Despite the turmoil of an ongoing pandemic, San Diego deal-making and high valuations is continuing into 2020.
Companies in San Diego County raised $1.2 billion in the second quarter of 2020, according to a July 20 report by JLL. Making it the largest quarter on record.
“The Life Science category had the largest single quarter of venture capital investing in history in San Diego,” said Grant Schoneman, managing director at JLL’s San Diego office. “The last best quarter in San Diego was Q3 in 2018, when the life sciences sector raised $780 million. This quarter we reached $875 million for the life science sector, which I think is only the tip of the iceberg for the region.”
JLL recorded $1.8 billion across all funding stages for the second quarter specifically. This is up 42 percent year-over-year and up 88 percent quarter- over-quarter.
Compared to last year, the funding is more weighted more towards the life sciences, than previous years with 93% of funding in life sciences ($875M) and technology ($244M).
“Investors are finding a good place to put their money,” said Schoneman. “The common theme we are seeing is a greater focus on healthcare, diagnostics, and testing as it relates to COVID.”
Toward the end of the first quarter and into the second quarter of 2020, the pandemic’s impact was felt across large sections of the globe, resulting in layoffs by technology startups, shifts to remote work seemingly overnight, and markets shutting down. Industries hit hard were travel, last-mile mobility, restaurants, events, among others.
Funding Held Up
Despite the turmoil and revised funding plans for many startups, funding held up. San Diego saw increased funding to biotech specifically, and decreased funding to transportation, and real estate.
“In all three major life science markets including San Diego, San Francisco and Boston we are seeing a similar trend,” Schoneman said. “There is a significant amount of venture capital flowing into the sector because the IPO market is opening and venture capitalists are seeing potential exit opportunities.”
Venture capital has sparked real estate decisions and additional jobs, allowing companies to grow their overall footprint, especially for life sciences and technology firms.
Mike Krenn, CEO of Connect with San Diego Venture Group said San Diego’s Q2 results was surprising given the current environment.
“San Diego is positioned really well. We had an amazing quarter, I did not see that coming,” Krenn said. “A $1.2 billion quarter is really great. A huge amount if there was no COVID, but even more stellar given the current environment.”
Krenn said the record quarter is a result of local companies having already built a good base of investors. Having established connections with tier one venture firms housed in Silicon Valley, many are willing to reinvest and allow companies to continue growth.
“Most of the companies that managed to close their funding rounds this quarter, had already laid the groundwork,” said Krenn. Emphasizing that founders that have had investor conversations pre-COVID-19 made it a bit easier to raise additional funding despite immediate impacts from the coronavirus.
In July, Connect with San Diego Venture Group launched its new startup investment tracking tool. Its aim is to serve as a public resource for those seeking funding, job seekers, as well as growth fund investors.
Krenn said the team plans to add historical 2019 data in the coming weeks, and keep the list live to the public going forward. Those interested can view the list on its website, which includes both Q1 and Q2 funding data.
Looking forward capital investors appear confident in the San Diego innovation ecosystem. Now in Q3, VC funding has produced three deals totaling more than $150 million, to date.
The San Diego Division of JLL is headquartered in La Jolla and employs 101 local staffers. JLL works with many venture-backed companies as they expand their footprint in the region. The firm also works with building owners to design and market space for the cutting-edge life science companies.