This Week in San Diego Tech News - December 5, 2024

What is up? Everyone happy post Thanksgiving? Hey Fred, it's good to see you.

Hey Neil, it's good to see you. It's good to be back.

Yeah, we have been out of pocket for a little bit. We've been busy. I feel like, I feel like October was so busy event wise. November ended up just being, you know, like everyone was tired from the events and just heads down, get work done before Thanksgiving happened for the last few weeks and now we're back and it's a race to before the end of the year for all the holiday stuff takes over again too. How are you feeling post Thanksgiving?

It's crunch time, you know, everyone is trying to squeeze in some last investor meetings and you know, cut some deals before the end of the year. You know, I think there's a resurgence of optimism for what's to come next year and I'm seeing, you know, things are a lot more busier than it has than the first half of the year.

Yeah, definitely, definitely. Funding's happening, we're taking, I know, Interlock, taking meetings, got some, we funded. We ended up funding three within October, November, period. And now we've got a few more indulgence right now. Hopefully close another one before the end of the year as well too. For us as well.

Startups get the party started, 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 for the green guacamole keeper Countins counting beans Contador Quentan frijoles found us trying to raise some queso la vida San Diego school of rappy Wrapping fire tortillas round jalapenos in these modern times of craft beer and coffee my coating yoga posse fold the body origami we be surfing Coronado eating tacos El gordo the taco stand in puesto lucha libre and sombrero Got a shout out to cost angels by the ocean watch the sunset La Jolla shows entrepreneurs trying to get funded When San Diego Startup Week is popping in the summer Oceanside, the Tijuana SD 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.

Come on, startup, skip the party. Startups get the party started. Startups get the party. Startups get the party started. Startups get the party. Startups get the party started.

You want tech in tacos, tacos and tech, you know we Got it.

Hey, startups get the party. Startups get the party started. Startups get the party. Startups get the party started. Startups get the party. Startups get the party started.

You want tech and tacos, tacos in tech, you know we got it. Hey foreign.

Well let's dive into our show. We got a lot has actually happened funding wise and acquisition wise a lot in the biotech. But let's, let's talk through some of the non bio first of some of the stuff that's popped up on your radar. One I caught you sharing some good Carta data on, on Twitter X with our friends over at Carta there. You want to take us through some of the data you were you've been seeing and tracking and sharing.

Yeah, so Carta is a organization that tracks well I think they actually help companies and startups with their cap table but they have a lot of great data on recent fundings and they compare the different cities like LA and SD or the Bay Area New York. So the latest report was looking at seed and series A funding and San Diego ranked I think roughly around nine, you know number nine behind like Boston and New York and Boss and LA and Seattle and Austin. And what I was seeing in there is you know biotech is still really heavily dominated in San Diego and I think I called out that you know consumer was slipping a little bit. So it's unfortunate to see that there consumers is dying down a bit. But I would say for the most part from series A and pre seed we're also starting to see uptick in tech deals. I'll be curious to see you know out of the whole entire year 2020, 2024, how does that stack up with other cities? I would say San Diego the takeaway is still San Diego, still top 10 cities to start up a company and raise funding. But we have kind of lost some of the rankings this year partly due to our tech funding being down.

Yeah, it was interesting. There's actually was a little conversation that spurred up between you, me, Peter and even Mike Cran chimed in around just like where, where are we trending tracking, you know, in what stage and what industries? San Diego overall I think there was some data that said San Diego overall funding wise, top five total if you just look at all VC funding in into a city. But that was almost predominantly series B and later for San Diego companies. And if you look at seed in series A funding where it stacks up and we'll link some of these in the show notes here, you know we're at number four for biotech, for seed and Series A. We're a number 10 for SaaS and we're a number six in hardware and we don't even make the top 10 for consumer fintech, health tech, some of those. So at least, you know, even in seed, in series A, which predominantly we don't have a lot, we'd have very little local funding for that and even less, you know, outside funding coming in for those deals. So at least we're still hanging in there in the top 10. But, but interesting that we're top five for series being later. So go get your capital somewhere. But you know, the later stage companies are, are getting, are definitely getting the capital and I would think that's partly, I would say in help to like Mike Cren bringing a lot of VCs town to show off our companies multiple times a year. Right. And I think also is a lot of our legacy companies who have been around 10 plus years still continue to raise big rounds and that just keeps us in there, you know, like raising 2, 3, 4, 500 million shield AI this year. Right. Like that's, I bet we're going to look at the data this year and be like, oh wow, there's probably only like 10, 15 companies that actually raised the majority of our tech money this year. So that'll be interesting. We'll do a deep dive into that data December 31st or as soon as we got it as well. And we'll have a report to you, I'm sure, both on Fred's newsletter and on this podcast coming up soon here. Let's dive into it. You got a, you got a hot consumer funding that you shared news on recently?

Yeah, we had a hometown hero company had some really huge funding news that broke last month. Viewer Clothing the raise 825 million led by General Atlantic and Stripes. And the deal is allowing early investors and employees to sell shares in a tender offer, valuing the company at 5.5 billion. This is up from their last valuation which was around 4 billion in 2021. And you know, SoftBank had led their last previous round. What are your thoughts on this, Neil? I think this was probably my most popular post that I published this year. I think 160,000 people saw it, 1200 likes, obviously. It's great to see, you know, San Diego consumer company find success in this type of environment.

Absolutely. Yeah. I mean I think this is just a stunning company in and I would say, you know, something like a, I mean it's a category creator. It is Lululemon for men Athleisure Wear has become, you know, is absolutely taken the whole industry worldwide by storm. And it started in this and now headquartered in Carlsbad, which absolutely makes sense. These are like the place where everyone locally is wearing it. So they know their customer super well. What I remember uniquely about the funding is last round, which was a $400 million round and this round. So last round I had heard. I don't know if this is totally confirmed. Maybe you confirmed the money went in secondaries as well to early investors and early and early employees. It wasn't even necessarily needed for the company. Like they didn't, they didn't need the capital per se. Sounds like this is similar also for employees. Like. So this company doing what, 800 million to a billion revenue wise, growing at its own rate, really doesn't need the capital to grow at this point. It's just paying out and cleaning up the cap table, which is, you know, amazing for, for a company, especially one on a consumer brand where you would think it has to put every dollar in to go acquire more. And it's not. So I think by all sense of the definition, this is unique and will be studied for a long time and therefore we should be looking at talent coming out of here, going to start other companies like this because people are obviously getting paid out from working at it and growing this, this behemoth. We should be tracking and seeing what people go do next once they've got made some money off of these tender offerings. So super interesting and great scoop. Fred. Go Vori you man. There's been a whole year we've been talking about how hot biotech M and A is and I think we had like one a month for a lot of the year and then we had three in a month in November time frame or late October. Take us through the triple header, triple billion plus acquisitions that we just had in biotech here.

Yeah, I think San Diego has been on a tear as far as acquisitions. And there are three notable ones that we will call out, but collectively there's over 5 billion in acquisitions. Collectively. Kate Therapeutics was acquired by Novartis for 1.1 billion. Roche acquired Posada Therapeutics. Am I right? I'm not pronouncing that correctly. For 1.5 billion. And then Lubeck acquired Longboard Pharmaceuticals for 2.6 billion. And these deals were all the last 30 days or so, plus or minus. And for me, what I take away from this acquisition is big pharma. Well, one, there's a new administration and so there's Less pressure on being blocked by the Federal Trade Commission and this regulation of M and A and yeah they're these big pharma companies are swallowing up assets and drug targets in San Diego. I would be curious to see if you know largely these pharma companies hopefully will retain this talent and will keep the San Diego team here. And we're seeing this big pharma they're acquiring, they're acquiring the company and then they're growing their presence locally. So I hope you know not only investors make money and early employees make money but hopefully the talent stays in San Diego which tends to be a trend with previous acquisitions.

Well that'll be. Yeah, definitely what we're seeing, we've been talking about is how drug and pharma companies switched from the COVID you know, world environment of their, their funnel and Sierra funnel of what they're working on and now going on kind of an R and D buying spree to get into catch back up in the non Covid drug related world. So you know San Diego is a great R and D area and they're just you know buying up potentials assets here. A trend we have seen already though is is founders exiting the company pretty quickly after the acquisition. So hopefully the employee talent stays. But man we've seen significant amount of founders who've had the acquisition and within less than a year starting up the new company and getting funded on their next one as well too. That's a good sign for San Diego at least that you know new companies are spinning up capital is going back, getting put back to work. So all those are good signs related to you know, some of us investors, new fund ventures or Tech coast angels as well. We are just getting our second and I believe last payout for DTX Pharma that had it was a 500 million plus $500 million exit a year ago. So the second half is now coming back out to invest like right now. I know, I think I just put in my payment details here. So that's great sign to see. It'll get put right back to work in investing into early stage bio from that regard. So that's a great sign just seeing this. I can't wait for us to do a full year wrap up on just the bio M and A that happened in San Diego. I mean if I just think offhand, easily 20 billion plus that happened this year that I remember. So that's a lot of capital that we're going back to work and building more companies here. Now we just need to get this Tech, tech side funnel running just as fast, Flywheel, if you will. Well, something's going to help us there. A new Fund for Fund 2 for Neo's partners raised a clean tech fund too, I believe. Right, Fred? A $1.37 billion fund here.

Yeah. So this is pretty under the radar story. You know, we don't have too many private equity shops that are raising massive funds obviously. You know, JMI Equity and C Stepstone and others. NEO Partners, Neil's NEOS Partners, they're a new private equity group on the block. They started around I think 2022, but they raised their fund one last year was around 800 million. And then this year last, like I think three weeks ago or two weeks ago, they just raised their fund two, which is 1.37 billion. And what they specialize in is clean energy investments as well as data centers and that whole category of clean energy. And yeah, it was great. It's a great sign that we have a growing private equity scene locally. I know this story resonated with, you know, our audience, so we'll link that in the show notes. But yeah, keep an eye out. This is a hot sector. I know you're, you're doing some deals in that space. Neil and I continue to see the, you know, interest from investors in that space.

Yeah, a lot of clean tech, hard tech in San Diego, whether it's battery related or other aspects of this infrastructure related. So I'm looking forward to sharing some notes here with the NEOS Partners team. You had a great piece on JLabs. Just talking about the, what JLabs has done for not just San Diego ecosystem, but for the globe. But what was cool is to highlight San Diego was the first jlabs. I have continuously met companies who are either in it or going through it or coming out of it. You know, it's, it's a prime incubator for early stage bio. I invested in a few companies that weren't even, you know, hard wet lab pharma were just like software companies building for the biotech world and they were incubated there. So yeah, take us through a little bit about what you got to do on a deep dive with JLabs.

Yeah, so at a high level, you know, JLabs was one of the early adopters of this incubator model in San Diego, started in 2012 and it's currently being headed by Nick Morales who came from Menlo park and is an entrepreneur himself. He started multiple companies and has been running, yeah, the local incubator here locally and they share some, some great data. They've helped over 190 biotechs in San Diego. They started here but then they've since expanded to 11 locations globally. It's pretty impressive what they've been able to achieve. They've even had some recent wins this year Report Therapeutics had an IPO of like 150 million which started, not started but in JLabs when they raised 100 million from Third Rack Ventures. They bring a lot of relationships helping bridge gaps to investors in Boston and New York and you get lab space and you know it's a community effort and you know it's really hard to quantify their impact in our ecosystem but you know jlabs is a great resource and if you're in life sciences or in biotech I recommend you know checking them out and maybe applying if you're looking to start a new company.

And how cool for like a corporate venture you know to make this long term bet investment wise to create a coworking space that really is like deeply embedded with your potential customer or acquirer just to you know have that as an ecosystem build. Pretty cool. So thanks to the jlabs team for opening up and sharing about that one last fundraise we forgot to mention here was a life science series B round emprein or did you already mention that Fred? No, these just close the series B and they're focused on a specialized test to help detect brain diseases. You know more about this one?

This one I don't have the scoop one. I'm going to find out more but we're starting to see some you know finding pick up and biotech is not slowing down seems like so yeah just calling out 50 million series B. We'll have the scoop more details soon.

Yeah I've been hanging on to evo Nexus a little bit. They've got a bunch of biotech med device kind of companies in their current portfolio of companies too. I literally was seeing a company forgetting their name using working on a brain surgery tool and they've been practicing on on pig heads in evil Nexus. So crazy stuff happening here in San Diego. As always there's events coming up. Make sure you're coming out to them. This Friday San Diego founders hike early 6:30 in the morning. Torrey Pines glider port we will sweat. It is a good steep hike up. It is fun. That night is our tech holiday party. DJ dance party with silent disco. I've got the silent disco headphones in my car that just came in the mail today which is super fun. So come celebrate at the end of the year. Bring your spouse. I know a number of people are, you know, make it a, make it a family thing. If you've got a partner, come on out to that Love good time. We got taco truck coming as well too and it's up in Carlsbad, so that'll be fun. A bunch of other events. Always make sure you know, if there's other events to worth checking out, check on the social Coyote newsletter that we link here in the show notes. Already we're looking at January, which is going to be busy. CES jumps in right away. I know a whole bunch of hardware companies are going to be out there. I think I'm going this year actually. I got to work on that. But there might be a whole little San Diego gathering at ces and then always right after is JP Morgan Healthcare conference and at the end of that week is TechCon SoCal which is bringing, you know, 5, 600 investors and tech execs coming into town for some really good thought leadership. I'm leading the fintech track and the deep, deep tech track. I've got some really cool panels on space, on energy, on autonomous vehicles and so I'm excited for that. But we'll do a deeper dive on the content as it's coming out here shortly. The panel should be announced in the next few weeks. I know the speakers are starting to get announced. So anyway, we'll see you all this week, next week and continuously out from here. As always, follow Fred and me on our social pages, primarily LinkedIn and Twitter X. We're pretty active there. And give Fred a subscription on the business of San Diego and subscribe to FreshProtect subsequent as well too. We appreciate it. Share the news so that we all are educated here. You know, Fred and I are trying to trying to be amplifiers of what you all are building. So keep building good stuff and we'll keep sharing it with the world. Fred, thanks so much. Always a pleasure man and we'll see you soon.

Always a pleasure, Neil. See you next time.

Cheers.

Get the party startups. Get the party party started.

You want tech and tacos, tacos in tech, you know, we got tacos. And tech is on smash for the green guacamole keeper Countins counting beans Contador Quentan Frijoles founders trying to raise some queso la vida San Diego school of rappy rapping fire tortillas round jalapenos in these modern times a craft beer and coffee My coding yoga posse Polter body origami we be surfing Coronado eating tacos el gordo the tacos stand in puesto lucha libre and sombrero Got a shout out to cost angels by the ocean watch the sunset La Jolla shores Entrepreneurs trying to get funded when San Diego Startup Week is popping in the summer Oceanside to Tijuana Sd 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 hashtag SD TechOS with your host, Neil Bloom.

Startups get the party Startups get the party started. Startups get the party Startups get the party started. Startups get the party Startups get the party started.

You want tech in tacos, tacos in tech, you know we got it. Hey.

Startups get the party Startups get the party started. Startups get the party Startups get the party started. Startups get the party Startups get the party started.

You want checking tacos, tacos and text, you know we got it. Hey.