This Week in San Diego Tech News – July 8, 2022

It.

Hey. Hey.

Happy Friday.

Hello. Happy Friday. How you doing?

Doing well and yourself?

All right, thanks. I just got off a coaching session. I am taking storytelling coaching and so I am all fired up from my coaching session. But welcome everyone. Happy Friday or whatever day you are listening to this since we do record it and we do put this out on the Talkers in Tech podcast network. This is this week in San Diego Tech for the week of July 8th. Like, feels like we're deep into July already. Like deep into summer. This is weird. Super weird.

Yep.

I spent the week in Atlanta getting to know the startup scene there a little bit. It was my second time out there and working with some big corporates who also are very interested in startup scene as well. So I had a good week in Atlanta. How about you? How was your week, Seisha?

Doing well, you know, there's always, it's, it's never boring in cybersecurity, so always a little bit busy, but had a little bit of a break and went up to San Francisco. And I will say the differences between NorCal and SoCal are there. Like they're. And they are quite obvious. So that was kind of interesting to see that from the lens of a Seattle person, but it was fun.

Awesome. Well, welcome back to your trip. I'm back as well, but then I am back on the road Sunday in Santa Barbara. So shout out to Matt the great house. I am looking hopefully to see you be nice, maybe also see your dad John as well too, get a whole great house meeting going, which would be awesome. But let's jump into this week this. First of all, I'm Neil Bloom. I'm an entrepreneur, investor, community builder. I do all those things at the same time, but I also have done them previously which has led me to here, which is running a podcast and kind of whole tech news community which has luckily led me to investing in my peers through now Interlock Capital. So very excited to be doing all of this together and have a co host, Sesha, who helps me speak the tech news gospel.

Yep. Hey everyone, my name is Sesha. I'm a former biotech data person currently working in cybersecurity and cloud evangelism over at Microsoft. I'm a San Diego transplant by way of Seattle and it's been a little over two years that I've been here and I am loving every minute of it. Not just because of the tacos, of course, but because of, you know, tech startups. All of all of the amazing community I've discovered.

Yeah. And I would say probably like you, a lot of people only discover and experience it once they actually come and see it. I think it's hard to know what's going on in San Diego, which is kind of why we started this podcast. So please share with others what's going on through, you know, share our newsletter Share our podcast as we all hopefully help to up level the local community in that regard. And one thing we want to jump right into talking about, you know, San Diego, how it competes against other cities is our venture capital scene and the capital that flows into our local companies. And so we did on Fresh Brew Tech, we did a pretty big in depth end of 2021 report that not only said, you know, here's how much venture capital, but we we dissected into what kinds and sizes of companies, what stages, and we split up biotech and tech to see for the first time like tech was taking a majority of the capital both from number of deals and total dollar amount. That was fascinating in 2021. So I'm looking forward to doing that again at the end of this year. But we did like a mid year check in to see how, how it's going. Because I can imagine all of you realize, you know, the first six months of 2022 from a capital and market standpoint have been a bit tumultuous from a number of factors. If we thought 2021 was already tumultuous, man, I did not have war with Russia and Ukraine on it. Even further supply chain issues, you know, crypto, crash, all those things. Well, maybe that one could have predicted, but not when it happens.

And so we don't. We'll have to get Jonah to weigh in on that.

I don't know if he wants to weigh in right now on the crash, but for me, the quick answer in crypto, for me it doesn't feel like a crash. It just feels like a resetting of where we were like two, three years ago, which is still way higher than where crypto was five years ago. And that's kind of actually the story right now is that with capital, with markets, while it feels like a crash, it really feels like more of like just a resetting of where we're headed back to a few years ago because of the massive amount of capital that flew into the markets. So you had between 2 to 6 trillion dollars printed from the US government and that's just flown into the market and it has to be spent. It's not just sitting in bank accounts. So I think that really inflated a lot of spending from public companies. All the way on down to private capital investment. And so last year, while you saw a lot of capital raised from venture capital funds, you know, that means a lot of dry powder that is available to write into startups. So that all exists. And so what we're seeing so far in 2022 is, yes, lower amount of capital in general in the community compared to where we were one year ago. So let me take you through a few numbers. In 2021, total 9 and a half billion was invested into San Diego startups. Okay. So if you would imagine if money flowed in uniformly quarter over quarter, you know, halfway through at this point last year, you'd see something like, you know, four, three and a half to four and a half billion would have probably been invested. And so right now we're at 2.77 invested. So. So lower for sure, but we're kind of like a little higher than where we were even in 2020. So I think right now we're somewhere in between the five billion total year of 2020 and the nine and a half billion total of 2021. Yeah. So I don't think it. I think, and the macro markets actually say similar that while, yes, deals are down and total dollar amount capital's down, capital's still flowing in at rates that are higher than we easily were two, three and four years ago. So, and that I think from a private capital standpoint, because there's so much venture capital money and it has to be deployed like, you can't just sit there, otherwise you can't report a return to investors. So money is going to still flow in. It's just going to be. What's interesting to see is will the, where the valuation is going to be. So companies that may have got a billion dollar valuation a year ago, same company maybe is getting half that valuation now. I think people are just being stricter on the kinds of companies and the valuations that they're willing to invest in. So I think that's what we're going to watch. The other part that will be interesting to watch is there will not be a lot of IPOs this year, which is an exit path for companies. Right. For investors and for employees. So what that means is less capital gets returned back to people, which means eventually less money gets put into new either in starting new companies or investing in new companies. So it's all a cycle and I'll be interesting to watch.

So do, do we have any data that, that tells us, like, which sectors we're seeing those investments in? Is it like biotech Is it in like proper tech? Where are we seeing like what are the.

Yeah, I didn't do a sector by sector. I did look at just one huge stand up investment in a biotech manufacturing company called Resilience. This company is insane. They have raised, in two years they've raised 2 billion in capital and most recently raised a $625 million round just in the last few weeks. This is the second, I think second largest funding for a San Diego company. You know who the first largest funding was? Same company, they raised $800 million a year and a half ago. And what they're doing is applying to build contract manufacturing factories all over the US to support the spin up of vaccines, drugs, medical devices, all the above because of what they saw during COVID which was that China was building all of our vaccines and they were shut down and we need to be able to build the things that we need. Now that's probably a big chunk of the capital. Of the 2.77,625 million of that is for one company alone this year. But there are, you know, there's eight companies that have raised over 100 million in funding this year. So that's, you know, 1.5 billion of the 2.77 are literally from eight companies alone. So we're going to have to really watch and see do the total number of deals drop over the year. And that has been a trend I've been watching for five to six years that every year less and less companies are getting funded and more companies are raising bigger rounds. So that's what worries you for that is that if all the late stage companies are the ones getting funding, we're not filling the top of the funnel again for brand new companies who are getting two, three, five million dollars, who eventually will be the late stage companies. But if we're not funding new companies every year, you know, will dry up eventually. So something we also always watch. So something good to check in on now to see where we end up at the end of the year.

Interesting. Yeah, I think it's an optimistic view to at least say that, you know, we're, we're tracking along what the markets are doing now. We're not doing anything unusual per se and that I like this whole idea of saying it's a resetting because it's a lot, you know, it's a lot nicer than it is to say, say that we're crashing with the market. So I love that.

Yeah, I think what's different this time around than 2008 is that it's not affecting. Well, inflation is affecting everyone. Obviously prices are high for everyone. But I think people have a lot more disposable income this time around than 13 years ago. But we shall see. So that was a good check in. Let's. Let's jump in. And some other stories. Oh, we've been telling a lot of beer stories lately because that's just the San Diego, you know, mainstream industry here. Last time we talked about the Stone acquisition. This time we're going to bring up Modern Times, which one is a fan favorite of mine. I love any of their stouts that they do.

They are delicious. I'm with you there.

But they've been in distress, unfortunately, over the last few years during COVID they rapidly expanded a little bit too far, opening tap rooms all over the West Coast. They've closed half, but still running a few. I know the Encinitas one's still open. I think the one in LA Anaheim might be still open. And they went into reorganization and we're up for bid last week. And from the bidding, what emerges? Maui Brewing is going to be buying them for $15 million. After Brewery X, which is an Anheuser Busch like stealth motor R D craft beer, R D group, they pulled out after having the winning bid. So this is interesting to see that a Maui Brewing company is going to be buying them. In the article, which is a good article by Mike Freeman in the Union Tribune, he talks about the rankings of breweries by production size. And Maui I think was like number 44 and modern times like number 48. So they're pretty similar sized breweries. So theoretically, you know, they're going to double their size, which is pretty cool. The one thing they talk about here, and I want to talk about it, a stalking horse bid. Do you know what a stalking horse bid is?

Okay, so Google was very fun in this case. So stocking horse bidders are number one chosen by the court to set the floor price for an asset. So in this case it was $7.6 million. And Maui Brewing is the stalking horse in this case, they upped their bid to 15.3 million on June 17. And when brewery X, they dropped out, Maui got it again. But what was really interesting about this one. So stalking horse, what does that actually mean? So it's an old hunting term referring to either a real horse or an image of a horse, typically some type of screen behind which a hunter would hide to conceal himself from and get closer to his prey, to which I thought was a real graphic way of describing A pretty like, ordinary thing. But hey, we will take a creative description of something like that.

I love the visual of like. Yeah, like using a photo or not. Yeah, yeah, the stocking horseback. Well, congrats to Maui. The CEO who stepped into Modern Times recently is also like a big, big beer, craft beer businesswoman. And I'm forgetting the name of the company that she came from out of. Out of Den or out of Colorado. Who makes Fat Tire?

Oh, that is a good question.

Okay, well, I'm gonna check. Oh, New Belgium. So she came from New Belgium, is now the CEO of Modern Times. New Belgium is a great, great beer. So I expect, I expect good things from Modern Times still. I think they're excited to have a new owner that helps them from their debt and allows them just focus on making good beer. So we'll see more about that. Not a tech story, but a San Diego story, that's for sure. But you know, it is a good tech story. This next one about Plano. So Plano is a new startup that is using telecom coding techniques for clinical diagnosis. Now, before we jump into what they're doing now, what's really cool, actually, let's talk about what this company's doing now. I want you to talk about it and then I want to tell you about the history of the founders here because it's pretty interesting.

All right, let's do it. So this one is super cool. Comes also related back to my background. So I had a fun time learning and reading this article. But so Peter Van Roen, he's the founder of the startup Plano. Fun fact, it's his second startup, so it's sort of like his second act, which is another fun piece of it. But he is building an instrument that hypercodes or using signal processing techniques from the telecommunications sector to find DNA and RNA markers in samples. And so this is very similar to what PCR machines already do. So they essentially look for gene markers within samples. And it became popular amongst the everyday community because they were used in order to figure out what was in Covid, what were the particular gene sequences of COVID But what Van Roen is trying to do is he's trying to create this instrument that has higher throughput, meaning that you could get, you could look at and code for three to four times increase in magnitude from the PCR machine, meaning that he could essentially find more samples, more granularity within the sample size itself. And so he's, he's doing that via hyper coding, borrowed from the telecommunications sector. And so they have a product that they're expecting to be completed in 2020 and they just received their seed funding for, I think it was $15 million in seed funding. And so this will be very, very cool to see what they come up with and if, if they're ready by 2023. Because I think it'll take the PCR instrument industry by storm. But Neil, take us through etiqueogenome and that side of the story.

Yeah, with Peter, it's, it's not just company number two. The guy is very, very, very successful at building businesses and starting technology companies, in fact. And so I got to know him when he was starting ETO back in 2013 because we were in the EVO Nexus incubator at the same time. He was in La Jolla office, I was downtown. We were watching each other build companies. And Etiko was a chip specifically manufactured and designed to assess the genome. So it was two huge plays for San Diego. Obviously our chip space is huge and our genome space is huge. And he was marrying those together, which is awesome. But that wasn't the first time he built electronic processing companies like this. In fact, he has his co founder of Truvian, which is the real legit version of Theranos is the easiest way to say it. It's a lab on a chip that really can assess blood for a variety of things. And before that he was co founder of Eco atm which is a kiosk that maybe you see in the markets that you put in old phones. It connects and sees what the health is and pays you money on the spot. Wow. So he has obviously been in the hardware, electrical, assessment and diagnosis business for quite a while. Eco ATM co founded by the CEO Mark Bowles. That whole group have gone on that group or band of them, most of them also did trivia together, most of them did etiquette together and most of them are now doing Plano as well. So this is a great, amazing story of multi, multi time founders, serial entrepreneurs, but not just themselves, but bringing the band back together and doing it in similar spaces. We love seeing this. This has not really happened a lot in San Diego, especially on the tech side where you have the same group, which is probably why they could get $15 million for pretty much an idea at the seed stage to go build this. It's a pretty sure bet compared to someone who's doing it for the first time.

Absolutely. And I think, you know, just the marrying of two separate industries and putting them together and creating product that, you know, clearly takes us a step forward. And in genomics and in and in gene sequencing. Incredible. That is so cool to see.

Yeah, absolutely. So Peter, if you're listening, which I know he's a fan of this, of the pod, and we've written some stories about that, what I call the Eco ATM mafia on fresh fruit tech. But we need to get Peter on the podcast. So I'm going to reach out and get that going because I'd love to hear it directly from him. Speaking of someone we had on the podcast recently, CEO Garrett Moore of Agoras, which is a construction tech startup, they just raised six and a half million dollars and they're honestly, what they're trying to do is redo the way we construct houses. So this next story specifically about their funding is a really cool story about automating the home building process. You want to take us through a little bit?

Yeah, sure. So essentially what Agoras is trying to do is they're focusing in on modular home construction in which they have this proprietary software that enables precision off site manufacturing of homes apart in an automated assembly line. And so essentially you have all of the bits and pieces that go into building a home into these panels and then construction crews then add in the final touches and then create homes on the assembly site. And so what this process does is you're essentially reducing the building time to days, not months. And I really love. There's a quote in the article that, where I think it's Garrett who says permits to keys in 30 days. Which I don't know, that sounds wild. Like just the idea that you can have a home in 30 days. There used to be a show back in the day that was like my Extreme Home Makeover, something like that. This reminds me of that, but like better and cooler. So yeah, they have this emphasis on reducing waste and cutting energy consumption. And so we'll have to see how these homes look like and how they are. So far they've built 100 projects and with this funding, we'll see where that takes them.

Yeah, this is a really cool story. Also a trend in San Diego, construction tech. We've got a number of interesting construction tech companies. Most are in the purely software space. This is one of the few that's actually in the construction manufacturing side where they're literally going to be spinning up factories to pump out houses. Super interesting. So if you want to hear more in details about this, go listen last week to the talkers and tech podcast where we did a a deep dive with founder and CEO Garrett Moore. But our next story is about Scripps Clinic. So one of Our larger research institutions here are using 3D holograms for surgery in SoCal. So pretty cool to see a tech that, you know, came from what was one of the first consumer 3D holograms. I think it was Tupac at a concert, right?

Yeah, one of the first.

We've obviously seen a versions of it with AR mixed with VR, like Pokemon Go, being able to collect all the things, which is.

That's a fun one.

That was a fun one. And now they're doing it for surgery. So, you know, just because tech starts off as for fun doesn't mean it's going to end up for. Not for good.

Yeah.

So what's going on with 3D hologram and surgery?

Yeah. So Scripps Clinic becomes the first in SoCal to use this mixed VR headset tech to give surgeons a holographic view of a patient's preoperative surgical plan during shoulder replacement surgery. So essentially, you can imagine it, they have their headsets on that overlays the surgery plan on the area that the surgery will happen. And so it's really overlaying the plan over the actual tissue. And so it allows a level of precision and accuracy that, you know, the surgeons can go and very carefully do exactly what they do need to do, as well as giving you, like, a personalized view of the prosthetic placement itself. So it's currently one of 33 health care providers using this mixed reality tech, and it's the first in Southern California. So I'm very excited to see this. I think this is just the next, next, next level and next step in healthcare. And, yeah, so super cool to see.

This is very cool to see. We've obviously had remote and robotic surgery where surgeons can do the surgery from an area in the world while they're manipulating, you know, the robots. But now to have the vision part upgraded to a whole other level is pretty interesting. We have to keep track of this for sure, because I'm always looking for practical applications for VR. Some good stories this week for sure. We got to give us some shout outs here, though, from both some. Some people and some events. Coming up, Scratch Barbecue Sauce, which is a local San Diego company, they just won a pretty big competition, didn't they, for competing against others? And they applied for the Gelson's local discoveries contest and they won the competition. Now it's on all 27 Gelson shelves, which is pretty cool. This guy was just doing it at home. Antonio May is building his own barbecue. I mean, he's an experienced pit master and butcher. Like, I think sounds like though on the side has always been working on his own sauce. So I'm gonna go find some.

Oh, absolutely.

Try it this weekend. Big barbecue sauce fan. So events coming up and this one specifically, Matthew for you. You come into town next Thursday. Well, that Thursday night I want to see you at July 14th Innovate78 startup event. It's up in Oceanside, not far from you. So, you know, push the boxes aside, come join us. It's going to be event all about talent and recruitment, which I think you'll love, both from the startup side. So what's it like for a founder to have to be thinking about talent, recruitment and then the job seeker side. What's it like right now to find jobs? We say it's a hot job market, but then you also are seeing companies lay people off, like what's really going on? And we have an amazing panel to talk about both sides of that. So come on out next Thursday night to Innovate 78 startup event, comic Con the week after. So you know, San Diego, make sure you empty out so that we let the tourists now. I'm just kidding. By 21 to 24th, downtown is going to be insane. Stacia, I'm sure you're excited to wander around. Are you going to dress up? You're going to get into cosplay?

I mean, I might as well. So I, I'll try to like run past there in my. I think that's the, the true, the true San Diego thing to do. If I can like run there in my costume, like wander the crowds, I will be the happiest young Sasha that.

You ever saw do it, you know. So you're going to run like in a pirate costume?

Yes, absolutely. The pirate queen.

Right? Got it. I love it. All right, well, we'll see everyone out at Comic Con and then marketing night by Fresh Brew text coming back August 30th. And we've got a really cool panel, everyone with a bit of consumer experience. So we're going to focus on B2B2C kind of marketing, which should be really interesting. So we'll put links out there for you to go and find. You can find all this on freshprotech.com this podcast will be published on our podcast probably hopefully by early next week. Seems to be that it takes a few days to get it out. We have to like download the files from Twitter, which takes 24 hours. So in either case, if you're not listening to this live, go and subscribe to the newsletter on freshprotect.com and find our podcast there as well. And really, more importantly, see in person soon because all that. Oh, wait, two other events are coming up. July 30th, August 31st is San Diego Life Changing Summer Bash. So look for that event. And then a little early, but we're spinning up Startup Week in October all week, all in person. So I think you can apply right now for the Startup Incubator, which is going to happen for the entire month of October. And then the end of the Incubator pitch competition will happen at Startup Week, which should be really fun. So check out startupsd.org to find more details about Startup Week. And that's the show. We did it all in less than 30 minutes.

We sure did. I mean, it looks like it's going to be a great summer, great fall, and looking forward to seeing everyone in person.

Yeah, likewise. Thanks everyone for joining in. Make sure you share this with others so that they know what's going on. And we'll see you next week. Thanks, everyone. Take care.

Thanks. Bye. Happy Friday.