We’re a trusted resource to the venture community. Fact is, we made a conscious choice to build out the worst business model ever: We don’t invest, we don’t take fees, we don’t take equity. All we do is work to support the San Diego ecosystem. And it’s worked. We helped San Diego go from $1 billion invested here in 2015 to $9 billion in 2021.
The SoCal Venture Summit began some 20 years ago, the brainchild of Mission Ventures founder Leo Spiegel.
At that time in 2001, three venture capital firms were headquartered here, with more than $1 billion in assets to invest. Those funds are all gone. While San Diego has transitioned and gone through rough times like the financial collapse in 2008, the SoCal Venture Summit has been successfully resuscitated by Connect San Diego.
This year’s Summit was held Sept. 29 and drew 120 VCs – 90 of which were from out of town. The event featured a two-hour session at the Omni Hotel where the VCs mingled with 26 pre-venture companies. From there, the group migrated to Petco Park, where they mixed with 30 post-venture local CEOs.
“We take a long-term view. We want the VCs to come down and see high-quality, interesting companies,” said Connect CEO Mike Krenn, who added that the goal of the event is “not necessarily about funding deals on the spot but rather leaving an overall impression on the VCs. They see quality, and they know something going on in San Diego. It’s a long-term play. When they’re comfort-able with the market, that’s when they start writing checks.”
The San Diego Business Journal recently sat down with Krenn to discuss what makes San Diego unique in the world of innovation and the venture capital that fuels it.
What is the state of venture capital for San Diego’s innovation ecosystem?
I believe we’re in a better spot than most regions, for several reasons. One is the breadth of companies here. It’s not just life science, it’s not just tech, it’s not just dual-use defense. If one sector has a decline, there’s another sector to pick up the slack. The macro economy is uniquely robust here.
San Diego companies also are known for solving hard problems. Entrepreneurs here are building real businesses; they push real metrics, with real customers. There’s still plenty of venture money out there for companies that hit milestones in big markets.
It’s absolutely true that the bar is a little higher. But it’s not supposed to be easy. And yes valuations are down, but that really shouldn’t be a surprise. VCs are still writing checks for quality companies and we have those here in multiple verticals.
What are your thoughts on the challenging labor market for innovation companies?
Everyone is looking for that high-quality bench scientist or senior engineer, someone three to 10 years out of school with experience – it’s a supply side issue. And now we’ve got the big boys coming to town – Apple, Amazon, Google, Meta. We expect them to hire 8,000 to 12,000 people over the next five years. That’s a big number. They’re going to poach from our existing ecosystem. That’s why they came – the talent. It’s validation, but it’s simultaneously a challenge we need to acknowledge.
That said, the universities and junior colleges are doing an amazing job. They’ve all got entrepreneurship and engineering programs – great ones. The colleges are all expanding. The early-stage talent pipeline looks tremendous, as good if not better than any other region in the country.
While we may have some challenges in the next few years, long term, San Diego is poised perfectly to absolutely crush it – if we do it right. As our existing tech companies continue to grow, and these large global companies further develop their presence, we’ll attract the best and brightest from around the world and our pipeline of entrepreneurs will expand exponentially. I believe San Diego is positioned like no other ecosystem in the country to excel – if we do it right.
And that is why I’d really like to see those four companies – Apple, Amazon, Google and Meta – actively engage and support our ecosystem. Like Illumina, Qualcomm, Dexcom, ResMed and so many others. We have an opportunity to build something truly special, and we would love to see their leadership involved.
What kind of future events and programs are you working on for Connect?
Well, Five•Ten•Thirty was a hit. We’re exploring the idea of making it a mini-version of South by Southwest – to create a five-day spectacle in conjunction with a music festival. We’re talking to some people about a possible joint venture in the fall of next year.
The other initiative we’re really excited about is our XEO program, headed by Regina Bernal, to support diversity within the innovation sector. With support from company leadership across San Diego, we’ve engaged 30 diverse mid-level professionals from tech and life science companies. Together, they are going through a three-month program. People from marketing, finance, ops, facilities, bankers, lawyers, scientists – and they’re learning from each other. We’re organizing site visits, getting them in front of senior leadership they might otherwise not meet.
It’s built on the notion that mid-level managers will become directors, directors become VPs and these individuals will permeate their companies and our communities. They will become hiring managers. They will leverage one another over time. We will lift up one another together. We will grow into greater numbers, with more prominent positions. And as a network, we will collectively continue to give back.
Why are Connect innovation events so important for attracting venture money to San Diego?
People often ask me why there’s not a lot of VCs residing in San Diego. It’s actually kind of simple: If you have an office in LA, San Diego is just a two-hour drive away. If you’re in Silicon Valley, we’re just an hour flight. So firms feel like they can cover it from their offices north of here. But we all know the drive sucks and so does the flight. So it’s hard for VCs to be well-networked here.
Connect fills part of that gap. We’re a trusted resource to the venture community. Fact is, we made a conscious choice to build out the worst business model ever: We don’t invest, we don’t take fees, we don’t take equity. All we do is work to support the San Diego ecosystem. And it’s worked. We helped San Diego go from $1 billion invested here in 2015 to $9 billion in 2021. (Krenn noted that he expects San Diego to finish around $6 billion in 2022).
How do you think the market downturn will affect San Diego’s innovation ecosystem?
2008 was the last recession. If you’re only 10 years into the market, the only thing you’ve ever experienced is up-and-to-the-right. Of course, it’s been great, but realistically some of the valuations were a little rich. The market was due for a correction.
Yes, it’s going to be a little harder, but on a national scale that implies that investors will weed out the fluffier stuff. And since San Diego doesn’t do fluffy, and because we have such breadth, I believe we’ll come out of any downturn faster than other regions.
What’s next for San Diego?
I like to think of Connect and our ecosystem as a startup with an authentic purpose. Many startup companies get going, do very well and then plateau. We need to continue to scale, thoughtfully – not simply for the purpose of growth but instead to create the next great inclusive ecosystem. Let’s learn from the mistakes of Silicon Valley. We can do better. We can build an economic engine across the region of San Diego so that economic opportunity is available for future generations, for all San Diegans. We can create high-quality jobs across the region, close to homeowners so they need not migrate, reducing traffic patterns at the same time. We can make family lives better.
When people think of the most innovative regions in the country, they inevitably mention Silicon Valley and Boston. It’s because those regions do both life sciences and tech. San Diego is in the pole position for greatness. We have a unique opportunity to build something truly special that benefits all of San Diego well into the future. We just have to be thoughtful about how we go about achieving it and then go do it – together.
A trusted partner for more than 35 years, we propel our region’s entrepreneurs as they create and scale their companies – from first-time founders to seasoned executives. We operate across diverse industry verticals with a mindset driven by inclusive sociaI good – making a positive impact across the entirety of the megaregion. In elevating entrepreneurial mastery such as providing access to capital, mentoring and partnering opportunities – we bring together our region’s culture and spirit to ignite our region’s world-class innovation economy.