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Venture capital ticks up in 2Q

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More venture capital dollars flowed into San Diego in the second quarter, with the number of deals looking comparable to figures from years past, according to the latest data from Dow Jones VentureSource.

“San Diego is positioned fairly well,” said Ernst & Young partner Dan Kleeburg in a phone interview. “The obvious strengths in certain industries plays well to where VCs are investing.”

Local companies attracted approximately $208.8 million in 25 deals in the second quarter.

The dollar amount is still well below the $350.0 million raised in 28 deals last year in same quarter, but the second quarter figures were an improvement -- both in dollars and deals -- from the $194.6 million in 15 deals San Diego saw in the first quarter.

Regional health care companies continue to attract most of the venture capital, picking up almost three-fourths of the money coming into San Diego in the second quarter.

The biopharmaceutical and medical device subsectors split the health care funds almost evenly this quarter; biopharmaceutical companies usually receive the majority of the investments.

The larger health care deals for San Diego included La Jolla-based Intellikine, a biotherapeutics company that raised $28.5 million in a second round of financing.

Information technology was the only sector to see a sizable increase from the quarter before, receiving a $50.1 million infusion in the second quarter.

Roughly $22 million of that money went to San Diego-based business software provider ParAccel in its third round of financing.

The IT sector took in $76.3 million in the same period the year before.

San Diego accounted for almost half of the money invested in Southern California in the second quarter, trumping both Orange County and Los Angeles, which both saw decreases in dollars and deals from the first quarter.

Orange County brought in $97.7 million in 10 deals, while Los Angeles accrued $110.9 million in 22 deals.

The San Francisco Bay area remains the dominant venture capital magnet in the state, drawing $1.8 million in 180 deals in the second quarter and helping California stay more than secure in its top slot in VC activity.

The state represented 42 percent of nationwide deal flow and 46 percent of capital invested, Dow Jones reported.

San Diego roughly reflects the trends seen at the national level. Venture capitalists invested $5.3 billion in 595 deals in the second quarter, a 32 percent improvement from the $4 billion invested in the first quarter but still dramatically lower than the $8.3 billion in 726 deals seen the year before.

Investors remain conservative, leaning toward older companies and smaller deals and focusing on companies already in portfolio, experts agree.

However, the deal sizes have stabilized, Kleeburg noted -- a sign that venture capital just might be getting its legs back.

“Clearly we’re in a downturn in the funding cycle,” Kleeburg said. “I think it’s still too early to tell that we’re coming out of that, but again, I think we’re positioned well.”

He added that San Diego has the advantage of being able to retain much of its executive management, a key element in consistently attracting venture capital.

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