How SD's VC-Funded Firms Differ from Other Markets

Olson: “We need another Qualcomm, a Google, a Facebook or Amazon to catapult San Diego tech into a new hemisphere. We are on the right trajectory with recent successes including Lumedyne, Zeeto, Wrike and Tealium.”

SAN DIEGO—San Diego has seen more-conservative growth patterns from venture-capital -funded tech companies compared to markets like San Francisco, Los Angeles and Seattle, which is not a bad thing, JLL SVP Tim Olson tells GlobeSt.com. A recent report from the firm revealed that San Diego biotech companies secured $149 million in VC funding among 11 deals in Q4 2015, a 24% decrease from the prior quarter but a 172% increase from Q4 2014. San Diego trailed only San Francisco and Boston/Cambridge in terms of venture capital invested into biotech during Q4 2015. We spoke exclusively with Olson about VC-funded companies, their typical growth pattern in San Diego and how the market will accommodate all of these growing firms in the months and years to come. GlobeSt.com: How do VC-funded companies typically grow in San Diego? Olson: It has been encouraging to see the resurgence of VC funding into San Diego-based companies. San Diego has experienced tremendous growth in the life-science and defense-technology space as of late, and rounding that out with a more-diversified and robust tech industry is only natural for the city’s maturation process; San Diego is still a young tech city in many regards. Life-science companies that receive VC funding have historically expanded more rapidly than tech companies due to their need for expanded laboratory space. VC-funded tech companies that are already established and have office space tend to expand within their current facilities should there be available expansion space. We have seen more-conservative growth patterns from VC-funded tech companies compared to markets like San Francisco, Los Angeles and Seattle. Looking at companies that have received VC funding, we see them crawl, walk and then run compared to companies in other markets that tend to jump from crawling to running. That’s not a bad a thing (it can be a great thing), just different from what we’ve seen in San Diego. GlobeSt.com: How will the San Diego market accommodate growing VC-funded companies in the coming months/years? Olson: San Diego has great capacity to accommodate growing VC-funded companies. For those companies that are just starting out, San Diego has been a hotbed for tech-focused incubators and co-working spaces including EvoNexus, Co-Merge, West Health, HeraHub and a few others in the works. San Diego has seen less new development and more redevelopment of existing buildings this cycle. With only 160,000 square feet of new construction, the San Diego commercial real estate market has had time to stabilize, and redeveloped /reimagined buildings in markets like Sorrento Mesa, the I-15 Corridor and Downtown have created non-traditional, “creative” office-space offerings that are attractive to many start-ups or expanding companies. These redeveloped buildings offer unique environments with value pricing compared to higher-end class-A buildings. We will continue to see this trend of redevelopment in the coming years, which will continue to supply growing companies. In addition, there is more than 11.2 million square feet of new development opportunities from Downtown to Del Mar Heights, so we don’t expect San Diego to be supply constrained for some time. GlobeSt.com: Which submarkets are best for these firms, and what type of space do they need? Olson: San Diego has diverse offering of submarkets from Downtown to Sorrento Mesa/Valley to the I-15 Corridor. It really depends on the industry profile, vision and goals of the company. Sorrento Mesa/Valley, the Downtown surrounding markets and the I-15 Corridor have the most inventory of “creative” office-redevelopment opportunities for those companies seeking a unique environment that tends to have less private office build out. Markets like UTC and Del Mar Heights have great options as well for companies that want more-traditional space and scalability; however, we have seen some really cool office space opportunities built out in some of the highest-quality class-A buildings. GlobeSt.com: What else should our readers know about San Diego and VC-funded companies? Olson: It’s great to see more money flow into San Diego, but we need more. We need a catalyst that will put San Diego on the map as a place where start-ups flock to seek money and grow. San Diego has a solid and diversified life-science foundation from the successful history of big pharma and the research institutes. Our defense-technology cluster has a similar foundation with Northrop, General Atomics, BAE and SPAWAR . The tech industry needs that foundation to expand. Aside from the tremendous success of Qualcomm , we need to widen the tech foundation that will breed new companies and new innovation—especially in the software space, which still pales in comparison to the likes of Silicon Valley. In addition to nurturing San Diego’s VC-funded companies, it is equally important to keep San Diego-based companies that have been acquired by outside firms. It is imperative for the future of our tech industry, and the City realizes that as shown by the proactive approach taken by Mayor Faulconer and the EDC . Bringing the San Diego tech/software industry into the fold with the other top West Coast cities will need to be a collective effort. We need another Qualcomm, a Google , a Facebook or Amazon to catapult San Diego tech into a new hemisphere. We are on the right trajectory with recent successes including Lumedyne, Zeeto, Wrike and Tealium .