 million. This tip came from a local DC firm in the Laguna Hills area. So one of the co founders is actually based in San Diego. The other one is based I think in the east coast. They raised 1.5 million. We will link it in the show notes but they're basically insurance tech company leveraging AI. We will have more details soon. The news just broke on Tuesday this week but I'm starting to see some some funding go up in the early stage side. Pre. Pre seed Seed will be great to see some series A funding pick up as well but I think that will come later this year.

Agreed. Yeah all good things here as well. And we at Interlock mentioned we made I think we got a post out there publicly. We made 11 investments into nine companies last year in 2024. I don't think all those companies actually have announced those funding rounds yet so those are probably still to come as well. But yes, great to see these early stage deals happening here too on the development side. And speaking of gaming and interactive and entertainment side, you had a good scoop on a new film studio coming to the market. Take us.

Yeah, it's funny, it's very time we're talking about the gaming industry in San Diego. It seems like there's some momentum in the entertainment space. There is a huge development happening in Chula Vista where they're designing a 85 million film studio and they're estimating that this is going to bring about 544 million in economic impact for the region over 10 years. This project is in the early developments of it. It won't be done for another two years, 2027. But yeah, stay tuned for that. I wonder if there's going to be kind of this Hollywood hub in San Diego at some point and this might be the domino effect for the beginning of it.

Yeah, I mean I think you've definitely seen, you know, a little bit unbundling of Hollywood if you will, whether it's from where it needs to be done and then how it's being done, whether it's AI kind of creeping into all aspects of the writing and those pieces of it. So all that is super interesting. I'd be curious to see if the studio is coming from kind of other studio expertise experience or are they building it in the hopes to attract that expertise to come pick up there. I would also imagine like the border cross border Mexico, Tijuana connection is going to be interesting from a labor perspective. You know, the ability to film in other geos and being close by as well too. So all good things. We'll keep tracking it and share as the development comes along over the next few years here. Good scoops. Love it. We got ton of events already booked up over the next few weeks. One of the ones I'm excited to see. And by the way, you can, you could always go and check out the Social Coyote, the weekly newsletter of what's happening in the tech ecosystem this next week and the weeks after. Link there in the show notes Startup Grind, which is a national but then hyperlocal chapter community of helping startups. They're known for doing great fireside chats. Well, it's back in San Diego which I love. The leader of the event is actually kind of very much rooted in north county. So it's startup grain. Carlsbad is where these events will be focused for now they're partnered with the Chamber of Commerce of Carlsbad and I think the city of Carlsbad. And so they've got a pitch battle coming up on January 14, which is next Tuesday. I believe the winner or winners of these two minute pitches, no slides, just expert feedback, will actually get elevated to the national level. So and I think that's all zoomed and virtual in that regard as well too. So excited to see that the startup brand come back to San Diego. We'll actually be interviewing the leader on this podcast coming up very soon to hear what the plans are for the full year, so stay tuned on that. Also coming up, we've been talking about a lot Techcon SoCal January 17th and 18th. It's kind of a half day afternoon into the evening on Friday the 17th and then a full day on the 18th. The all the agendas now been announced live so you can go and see what events are happening on what days and all the panels are live, so. And I think there's even an app you can download now too, so come out and see it. I'll be out there representing for the full two days. I'm even moderating a panel I think on each of the days, Friday and Saturday. So come on out and have a good time with us. Connecting with San Francisco and la, kind of coming to San Diego. I think we're at 5, 600 tickets already in terms of attendance wise looking right now. You want me to keep going here, Fred?

Yeah, I mean two more to add. We have a ACG San Diego, which is a really popular M and a investment banking PE conference right here in San Diego that's happening on February 21st through 22nd. So yeah, some time to your tickets for that. But if you're interested in the financing and what's happening locally, people fly in from, you know, some of the major markets like New York and Boston will also be in attendance. I think you spoke on one of the panelists last year and I also was at the event. I thought it was was really great to meet other deal makers and investment bankers and just really smart folks in finance in San Diego. It was great.

Yeah, it was like a full ecosystem. You had the M and a advisory bank, you know, kind of investment bankers, actual funds, the legal and like the whole stack was really there to really help this and so excited to see it go off again as well too. Last event coming up, San Diego Angel Conference always starts to kick off around December, all the way through April or May I believe maybe it's going off June. Santa Angel Conference is a conference. It's really a whole, you know, training process of how both on both sides, how to get funded as a founder and how to make your first investment as an angel. So it's a great ecosystem boost in terms of building new angel capital to invest in startups. Every year they award, you know, between two to four investments at the conference live on stage, which is pretty cool to see. You don't usually get like a pitch competition where you actually see like hundreds of thousands of dollars invested directly into this company right on the spot. And so they've got two events coming up that are more informational sessions around what it is to be an angel investor. So that's I think they've got two events we've linked here in next week on the 14th and in early February. So make sure you go check out if you are interested in learning the angel capital side. And that's our show for the week. Fred, safe travels. We'll miss you over the next few weeks, but can't wait to hear about your trip. Make some new connections in the startup community overseas that we can share some learnings with. And thank you all for tuning in. Cheers. See you soon.

Always a pleasure, Neil. Thank you.

Thanks, Brad.