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Region Attracts Over $1B in Venture Funding in 2012

Venture funding into San Diego companies last year passed $1 billion, the first time that’s happened since 2008, according to the latest MoneyTree Report.

As has been the case for most of the past two decades, the life sciences sector (which includes medical devices) took the majority of that total with $709 million invested in 2012, up from nearly $600 million in the prior year.

The final tally in local venture funding for the past year was $1.12 billion in 101 deals, compared to $930 million in 113 deals in 2011, according to the report done by PricewaterhouseCoopers LLP in conjunction with the National Venture Capital Association.

Bill Molloie, partner with PWC, said the local VC investment numbers were particularly compelling in view of national trends that showed a double-digit drop-off in investing in life sciences.

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“Investors saw in this market a greater opportunity in early stage investing in life sciences companies, both in new investments and follow-on investments,” Molloie said.

Fifty-seven percent of the local VC dollars went to startup and early stage companies last year, compared with 2011 when 47 percent of the investment dollars went to those types of companies, the report found.

Sapphire Energy Funded

Within the life sciences, the firm attracting the largest VC funding was Sapphire Energy, which obtained $142 million earlier in the year, the report said.

Sapphire is developing technology enabling the conversion of algae into crude oil. The company bucked a trend last year of clean-tech companies falling out of favor of many investors, and investment ranked among the 12 largest venture deals in the nation.

Starting in 2014, Sapphire says it will produce 100 barrels of crude oil daily at its algae farm and separation plant in New Mexico. Founded in 2007, Sapphire has raised about $300 million in venture funding, including Cascade Investments, the venture arm of Bill Gates, and Monsanto Co.

Much further down on the list of local biotechs getting VC money was Lithera Inc., which is developing an injectional drug to reduce fat. In December the company obtained $21 million in an add-on investment round that could increase to $36 million.

Susan Knudson, Lithera’s vice president of finance, said the funding will be used to support the phase two clinical trials on the drug called Lipo 202. Like many smaller biotechs here, Lithera, which was founded in 2007, outsources a great deal of its operations and has a relatively small staff of 15.

Of the top 10 local companies receiving VC money last year, eight were from the life sciences sector, and two were in software.

Funding in Two Areas

After Sapphire, the next four largest recipients of venture funding last year were Aragon Pharmaceuticals, $88 million; Tandem Diabetes Care, $55 million; Celladon, $52 million; and SmartDrive Systems, $52 million.

SmartDrive, which provides video recording systems for vehicle fleets, has offices in the United Kingdom, Australia, New Zealand, India, the Ukraine and China, and has about 375 employees worldwide. The company said it has raised about $118 million since its founding in 2004.

“The funding is going into two areas,” said SmartDrive spokesman Jim White. “First is R&D (research and development), and the other is expanding our marketing and sales.”

White said the firm hired two new managers last year in San Diego, a vice president of marketing and vice president of client services and each is hiring other employees here.

San Diego’s annual VC totals improved last year despite a fourth quarter that saw a 41 percent drop from the like quarter of 2011 to $174 million in 24 deals.

The top five investments in the fourth quarter were Ambit Biosciences, $22 million; Lithera, $21 million; Tandem Diabetes, $20 million; Cebix, $18 million; and Auspex Pharmaceuticals, $17.5 million.

On a national level, the MoneyTree report counted $26.5 billion invested in nearly 3,700 deals in 2012, down 10 percent in dollars, and down 6 percent in the number of investments.

The largest declines over the year were in the life sciences and clean technology sectors. These were offset by increases in the software sector, the report said.


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