Local companies raised $2.4 billion and $2.54 billion respectively from January through March, up more than 200 percent over the same quarter last year, according to data from PitchBook-National Venture Capital Association Venture Monitor.
Across all sectors, including technology and life sciences, 88 local firms netted investments in the quarter, up from 71 deals a year earlier.
“It’s been exciting to watch — there’s a lot of momentum that’s been built up over the years,” said Mike Krenn, chief executive of Connect w/ the San Diego Venture Group. “At Connect, we sort of knew about every major funding round before it was announced, but now we’re seeing investments happening all around us, which I think is super healthy.”
Life Science Dominated
Life sciences firms dominated venture capital fundraising locally, which is typical. Those companies brought in $1.82 billion, just shy of the previous record breaking $1.87 billion raised in Q4 2020. Biotech companies saw eight deals of $100 million-plus.
Notable investments include Blacksmith Medicines, a spin-off from Forge Therapeutics that develops treatments targeting metal-dependent enzymes, raised $300 million in seed funding, one of the largest rounds of seed funding raised on record by a San Diego-based company.
Vividion Therapeutics, which developed a drug discovery platform to develop transformative treatments for serious illnesses, announced it raised $135 million in Series C funding in February.
The region also saw several large technology deals as well, particularly in software. Tech companies raised $470.3 million in the quarter, the second highest funding raised on record after Q4 2020 ($762.0 million). Technology firms received roughly 25 percent of San Diego’s total venture capital deals in the quarter.
“We had 18 companies that raised over $15 million, with several of those raising over $100 million in quarter one,” said Tim Holl, partner at Ernst & Young. “We’re seeing the majority of investments go to life science companies but as we make our way down to the smaller deals happening we’re also seeing a lot of technology-related investment.”
Notable investments include Tealium, a website data management firm, raised $96 million. Shield AI, an artificial intelligence outfit, pulled in $90 million, and marketing technology provider SOCi raised $80 million.
Grant Schoneman, senior managing director at JLL, said the near-record quarter is producing a significant demand from a real estate perspective.
Last year, life science companies had record leasing activity in 2020 with more than 90 lease transactions were signed during the year, totaling over 2.2 million square feet.
“Today we’re probably between 2.5 to 3 billion square feet of active tech demand in the marketplace of overall companies looking for space,” said Schoneman. “Last week, I received a call from a broker that needed 30,000 square feet of space and another broker that needed about 50,000 square feet of space. It’s producing a ton of demand.”
“It has tightened the market a bit. It’s also affecting HR on the hiring side as well,” he said.
Five IPOs This Year
Venture capital investment across the U.S. is at record levels, fueled by a strong stock market that’s receptive to initial public stock offerings for VC-backed firms.
Nationwide, venture capitalists poured $69 billion into startups in the quarter, up nearly 93 percent from the same period last year.
In the first quarter, the U.S. IPO market had its busiest quarter since 2000, with 100 companies going public, according to Renaissance Capital, which operates an IPO- based Exchange Traded Fund.
“San Diego saw 12 IPOs on the US exchanges last year, which is the most we have seen in the last five or six years years,” said Holl. “This year, we have already seen five companies go public, including TuSimple ($TSP) , which is not the traditional life science companies we’re used to seeing.”
As time goes on, Holl said the region’s technology community will continue to grow and more companies will seek to become a publicly traded company.