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San Diego Had 36 More VC Deals Than Orange County in First Half of ’07

Ernst & Young LLP and Dow Jones released venture investment statistics for the first half of 2007 on July 23, showing Southern California, including San Diego, on track for hitting deals and dollars not seen since 2001.

Thus far in 2007, San Diego reported 56 deals closing, trailing Los Angeles with 70, but towering over Orange County at 20.

However, in terms of dollars, San Diego is on track to break a billion dollars in the third quarter, reporting $994 million for its 56 deals. Los Angeles had $887 million and Orange County, $271 million.

Mike Schoenfeld, partner at Ernst & Young and the firm’s director for venture capital advisory in the Southwest, said that in 2007, Southern California is surpassing New England in terms of investment dollars.

“Generally the Bay Area leads and New England is second,” said Schoenfeld. “These last nine months, Southern California has seen more investments in terms of dollars than New England. Not because New England is doing badly, but because L.A. and San Diego are doing much better than they have in the past.”

According to Schoenfeld, in the second quarter, five VC investments topped $20 million on top of another nine in the first quarter, including: biopharmaceutical company TargeGen, which raised $40 million; biopharmaceutical company Ceregene, $25 million; electronics company Verari Systems, $24 million; medical device developer Ablation Frontiers, $22 million; and information services company ID Analytics, raising $20 million.

The second quarter also reported six deals valued at $15 million or more, including Ortiva Wireless, which received $15 million and Coradiant, which also received $15 million.

“The momentum we had (in 2006) is being carried through into 2007,” said Schoenfeld. “If things hold steady, we’re on track to exceed 2006’s fantastic year,” which, for San Diego hit $1.4 billion and 94 deals for the year.

In 2001, San Diego VC investment hit $1.6 billion, which Schoenfeld said could be broken in 2007.

Comparisons to the investment binging of the dot-com bubble are easy to draw, but Schoenfeld said recent investments aren’t as hasty as investments before the dot-com bust of 2000 and 2001.

All of the deals that pulled in more than $20 million were companies with proven products and ideas, Schoenfeld said.

“Pre-bubble companies were going public when they were in development stages and that led to irrational exuberance,” he said. “VCs are funding different companies nowadays and, when they go public, they’re profitable and shipping product.”

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Bank Reports Gains:

Regents Bank in La Jolla announced booming growth for the first half of 2007 on July 18, reporting 20 percent-plus gains in deposits and loans and a 54 percent gain in net income over the same period 2006.

As of June 30, Regents had $252 million in deposits, up from $212 million in the first half of 2006 and loans grew to $209 million from $170 million for the same period.

Regents President and Chief Executive Officer Dan Yates credits much of the growth to his existing clients, both because of their businesses’ success and from bringing in referrals.

Net income for the period was up to $1.6 million from $1.1 million last year and Yates said the bank is eager to get a foothold in East County where a number of Regents’ clients are located.

“The key is finding lenders in the area,” said Yates. “It could be a team of individuals.

“It helps to have feet on the street; loan officers familiar with the geographic area,” he added. “It’s a great market for our bank, but to be effective, we think it’s smart to start with a team of people that have experience out there.”

A brick-and-mortar presence in East County isn’t vital to expansion, Yates said, but it does provide some strategic and “perceived” advantages.

“There’s a perception that if an office is out there, entrepreneurs are comfortable making the decision to bank with you,” said Yates. “I laugh when I say it, but no sooner than we opened, we have clients across the street (from our branch) that use courier service and remote deposit capture; there’s a strong likelihood they’ll use those than walk across the street.”

“It’s a perceived issue, not a real one, as far as picking your banking partner, but, since I can’t change perception, a physical presence helps,” he added.

Yates also said that he anticipates breaking the $300 million in assets mark by year-end or in the first quarter of 2008. For the first half of 2007, Regents had $279 million in assets, up 18 percent from $236 million for the like period 2006.

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