Jan 05, 2019 -
You heard that 2018 was the year of expansion. Now read why it was also the year of tech ecosystem growth, and what to look out for in 2019 in the Fresh Brewed Tech article below:
2018 saw a flurry of tech companies expand in San Diego, including Apple, Amazon, Walmart Labs, Wrike, Zuora, and Teradata to name a few. San Diego is finally being recognized as an ecosystem with fabulous tech talent, great company culture, and in turn, great employee retention.
The continued funding headline in 2018: Big rounds, fewer number of deals. These huge rounds, led mostly in biotech, helped 2018 completely eclipse 2017’s funding in San Diego companies.
Quarter-by-quarter breakdown of funding:
Top deals of each quarter in tech and biotech respectively:
A slew of new local funds have spun up either their next fund or raised debut funds to be deployed either locally or abroad.
Exits bring liquidity to both investors and entrepreneurs while helping to spin the local startup flywheel a bit faster. Another big deal is how many of these companies are staying local post-acquisition and even bought by a local company, further deepening the talent and expertise in the ecosystem. Also, notice a lot of the later stage exits are bio or hardware acquisitions and the early stage is software. We need to see more of our software companies make it to later stages for ecosystem maturity.
Bring on 2019! What should we be looking for in the New Year? Comment below with your ideas.
Overall, San Diego continues to be a better version of itself as a tech ecosystem, more inclusive, with strengthened company culture, and startups hitting revenue milestones as they find market fit and traction, and grow with good talent.
But here are a few deeper dives to watch:
With all the new large tech company offices in town, on top of the existing tech companies continuing to grow and mature, talent is ever more in need. This is especially true for senior talent. Software development, design, data science, product management, sales, marketing, human relations, recruiting, and finance are all in big need and not just individual contributors but middle and senior management. While the good junior talent coming out of local universities is needed, we need experienced talent that have successfully built software companies in order to further mature our startup ecosystem. Our companies will need to relocate the experienced talent, which won’t be hard; SD Life Changing has been taking the lead in marketing the great benefits to life as a tech worker in San Diego. That will increase in 2019 and retention will be tested. There is exceptional hardware and embedded systems talent here and big name brands are capitalizing (Apple, Google, Fitbit to name a few) but not all will be applicable to software and data-driven biotech. The big name consumer brands like Amazon and Walmart will help pull the top talent we deserve in town while we continue to highlight how top notch our homegrown technology companies are too.
Between the new Horton Plaza and millions of new office square footage coming to downtown and the rest of the county, there’s going to need to be anchor tenants and they won’t likely be local. Who else is coming to town? All it takes is a willing VP/exec to set up shop as a remote San Diego office on top of those already here.
San Diego is a step ahead of many other hubs in that it has always had a strong focus on inclusion and diversity as an asset. With new female-focused accelerators like Hera Labs and Ad Astra and the new underserved communities accelerator CONNECT All (applications now open), San Diego’s founders will be sure to standout as it truly reflects our whole population. These are starter steps, with more efforts to come.
While 2018 showed increased private and public market liquidity for San Diego companies, 2019 is hard to predict. With recent public market volatility, it is difficult to tell if the IPO route is ideal, but I’m sure we’ll see more based on recent filings. If the public markets dry up, our later stage companies will need their next big round to keep them moving forward. This will come in either minority venture investments or majority private equity investments. The liquidity cycle needs to continue for early investors, and a lot of funds have raised a lot more money in the last year that they need to deploy.
While the public markets are becoming more volatile, there is some talk of negative economic impacts nationwide. If a recession truly comes, San Diego will for sure feel it, even with our extremely low unemployment rates. Our startups and tech companies are resilient as proof that funding in San Diego is always lower than other mega hubs and therefore our companies need to get to revenue quicker to survive. Look at some of our strongest later stage companies: Tealium, Seismic, Classy, Certona, all founded in 2009-2010 when economic conditions were less than ideal. Same is true in the highest valued startups with Uber, AirBnB, and WeWork. The strong and disciplined will live another day.
Yup, even more! People (including Jason Lemkin) love scootering around San Diego and the proof is in how many more are showing up in town and locals truly taking to them. We’re happy to be a testing ground!
Let’s continue to build our vibrant ecosystem!! Happy 2019!