As venture capital funding fell nationally in 2016, so did such investments in San Diego, shrinking from $1.49 billion in 2015 to $1.07 billion. Experts say the fallback is simply a reversion to the mean after a blockbuster 2015.

According to Dow Jones VentureSource, which tracks venture capital funding, 87 local firms received venture capital funding in 2016, six fewer than in the prior year.

Although VentureSource’s findings differed from another venture capital funding report released recently, the PwC/CB Insights MoneyTree report, both reported year-over-year and quarter-over-quarter decreases in the number of deals and amount of funding to young San Diego firms. (The MoneyTree report found 103 deals valued at $1.28 billion in San Diego in 2016, 20 of those in the fourth quarter totaling $179.23 million.)

Of the 87 deals in 2016 in San Diego reported by VentureSource, 24 of those took place in the fourth quarter of 2016, seven fewer than in the same quarter the previous year.

With the decrease in the number of fourth-quarter deals reported by VentureSource came a drop in the number of dollars invested: San Diego saw $341.5 million less, the report said. The total value of the investments made in the fourth quarter was $212.74 million, compared to $554.24 million the prior year, according to the report.

Tim Holl, a partner in the San Diego office of Ernst & Young, which works with Dow Jones VentureSource, said 2015 appears to have been an outlier.

In an average year, San Diego gets about $1 billion and 90 to 100 investments, he said, similar to the data VentureSource reported for 2016.

“Venture capital dollars are kind of relegating back to the norm,” he said.

In the fourth quarter of 2016, companies in San Diego doing drug development got $53 million; those making medical lab instruments and test kits received $43.5 million; and biotechnology firms received $14.12 million, VentureSource reported.

Technology firms also got in on the action: Classy Inc., a software firm, got $30 million; cybersecurity company Proficio Inc. raised $12 million.

Holl said the companies that had received funding were representative of the strengths of the region’s business community.

“It’s a good cross-population of what San Diego is good at,” he said.

Funding may have been slower than it would have otherwise been in the third and fourth quarters of 2016 because of the uncertainty surrounding the U.S. presidential election and global political unrest, Holl added.

“There was a lot of volatility, whether you’re talking public markets or venture capital markets,” he said.

Funding totals were also affected, Holl said, because unicorns – startup companies valued at $1 billion or more – were not funded as often as they were in 2015.


2016: 87 deals, $1.07 billion

2015: 93 deals, $1.49 billion

2014: 84 deals, $1.06 billion

Source: Dow Jones VentureSource