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New Wealth Brings A Reinvest Culture

When considering the wealthiest people in San Diego, a few names easily come to mind: T. Denny Sanford, Irwin Jacobs, Malin Burnham, Ernest Rady. After all, their names are affixed to lecture halls, civic buildings and research institutes across the Torrey Pines Mesa.

Many of these individuals made their money in legacy industries such as real estate, finance and agribusiness.

But as physical resources such as land and oil become increasingly rare, new wealth is emerging from knowledge-based industries in science and technology. Guys like Howard Lindzon, Taner Halicioglu, Kieran Gallahue and Faheem Hasnain.

These fresh faces amongst the established multimillionaires are slowing creeping up our Wealthiest list. They made their names in relatively nascent local industries such as biotech, software and technology. This “new money” is striking wealth at a younger age than the millionaires before them, some experts say, and they’re using their money a little differently than their elders.

New Sectors, New Players

The Wealthiest San Diegans list includes individuals with a primary residence in San Diego County.

Estimates of net worth are based on information gathered from shareholder disclosures and stakeholder filings, credible published wealth reports such as Forbes and Bloomberg, wealth intelligence sources, and trusted sources. A few individuals cooperated with us to provide guidance for our estimates; most declined or did not respond.

We know this list is incomplete; in many cases, there is not enough information to make a credible estimation. Many of the wealthiest people in San Diego closely guard their financial information.

We publish this because it shows a cross-section of the county’s key industries and inspiring success stories, from executives at promising life science companies to fast-growing craft brewers. It includes individuals and families that helped build this community and its innovative tech companies.

It’s a snapshot of prominent philanthropists, political donors and power brokers.

Nels Jensen

Editor-in-Chief

Dale Yahnke, co-founder and CEO of one of San Diego’s largest wealth management firms, Dowling & Yahnke, said local wealthy clients are younger than when the firm launched 26 years ago. He thinks the reason for that is the fast growth of industries like telecom and biotech, which often foster entrepreneurship, acquisitions, and big exits.

“A lot of money has been made in more entrepreneurial ventures, so we’re seeing younger, higher net-worth people,” he said.

San Diego’s local academic institutions have played a significant role in stoking entrepreneurship in tech and science, Yahnke said. Research institutes and universities incubate entrepreneurs regularly, and some have had far-reaching impacts on the local economy. Qualcomm Inc., for example, has roots in UC San Diego as the tech giant’s cofounder Irwin Jacobs taught there for a time before starting Qualcomm.

Not only has the university incubated numerous ventures, but now those ventures are old enough to be spawning their own offspring. Nervana Systems, for example, was an artificial intelligence startup founded by ex-Qualcommers Naveen Rao, Amir Khosrowshahi and Arjun Bansal in 2014. After only two years in operation, it was acquired by Intel Corp. for $400 million. That exit likely entered the founders into the young millionaires club.

Biotech Bonanza

The biotech industry is another major contributor to new wealth in San Diego. The local hub emerged in the late 1970s and has matured into a $34 billion economic engine for the region. As life science ventures get gobbled by Big Pharma, their executives become overnight millionaires (or billionaires).

In 2015, for example, San Diego drugmaker Receptos was acquired by biotech giant Celegene Corp. for $7.2 billion. Founder and CEO Faheem Hasnain cashed out big, and has since become a personal investor in several local biotechs. But CEOs aren’t the only ones who benefit from a mega sale like Receptos.

“Often it is more than a single person who benefits from an exit,” said Mary Walshok, an administrator at the University of California, San Diego. “Think of the dozens of people with stock options.”

San Diego has had a number of big exits in the life science space, including the sale of Life Technologies to Thermo Fisher Scientific in 2013 for $13.6 billion. Life Tech executive Greg Lucier invested some of his wealth in other local biotechs before jumping back in the hot seat to lead NuVasive in 2015.

Then there was the sale of CareFusion to Becton Dickinson and Co. in 2014 for $12.2 billion. CareFusion’s top executive, Kieran Gallahue, was a candidate for this year’s wealthiest list based on this sale alone.

In fact, Hasnain, Lucier, and Gallahue each received more than $100 million combined from accumulated compensation, stock options and bonuses from those sales transactions or exits.

Are They Philanthropic?

Like the previous generation, some young and wealthy San Diegans are carrying on the tradition of philanthropy, said wealth manager Yahnke.

A good example of that is the recent $75 million gift donated to UC San Diego by Taner Halicioglu, a 40-something technology lecturer at UCSD and angel investor in San Diego. Halicioglu is best known for being the first outside hire at Facebook, inspiring some to wonder if he cashed out on stock options after the company’s explosive growth. But his resume also includes top tech companies such as eBay, Loudcloud, and Blizzard Entertainment. Halicioglu donated the huge chunk of money to establish a data science institute at UC San Diego.

Halicioglu is one example of San Diego’s ‘new money’ taking part in local philanthropy, but there are others. Kathlyn Mead, president and CEO of The San Diego Foundation, said the organization’s donors under 50 years old are primarily new money from the tech sector.

New Money, New Priorities

Walshok said philanthropy looks a little different in the hands of the young.

“New wealth is living in a new world, where the problems are different from those faced by one’s parents and grandparents,” Walshok said.

There is skepticism among millennials, she said, which manifests itself in philanthropy.

“There is a perception that we’ve been giving but nothing changes; that homelessness is worse, the environment is worse, and old systems haven’t worked too well,” Walshok said.

This perception is leading new money to create alternatives to the status quo, rather than building on existing structures. An example of this is Facebook founder Mark Zuckerberg’s $100 million investment in charter schools, Walshok said.

Startups > Retirement

Eric Otterson, managing director at Silicon Valley Bank in San Diego, said he’s also noticed a change in priorities from new money versus old money. Rather than giving philanthropic gifts, new money is increasingly forming investment funds to fuel startups. Many consider this an alternative way to give back to the local community.

“San Diego has a history of having a more philanthropic culture than a ‘reinvest in San Diego’ culture. Yet I’m seeing more people start angel and seed funds instead,” Otterson said.

There’s certainly been an increase of small investment funds focused on startups in recent years. Howard Lindzon, the local tech founder of Stocktwits, started seed investment fund Social Leverage in 2009. In 2014, Analytics Ventures was formed in part by Blaise Barrelet, a guy who made his wealth from early tech venture WebSideStory. More recently, Seed San Diego, a collection of tech and science savvy early-stage investors, formed in 2015. And Kevin Hell, the former CEO of digital media company DivX, just formed a sports and active lifestyle fund called Motion Venture Fund in 2017.

Ashok Kamal, executive director of local angel syndicate Tech Coast Angels, said the group is seeing a lot of young members enter the investment space.

“These are people who sold companies in their 30s and 40s,” Kamal said.

Technology companies in particular move at a fast pace, meaning founders can go from start to exit in a matter of years. It makes the founders wealthy at a young age, leaving space to do more work in business.

“Say you sell your business at 41,” Kamal said. “What are you going to do? Retire?”

Investing in new businesses is a way for new money to stay engaged in the business community throughout their lives.

“Being an angel investor is kind of like being a grandparent,” Kamal said. “You get many of the joys of being an entrepreneur, but you get to drop the kids off at night.”

SD Growing Up

Yahnke said this uptick in new money investing in local philanthropy or local startups could also be a sign of the city’s maturation. As the region’s population grows, the number of people who are native to the area is increasing, playing a role in those entrepreneurs’ interest in giving back.

“San Diego has been a home of transplants,” Yahnke said. “I think San Diego as a town is kind of maturing, and there are more people here who have been born here as the population gets bigger.”

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