This Week in San Diego Tech News - July 26, 2024

Welcome everyone. Good to be with you. This is Neil Bloom here from Freshbird Tech and Interlock Capital. I help run community within San Diego including investing in it with Interlock Capital and I'm thrilled to have my ongoing CO host here, Mr. Fred Greer from the business of San Diego substack. Hey Fred.

Hey Neil. Happy to be here. Tech reporter at the Business Journal and Business of San Diego substack and excited to talk about the biggest news in tech in San Diego.

And we take one week off and all the news comes in. I feel like right, a lot of news. Well, luckily you put together a killer Q2 wrap up report on VC funding and just to the TLDR is that we had another billion dollar quarter but you pulled out some really great info from it of just the diversity of the industries that it was in, but also the size of checks which I think is interesting. Can you take us through and dive into some of this data here?

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You want tech and tacos Tacos in tech you know we got Tacos in tech is on smash for the green guacamole Keep accountants counting beans Contador Quentan frijoles found us trying to raise some queso la vida San Diego school of rappy rapping pie tortillas round jalapenos in these modern times a craft beer and coffee my coating yoga posse fold the body origami we be surfing Coronado eating tacos el gordo the tacos stand in puesto lucha libre and sombrero Gotta shout out to 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 the Tijuana est Be full of hustler 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.

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Yeah, so pretty much high level, you know. 1 billion was invested in Q2 24. The entire year of 2023 was a tough year for VC funding for both tech and life science companies. And in Q2 of this year we saw a diverse of Fundings from biotech to tech to consumer. Something that stood out to me in that report was Endeavor Biomed. They closed 132 million Series C. On the tech side we have two companies, Platform Science 125 million growth, Firestorm Labs 12.5 seed and we also had Consumer. We had a pool company launched by two time or three time entrepreneur Jeremy, he launched a company called Splash and they raised a 4.5 million pre seed round. And yeah, the whole report breaks down the different three categories. Who raised the most funding out of the top five deals. And so if you're interested in learning more, that's going to be linked in the show notes.

Awesome. Yeah, it definitely, I mean from an investor's hat perspective, we've written way more checks already in 2024 than we did in 2023. We've done about one a month already on the year including Splash with Jeremy Yamaguchi. So just from that very, you know, anecdotal experience, this year is off to a different beat than the year before. Long term, ten year vision here. San Diego used to do about a billion a year in total VC capital in the 2013, 14, 15, 16 time frames it obviously started, you know, go to that but now we're doing that a quarter. Right. So even if we and Q1 was also a billion I believe or closely around that. So if we keep on this pace somewhere between 3 to 4 billion on the year like we're looking at pretty, pretty big growth over the last 10 years and even over five years if we take out the 2021 hump of 10 billion like we're looking I would say pretty strong in an environment that's still a little bit unknown, you know in both tech, bio and consumer where there's no exits really happening at least at the IPO level except in bio. So we're, we'll talk a little bit more about Bio. Bio seems to be continue to be a good spot but let's, we'll end on bio fundings here. Let's go through a few of these other recent fundings. You had a great article on Athletic Brewing which is a non alcohol brewing company, has had huge international prominence and I think a little known San Diego company. Correct?

Yeah, yeah. People don't know that they're based in San Diego. They moved from Connecticut, they still have their office there but they have a growing presence in San Diego. And this new funding round which I believe it was around 50 million equity financing valuing them at around 800 million now. So they're Almost a unicorn company in the consumer beverage space. So yeah, they create a product that's non alcoholic. They own a majority share of the market, I think over 40%. Their sales are through the roof. They exceeded 90 million in sales last year and there are top 20 US breweries. So they're definitely making waves. Yeah, the new funding that they raised is actually to build a new facility in the US and they're looking to double their brewing capacity. So if you're looking to join a fast growing company, Athletic Brewing is one of them.

Yeah, and CEO is right here in Encenus. So you know, gotta get him on the pod one time. He's, he's been on one of my favorite podcasts, the T Boy podcast where they, they sat down and had a podcast. So calling out to get him on here as well. Let's, let's talk through a few other fundings especially on more on the tech side here. Company called Term Labs raised a $5.5 million fund. They've got. They're kind of like a fintech meets web3 platform. So they're basically working on a protocol in the defi lending space. So they're building out more tech to, you know, kind of bring stability and predictability to defi lending. So it's nice to see, you know, still raise and work being done in the kind of web3world, including all the way back from the Solana guys who are Qualcomm employees and obviously named what the top three or fourth coin in the world after a very special place here in San Diego. So good to see that there. Do you know the Term Labs team or not yet or hopefully soon.

This just got on my radar. I did look at the founder's background and looked like he had worked at Citigroup and Morgan Stanley and others. And so he has a strong background and you know, fintech. We hosted a fintech lunch earlier this year and it just shows that that ecosystem is very strong and thriving in San Diego.

Yeah, probably one of the oldest recurring, consistently recurring meetups every month is the bitcoin meetup at Edge Wallet's office downtown Little Italy. Probably been happening since like 2014 or 15. I definitely went in 2015. So there is a core group here for sure. Why don't you take us through the next big funding?

Yeah, so this was a huge news Kanji. They raised a 100 million I think series D round KI. They create. Well they don't create anything. They provide management services for companies that have Apple products. So Apple computers, they help them get set up and they provide a few different services. This is a company that's been growing pretty rapidly since 2020. They're based in San Diego, they have offices and think Australia and San Francisco. And this is the second largest tech deal in San Diego this year behind platform science. And I'm actually looking to talk to the CEO next week so I should have more details on the company there.

Yeah, they actually have pretty deep roots and you alluded this in, in the article. The they originally were it management called Interlaced I.O. which the company actually still around is now private equity owned. But the deep roots of the founders started and we're running pretty much IT for a ton of tech companies in San Diego. In fact they're still, as of last year I still saw them as sponsors of San Diego Startup Week and TechCon, SoCal and Top Tech awards. So there's Interlace Root still is actually very active here and it's very cool to see that they kind of went from services and spun it into a software model and continue to grow here. Obviously the Kanji team. Let's jump over to our biggest deal. I would say that we've seen right now the Element Biosciences raise raised a serious series D277 million. Take us through that. That raise.

Yeah. Element Biosciences is probably the, the most hottest life science company in San Diego and I would argue one of the top 20 biotech companies. You know, in, in the US they're competing directly with Illumina and it was founded by ex former Illumina employees and they just raised a massive round. I think it was like 170 or 180 million.

277 million.

Right. So I did some research on the, on the founding story and the way I discovered it was they pitched the idea at UCSC's library, the three co founders to some investors. They had a, you know, something ideal in a napkin. They didn't have a product just yet and they were able to raise I think 5 million seed round. And so to see them continue to grow. They have over 400 employees now. They have, you know, brand new office in San Diego. They've been making revenue, I think over 25 million in revenue for the products now competing directly with Alumina. And so this new funding round is allowed them to scale up and sell their devices more, more around the world. So I think, you know, if you're looking for a biotech company that's, you know, growing and succeeding, Element Biosciences is the one.

Yeah, absolutely. And as you mentioned, CEO Molly had deep roots in specifically in the genomic space within San Diego from Illumina and PacBio before that, which are kind of the two competitors to each other to and actually almost I think combined, but were stopped by the ftc. So deep roots here from that space. And so congrats to Molly and team on continuing to grow this element. Could we predict a IPO in the next year or two? Maybe it might be a future one here that we look forward to. There's still even more we'll touch on even on the next episode like Truvian just announced a big investment on their medical device for blood technology. But we'll do a deeper dive on some of those for sure just because we got so much to get through here. There's some other non. Let's talk some other non funding news. Just general technology companies. So Kratos, which is actually like a pretty under the radar aerospace company in San Diego, they're a public aerospace company. They actually were created from another company spin off about 10 years ago. And they are one of the leaders in unmanned aerospace, building drones and cyber security technologies and anti drone technologies. And they recently released some news specifically on the, on the race to hypersonics, which is kind of this whole space of getting planes at, you know, five times the speed of sound or faster specifically around and there's a lot of challenges around that from sound and heat to the plane. So people have been working on it for decades. In fact, I worked on it back in the aerospace days with Pratt and Whitney who had hypersonics propulsion technology all the way back to the 80s that we touched on. It still is this big hope and dream to, you know, get faster from our planes. And so the Kratos team has been working with NASA Wallops, which is out in Virginia. It's kind of a big test center that they've got there and they're showing some real success now in actually bringing costs down to actually get a real hypersonic test bed to market. Are you familiar with, with the hypersonics world at all, Fred, or the aerospace of Kratos?

You probably are more, more well versed in that area than me. Brad Gray's the Business Journal does a great job of highlighting the defense sector and he did a good piece on Kratos. So I recommend checking that out if you're looking to learn more.

Yeah, we'll link it here. One piece to note is that their big autonomous platform is the Valkyrie, which is an Air Force vehicle now at this point. And they're continuing to use that as a test bed to put this hypersonic propulsion on. So that's great to see because it's an existing platform. They're not building everything from scratch. They've got an existing drone that they are working to be a hypersonics plane. More in the show notes here. We're going to jump all over the place here which, which we love to do because there's you know a little bit of everything in San Diego Fashion file Harlsbad based consumer brand secondhand market so high end luxury brand that we actually did an event at together with CEO or co founder Sarah last year they're launching a series of pop ups of these stores and these stores are like hardcore both from a security standpoint and the kinds of brands they got like tens if not hundreds of thousands of dollars of purses and other branded goods. They're doing these pop ups around the world and they're bringing one to Coronado this summer which should be pretty cool. You're gonna go check it out and see what they what they're bringing down to Coronado.

Fred I love to see this man. You know consumer is underrated sector in San Diego but fashion file leads a space in that I think they did over 500 million in revenue two years ago and it was awesome to partner with Sarah and hear her founding story. As you mentioned they've done these pop ups in you know Irvine and San Diego now Coronado. Not too surprised. You know I think the, the most expensive houses are in Coronado and people buy luxury goods there. So I'm sure they're going to be doing extremely well and maybe if I have some time I'll, I'll project pop up during the summer.

Totally and I'll I'll drop a little hint for our listeners. You might be able to catch Sarah at Startup week this year. Carl's bad day she last year they had Joe from Vori and this year Sarah from Fashionphile might be representing on day one of San Diego startup in late October. Let's go back to some biotech news and this is kind of a part two we originally talked an episode or two ago. Fred had a great overview of how Eli Lilly and some other big bio companies are making some big bets in San Diego to incubate the next drug. And already we're seeing the next some news here where Eli Lilly is inked a pretty big partnership with local company RadionX that could be worth up to a billion dollars if it's turns into either acquisition or even a revenue Partnership. What can you tell us kind of on what this means here?

Yeah, so Eli Lilly, they're a large pharmaceutical company, they're publicly traded. You look at their stock price is at 860, 63. They're killing it. They're doing pretty well. Last time we mentioned their name they were expanding via a incubator program to support 10 biotech startups. Now this new news is they're acquiring a smaller company which values this deal at worth a billion dollars. And so essentially they're partnering with a radio, a radio IDX company. That's a big partnership and so basically if it pans out the deal for the startup could be awarded up to a billion dollars. And so they do these big pharma companies partner with smaller companies to accelerate their pipeline and so they're able to show proven success in pre clinical trials. They will upright acquire all the assets and you know, it creates liquidity for investors and also the founder of the company. So that's great to see. There's big pharma investing in smaller companies.

Totally. And another great article by Natalie Rocca, former colleague. And now you both are hitting the biotech beat for separate papers which I love to see. I hope you guys are collaborating a little and sharing some notes there. But yeah, I love to see this. Radionics Radionetics which is in the oncology space, they're getting 140 million cash up front to in, in this partnership and then Eli Lily has the exclusive right to acquire them for a billion dollars. So it's kind of an already set price that's like hit these milestones. We already invested some cash and you know, let's see if we can do some stuff together. They're on the heels of some other big bio doing stuff like this where raised bio was acquired by Bristol Myers Squibb for $4 billion late last year. So you know, we will continue to report on this because one, the biotech world is alive and hot and well right now and we personally love to map over the things that happen in bio, how and when and how do we make that happen on the tech side as well too from acquisitions, partnerships from big tech to startup tech and everything in between. So let's keep jumping through our stories here. We'll do some un. We always have a little bit of unfortunate news and that's kind of the barbell I think about biotech right now and that you know, we've talked about like just as much as there's acquisitions which sometimes lead to shutdowns or apos or fundings. There's also, you know, the negative news, which is job cutting. And so Novartis, another big bio company, is shutting down their San Diego office and unfortunately eliminating 100 jobs related to that office. Now they actually have multiple offices in San Diego. So they're not completely cutting out of the San Diego market. It's just a very specific office that they're shutting down. And I think it actually is. It's a part of like a general global restructuring that they're doing right now, which we're seeing still people coming out of COVID and doing new strategic plans in that regard. Right. Cutting certain diagnostics that don't have a market anymore or certain pharmaceuticals maybe that viruses don't have a market for and going, you know, either buying their way back into a different path. So there's a lot of restructuring globally around that. Anything come to you from this that's anything specific to San Diego, or does this just feel like a global restructuring?

Yeah, I mean, the news is. So they're winding down, I think, their San Diego site, which will eliminate about 100 jobs and will be completed mid-2025. So hopefully it gives them, the people, enough time to, you know, maybe find new jobs in San Diego. I think smaller biotechs and other biotech companies are going to benefit from that talent because Novartis is one of the large companies. I'm sure they have some strong talent there. So hopefully we retain that. And I talked to Ken Rollins from Cooley and another guy From, I think C3 Insurance bank, and, you know, kind of what they showed me was, you know, we're seeing increased consolidation in the biotech market right now. It's really hard for companies to go public. And, you know, some of these companies don't have a lot of cash on the balance sheet. And in exchange, I think we're seeing, you know, layoffs and restructurings and consolidation. So, yeah, you said it's a barbell strategy. There's growth and funding, but there's also layoffs and challenging times.

Yeah, I mean, Novartis is a 67,000person company, so 100 people of them is not that big a deal. But they actually are. In the article, they talk about that they're, you know, treating them with, with as much severance and, you know, transition as they can. That being said, they actually acquired a company about a year or two ago, Parma, and that still exists here in San Diego. So that's a different site up in Carlsbad. And I think it says, the article says total They've got almost 600 people in San Diego separate from this 100 that are getting laid off. So still a presence here though you know of a 76000 person company that majority are elsewhere that's for sure. So anyway news but as we always say here, one door closes and another opens. So if you are in need you just raised hundreds of millions for your biotech you now you know where to go. Look some people who are from land Novartis might be looking for something new to work on. So nudge, nudge to the element team here to go. I'm sure they're on top of it. Go and grab people who are fresh on the market, that's for sure. Let's close with a fun one here. Ans Gelato is the number one gelato shop in the U.S. they have both Del Mar which I just recently went to and I can attest it is fantastic. And I think two of the locations in San Diego. So three locations San Diego they have different themes at each location. Have you been to one of these yet Fred?

I gotta check it out.

Let's go, let's go get some auto. They if you'll ask they'll do a whole tasting so they'll give you the whole menu all on metal spoons. You can try every single one before you commit. So I'd recommend doing that. But the one I went to was over in Del mar right at 15th street there at Del Mar Plaza. So let's go get some gelato here by the end of the week.

Let's do it. I love to see. I think they're opening it in Ocean beach which is a great location and it's perfect for the San Diego weather in the summer right now. So yeah, it's great.

Yeah. Roll right off the beach right into the gelato shop or vice versa. Yeah, go get yourself some Anne's gelato. Congrats on the naming to number one in the in the in the country here. Let's talk about some events. We recently actually just did a Carlsbad life in action tech gathering. We had about 50, 60 tech leaders at the Airspace office in Carlsbad. This is something the city of Carlsbad is doing a monthly gathering of different industries. So one month tech, one month clean tech, one month life sciences and rotating through that kind of their big industries. And it was really cool to have the founders, CEO and CTO Ryan and Nick of Airspace I think a series D venture backed company in the logistics tech space open their doors, open their offices. They have 300 employees and it was really cool to have them host. And the next one of the tech gatherings is actually going to be at Shipcom's office and it's linked in the show notes here September 23rd. So come on out. If you are a North county tech leader, we'd love to have you, that's for sure. We'll get Fred there too in the future though at this point like you and I need to be at different places. Honestly, it's better for the community that we aren't. Same as how me and Mike Kren. There's just so much going on. It's better that we just cover the market by not actually coinciding in person. So all good either way. I always love to see you, Fred. We got a book launch coming up this Friday, July 26th. Cheryl Goodman's new book, which I've got right here next to my desk. And we actually just put a podcast out on the pot here on Tacos Tech Podcast how to Win Friends and Influence Robots. Kind of a play on words of an old book from about a hundred years ago and it's really like a basics 101 for the non tech world on what is AI and how will it better your lives and kind of a how to guide. Have you dove into this yet? Are you coming to the launch party?

Yeah, I just would say. Cheryl Goodman is a longtime tech leader in San Diego. She worked at Sony and Qualcomm, so I think she's a perfect person to convey this message and create this book. I do have the first copy first run in hands and we'll be attending her book launch this Friday.

Awesome. Love to see it. I'll see you there. It's at Biolabs in Sorrento Valley. It should be fun. Some other events coming up over the next few weeks and as always you can get like a way more detailed listing of events at the Social Coyote, which is a weekly newsletter about the events that are happening. Jonah's amazing at curating lists. These are just ones that are popping up on our radar or we're going to already. So we're inviting you to come join us. The Carlsbad clean tech gathering August 5th will be at Aptera Motors, which is a maker of a three wheel, one person, all electric, you know, car. And they're actually, I think going to be given some rides in their most recent prototype. Should be pretty fun. So come out and join us. The SD EDC Summer Bash is already back again. I feel like you were just there talking to Joe Kudla from Vuori. Are you looking forward to this year's Summer Bash? Ready?

I'm looking very forward and I will be promoting it too. I think the Summer Bash by EDC is one of their best events they held each year. Last year, Joe Kutla from Viewer Clothing sharing the founding story. That was awesome. I'm excited to see who they get this year and they haven't confirmed the speaker yet but get your tickets. It's going to be a great time. A lot of great folks in both tech and life science in San Diego will be there.

Awesome. Yeah. One event that just popped up on my radar, I'm just putting a link Here is the TEDx San Diego women. Eventually TEDx actually San Diego has a, has a long history here, maybe 10, 15 years but and then kind of a new group who started organizing over the last year or two and I think they've now started doing multiple events throughout the year. And so this one is a focus on San Diego women which should be good. August 28th I'm also just for you listeners doing a little sneak peek of something that we're testing out at Interlock. We've got our own little Interlock calendar which is really like what events are we going to or putting on? This is more and and they're we're sharing kind of being transparent. We're sharing all both our public and our private events. So we do a lot of curated invite only. Fred and I do a bunch of those lunches in that regard. And so we're sharing and just to see as a test like what you know, who, who reaches out, who wants to go can we better communicate without just saying everyone come to everything. You know we can't necessarily do that but we want to share and so we're testing this out. So give us some feedback. Once you see that you can subscribe to our event Google Calendar and you can ping us if there's certain events that, that are private but you think you'd be a good fit to come to. So with all that that's those are our events for the week. It's a busy week. We didn't really mention it's Comic Con week. So I'm actually going to some Comic Con events. I've got the Sony Ventures team is doing a gaming opening night that I'm going to join and there's like a space night both Thursday night I'm going to be a both I'm going to like try to go to one and hopefully they're like a block or two away to go to both of these. You do anything Comic Con related, friend?

I just read an article from the Union Tribune about, you know, downtown is like, you know, has posters around. I think Comic Con is probably the largest event that brings together people from LA and people fly in from New York and you know, from different markets. And I think it's. It's just great. I love it. It's. It's also a great time in the summertime. I will plan on being down downtown it tickets this year, but Comic Con is always a good time and great to see that it's still being held in San Diego.

It is traditionally. Honestly Sandigans like flee. I feel like during Comic Con, especially downtown, like it's like, Ah, here's 200000 people I don't want to be around. But what I'm stoked to see is the industry events. So not just like. Because I. I'll be honest, I'm not a huge like comic. I'm just not. It's not a hobby per se, but I love the industry behind it. The gaming, the tech, the innovation. They always have actually a really cool startup and innovation room, kind of like a CES Lite. But I'm loving what you might as well. If you've got industry execs there, you might as well gather and share notes, which is what you and I love to do. So I'm excited to see that and maybe next year we get ahead of that and do one of our own Comic Con events with some of these gaming studios that we have in San Diego. I mean from psionic to everything in between. So we'll see and hopefully I'll see you there too. All right, Fred, appreciate it. As always. Make sure you subscribe to Fred's Substack, the business of San Diego substack as well as fresh brewed tech which we just recently are testing out and trying substack as well too. So if you're listening to this podcast, you probably heard saw it first on Substack and share with everyone else so that they are in the know and we'll see you soon. Fred, thank you.

See you next time, Neil. Thanks.

Thanks.

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 tacos. And tech is on smash for the green guacamole. Keep accountants counting beans. Contador Cuentan 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 fold the body origami we be surfing Coronado eating tacos el gordo the tacos standing puesto lucha libre and sombrero got a shout out to coast Angels by the ocean watch the sunset La Hoya shows entrepreneurs trying to get funded when San Diego Startup week is popping in the summer Oceanside, the Tijuana 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, the party started. Startups get the party. Startups get the party started. Startups get the party. Startups get the party started.

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