Building Communities Kim Lachance Shandrow  | December 14, 2017

San Diego Startup Champions Are Hungry For Silicon Valley Venture Capital

San Diego is a breezy 90-minute jaunt from Silicon Valley by plane. Just like the Bay Area, the sunny coastal California region is teeming with promising tech startups shaking up every industry imaginable, from drones to cybersecurity, healthtech to oceantech to mobiletech, and beyond.

But, while Silicon Valley, the tech epicenter of the world, is saturated with more than 400 tech-minded VCs chomping at the bit to get in on the next big innovative thing, San Diego boasts exactly one: San Diego Venture Group.

San Diego does not enjoy a steady flow of startup venture capital. But local tech startup booster Mike Krenn is on a mission to change that.

On a Roll
A longtime marketer in the digital media space, the San Diego State graduate is the president of SDVG, an organization dedicated to connecting the city’s emerging technology startups with deep-pocketed venture capitalists from near and far, Silicon Valley very much included. He says there’s never been a better time than now to put skin in San Diego’s sizzling tech startup game.

“San Diego is on a serious roll right now,” Krenn told Free Enterprise. “Investors are increasingly seeing San Diego as not only a viable place to build a company, but a smart place to grow a company, too. As Silicon Valley costs continue to spiral, and talent gets more and more expensive for companies there, San Diego has become a more attractive market, with all the key infrastructure elements in place where companies can excel.”

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By the looks of the 2017 Innovation That Matters report, San Diego is indeed on a roll. The city recently ranked fourth out of 25 leading American startup cities analyzed in the comprehensive study, which was conducted by 1776, the U.S. Chamber of Commerce Foundation, the U.S. Chamber Technology Engagement Center (C__TEC) and FreeEnterprise.com. Home to fast-expanding tech sectors such as Big Data analytics, robotics and software development, the busy port metropolis saw notable increases in startup connectivity and capital, despite some dips in startup culture.

Paul Shockley of The Guru.

Bridging Big and Small
For their part, Krenn and his colleagues act as startup network connectors, catalysts for change at the bottom and the top of the Golden State. And their most recent efforts have centered around drawing venture capital from nearby Los Angeles, and, of course, from a day’s drive up north in Silicon Valley.

Paul Shockley is one of the dozens of San Diego-based tech startup founders to work closely with Krenn and SDVG. His nascent company, The Guru, which offers an augmented reality app that makes museums, zoos and aquariums more interactive and immersive, last year scored $225,000 in venture capital. The cash infusion was the prize for winning a Qualcomm Ventures-sponsored pitch competition hosted by local startup leaders, Krenn among them. Dubbed SeismicSD, the pitch-fest was supported by SDVG, angel investor group Tech Coast Angels and tech incubator EvoNexus.

Shockley says being based in friendly, small town-feel San Diego has been critical to the startup’s fast success, thanks in large part to its close-knit startup ecosystem.

“Everyone here wants you to succeed,” Shockley told Free Enterprise, “and everyone is willing to help you. That is something I haven’t experienced anywhere else. You just don’t see this level of willingness to take meetings in other cities.”

But it’s not all rosy.

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On the flipside, Shockley continued, “The only real con here is that there still aren’t a lot of real investors. It is getting better, however, and being based here is no excuse for not being able to raise money, but you just have to hop on a plane.”

The Road Ahead
Despite some recent gains, like The Guru’s, Krenn still describes San Diego as grossly undercapitalized. He says there are “very few” venture capitalists at the moment there, despite the densely populated seaside metropolis’s rank as the eighth largest city in the U.S. and the second largest in California.

Mike Krenn of San Diego Venture Group.

While Krenn hopes to continue to woo influential investors from Silicon Valley, he doesn’t, however, want to position San Diego as “competition” for Silicon Valley.

“We will never be Silicon Valley,” he said. “Nor do we want to be. Rather than compete, we need to leverage our proximity to Silicon Valley. And, if we want to compete with cities like Seattle, Austin and Boulder, we need to do better.”

Tech Talent Abounds
As for access to talent, Krenn credits the University of California, San Diego (UCSD), for churning out a steady flow of ambitious, hire-ready tech talent. Computer engineering is among the top majors at the university, with recent Jacobs School of Engineering graduate-founded STEM education startup LearnToMod garnering a prestigious $750,000 small business innovation grant from the U.S. National Science Foundation.

“UCSD produces more engineering graduates every year than Stanford and Berkeley combined,” Krenn said. “And this is just one of San Diego’s schools. If you factor in all of the research initiatives we have here, you’ll see we have immense tech talent here. And then, of course, who has a better quality of life component than San Diego?”

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Shockley echoes Krenn’s sentiments on the quality of life in San Diego, and its ample access to talent.

“You can’t find anyone who doesn’t want to live here,” Shockley said, “so convincing the right people to move here to work for you isn’t too big of a challenge when your average temperature is 72 degrees year round. And there’s plenty of talent already here in San Diego, especially with the amount of universities we have.”

SoCal In NorCal
Even amid a wealth of tech talent in balmy San Diego, bathed in an average of 266 sunny days per year, Krenn — and the city itself — continues to recruit software and other engineers from Silicon Valley. Literally putting a foothold in the Bay Area, the City of San Diego officially launched a five-desk satellite office at WeWork’s bustling San Francisco coworking space, right in the heart of the Financial District.

The goal of the first-of-its-kind initiative, nicknamed “The Beachhead, SoCal in NorCal,” is to lock down venture cash from Silicon Valley investors. San Diego Mayor Kevin Faulconer put some skin in the satellite office’s creation, furnishing a $20,000 contract from the city to ease setup costs. The Mayor’s office also helped to raise more than $207,000 in crowdfunds “to build San Diego’s Silicon Valley outpost.” The haul exceeded its GoFundMe campaign fundraising goal.

While it’s somewhat early in the game to tally up how effective the first-of-its-kind effort has been so far, we do know that, according to the San Diego Tribune, in 2015, Silicon Valley investors infused San Diego area companies with $1.3 billion.

While that may seem like a pretty penny, Krenn says there is still more work to be done.

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“We still don’t have a lot of capital resident in San Diego,” he said. “And our angel investor community is not as big and as active as we might like. But, that said, we have always dealt with that, and we will continue to work it.”