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Funding for San Diego startups tumbles to smallest quarterly investment total in 8 years

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Funding for San Diego startups tumbles to smallest quarterly investment total in 8 years


San Diego County startups raised only $590 million in the third quarter, a 60% drop compared to a year ago and the smallest quarterly investment total in eight years. 

The number of deals told a similar sluggish story. The county saw 48 venture capital deals inked in the three months ended Sept. 30, according to a report by PitchBook, an industry research firm, and the National Venture Capital Association. That’s a decrease from 61 deals in the third quarter of last year and the lowest quarterly count in seven years.

Nizar Tarhuni, executive vice president of research and market intelligence at PitchBook, said: “Fundraising continues to lag amid ongoing market hesitancy, driven by years of capital influx the industry was ultimately unable to absorb.”

Mike Krenn, managing director for Prebys Ventures, offered additional insight: “Both early-stage money and growth capital is increasingly difficult to raise, both for tech and life science companies. And we’re seeing the hottest sector of the day, AI investment, is largely concentrated in the Bay Area, with billion-dollar funds deploying large amounts of capital at very rich valuations. That, too, is affecting all regions, not just San Diego.”

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Krenn added that while the total dollar investment for San Diego County is “certainly low, that’s attributable to the fact that we didn’t have any large rounds. We already have one $200 million round logged for Q4.”

He’s talking about San Diego-based Crystalys Therapeutics, which Krenn’s fund invested in. Crystalys is a clinical-stage biopharmaceutical company that recently announced a $205 million Series A financing. It was co-founded by James Mackay, a veteran biotech leader with 40 years of drug development experience and six drug approvals.

Its drug — a pill called dotinurad — has been approved in Japan and China and is providing “meaningful relief for people living with gout,” a common inflammatory arthritis, said Crystalys CEO Mackay. “Our experienced team is now well-positioned to accelerate dotinurad’s development in the U.S. and Europe as a much-needed second-line therapy for patients who do not respond adequately to first-line treatments.”

AI focus

“AI’s rapid momentum continues to reshape the U.S. venture landscape, driving deal count growth and capturing the majority of capital deployed in Q3,” Tarhuni said: 

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Nationally, top AI investments went to Anthropic in San Francisco, which raised $13 billion in September, and xAI in Palo Alto, which raised $10 billion in July, according to PitchBook.

Locally, three of the top 10 deals went to AI startups. 

Alvys, a Solana Beach transportation management system using artificial intelligence and automation to transform freight operations, said in September that it raised $40 million in Series B funding. 

Founded in 2020, Alvys said its customers achieve a 30% increase in monthly loads, a 10% sales boost, 90% faster accounting, 80% reduction in data entry, and savings of hours weekly in dispatch and administrative tasks. 

“We’re scaling enterprise-grade solutions with AI at the core,” said Nick Darman, Alvys founder and CEO. “That means using AI, automation, and integrations to remove wasted steps, give teams smarter decision-making in real time and help carriers and brokers grow their operations and their profit margins without adding overhead. This funding helps us push toward that goal even faster.”

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Turnout, which was founded about a year ago in San Diego, is an AI-powered consumer service that streamlines complex government and financial processes such as tax debt relief and Social Security Disability claims. It said in September that it raised $21 million in seed funding. 

Its AI automates nearly 60% of tasks by pulling transcripts, checking eligibility, pre-filling and filing applications, gathering medical and wage records, tracking deadlines and sending status updates. 

“Turnout is using AI to transform the lives of everyday Americans, helping them navigate their finances, secure the benefits they are entitled to,” said Mo Koyfman, founder and general partner of Shine Capital. 

GigaIO, a Carlsbad scalable infrastructure designed for AI inferencing, said in July that it raised $21 million in Series B financing.

The new funding allows the company to expand production of its flagship products: SuperNODE, a cost-effective and energy-efficient infrastructure designed for AI inferencing at scale, and Gryf, a carry-on suitcase-sized AI inferencing supercomputer. 

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“As enterprises and cloud providers race to deploy AI at scale, GigaIO delivers a uniquely flexible, cost-effective and energy-efficient solution that accelerates time to insight,” said Jack Crawford, founding general partner at Impact Venture Capital. 

In a PitchBook report, J.P. Morgan experts noted that while implications of investors’ love affair with AI “will take time to play out, history tells us significant market concentration carries risks.”  

Defense

In addition to artificial intelligence, Bobby Franklin, president and CEO at NVCA, said U.S. deal values are climbing across other key sectors, including robotics. “This momentum isn’t just encouraging; it’s essential. Startups are the engine of U.S. job creation and the cornerstone of long-term economic growth.”

J.P. Morgan experts added that investment activity in sectors such as defense tech and robotics reflects prevailing geopolitical considerations and national security priorities.

A local example is San Diego’s Firestorm Labs, which was founded in 2022. The expeditionary manufacturing company said in July that it secured $47 million in Series A funding. The investment will help Firestorm add engineers and open a larger production facility to meet the evolving needs of U.S. and allied defense organizations. 

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“Our military needs technology it can trust to be ready when the circumstances demand it,” said Chris Moran, vice president and general manager of Lockheed Martin Ventures. “Deployable, on-site 3D drone printing is a powerful tool that further extends the warfighter’s ability to secure the battlespace, while advancing U.S. leadership on the frontiers of defense technologies.” 

Retired U.S. Army Gen. Richard D. Clarke, who recently toured Firestorm’s San Diego facilities, said: “Firestorm’s innovation is really helping that logistics chain to operate more efficiently.”  

Exit deals

Carly Roddy, co-head of venture capital relationships for J.P. Morgan, said nationally, “Strong performance of the latest wave of tech IPOs is bolstering confidence for others in the pipeline, and M&A activity is also rebounding. While there is still a long way to go in some areas of the market, recent developments are encouraging to see.”

Locally, Carlsmed went public in July. The Carlsbad company has developed a patented, machine learning technology that taps a patient’s X-ray and CT scans to design a digital surgical plan to achieve the best spinal alignment and then 3-D print titanium implants.

Company revenue for the six months ended June 30 was $22.3 million, nearly double from the same period a year ago. The company has a market cap of about $315 million.

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Inmagene Biopharmaceuticals in July completed a reverse merger with Ikena Oncology and $75 million private placement with new and existing investors. The combined company in San Diego publicly trades under the name ImageneBio and has a market cap of about $82 million.  The clinical stage biotech business develops treatments for autoimmune and inflammatory diseases.

Also, AbbVie in August completed the purchase of San Diego-based Capstan Therapeutics for up to $2.1 billion.

Founded in 2021, Capstan develops therapies that modulate unhealthy cells inside the body — rather than editing the cells outside of the body — through RNA delivery methods. Capstan encodes mRNA and packages it in a lipid nanoparticle that is “decorated” with an antibody, which directs the body’s T-cells to attack problematic cells. 

“AbbVie and Capstan aim to transform the care of those living with autoimmune diseases by developing treatments that have the potential to reset the immune system,” said Dr.  Roopal Thakkar, executive vice president of research and development and chief scientific officer at AbbVie.    

In late October — after the close of the third quarter, Boston Scientific announced another local acquisition. The Massachusetts company said it will pay about $533 million for the portion it doesn’t already own of Nalu Medical, a Carlsbad company that develops a minimally invasive system to treat chronic nerve pain in areas such as the shoulder, lower back and knee. Boston Scientific has invested in Nalu since 2017. 

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Earlier this year, Boston Scientific said it bought another Carlsbad company called Bolt Medical, which develops intravascular lithotripsy that treats coronary and peripheral artery disease.

Nalu’s therapy uses mild electrical impulses to interrupt pain signals before they reach the brain. The system uses a miniaturized, battery-free implantable pulse generator powered wirelessly by a small externally worn therapy disc and controlled via a smartphone app. 

Boston Scientific expects Nalu to generate sales of more than $60 million this year and to post year-over-year growth of about 25% next year.

Jim Cassidy, Boston Scientific’s neuromodulation president, said: “Peripheral nerve stimulation is an exciting field with significant unmet patient need.”

Nguyen is a freelance writer for the U-T.

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San Diego Humane Society planning $11M animal hospital to provide low-cost care to pet owners

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San Diego Humane Society planning M animal hospital to provide low-cost care to pet owners


Seeking to provide more affordable care for pet owners in the region, the San Diego Humane Society plans to expand a 500-square-foot clinic at its Morena campus into an $11 million full-service animal hospital, envisioning a summer or fall 2027 opening.

Officials say the project, to be funded entirely by donors, will include space for a high-volume spay/neuter clinic and an area to house dogs that have been surrendered or picked up by humane officers. It will be inside a Gaines Street building that the nonprofit acquired in 2020 along with five other buildings it had previously leased.

The Humane Society plans to triple its vet staffing for the hospital, which will provide dental care, surgeries and emergency services, as well as routine care. The goal is to expand affordable care options in the region, recognizing that some people surrender their pets, or even euthanize them, because they can’t afford veterinary care.

The University of California Davis is also building a new animal hospital in San Diego, expected to open later this year.

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The additions come amid a persistent shortage of veterinarians in California and beyond.

Dr. Gary Weitzman, president and CEO of the San Diego Humane Society, said officials have discussed building the Community Veterinary Hospital for years. About $3 million has been raised for the project so far.

Several factors are making veterinary care unattainable for some, including a shortage of veterinarians and the high cost of services. Vet offices that do exist may not be able to schedule appointments quickly, while some pet owners live in “veterinary deserts” with no clinics or hospitals nearby, Weizman said.

“Access to care is becoming more and more challenging for most people with their animals,” Weitzman said. “That’s the opposite of what we want to see.”

Emergency hospitals can help fill the gap, he said, but often are too expensive for pet owners.

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On its website, the Humane Society describes its community veterinary program as low-cost care that is accessible to pet families who need it most. “By providing affordable, compassionate and exceptional veterinary care to San Diego community members, we help keep pets out of shelters and with the people who love and need them,” the site says. In recent years, the nonprofit has grappled with record numbers of dogs in its shelters.

Weitzman said building the community veterinary hospital will require extensive fundraising, not only for the construction but to pay for staffing.

Officials expect it will cost about $5 million a year to run the hospital and will look at creating endowments to pay for positions. “This will definitely be a financially involved program,” he said. “But I think it’s really game-changing for the Humane Society and for the region.”

Those interested in contributing can email donate@sdhumane.org.

Dr. Andrea Brkic examines Cali at the San Diego Humane Society Community Veterinary Clinic on Thursday. (Meg McLaughlin / The San Diego Union-Tribune)

A decade ago, Weitzman said he would have expected private vet practices to oppose the project. Instead, he said, those providers are increasingly sending animals needing care to the Humane Society because their owners cannot pay clinic fees.

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“Ten years ago, there definitely would have been concern among my private practice colleagues,” he said. “As of COVID times, there has been no concern whatsoever. As a matter of fact, the opposite — we get referrals from private practices because they don’t want to have to resort to ‘economic euthanasia.’”

The Humane Society is able to charge lower fees because its work is supported by philanthropic gifts, he said.

“What we want to do is provide urgent care that (allows) people to come in and not have to get a second mortgage to get care for their animal,” he said.

The Humane Society began its community veterinary program in 2022, with services initially provided from a mobile clinic. In the summer of 2023, the clinic moved into the Gaines Street space, although mobile clinics are still used on a scaled-back basis, spokesperson Nina Thompson said.

The Humane Society’s website says those eligible for services at the clinic include pet owners with an annual household income under $70,000 or people enrolled in federal or state assistance programs or receiving unemployment benefits. However, clinic staff do not ask for documentation when people show up for appointments.

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Veterinary assistants Vanessa Meza and Madeleine Inoue treat Mochi at the San Diego Humane Society Community Veterinary Clinic on Thursday, Jan. 8, 2026 in San Diego, California. (Meg McLaughlin / The San Diego Union-Tribune)
Veterinary assistants Vanessa Meza and Madeleine Inoue treat Mochi at the San Diego Humane Society Community Veterinary Clinic on Thursday. (Meg McLaughlin / The San Diego Union-Tribune)

“If you have a vet that you’re going to now, and you can afford those fees, please stay with your private practice. We’re here for people who can’t get in, and that’s really the purpose of the program,” said Weitzman, a veterinarian who works at the clinic one day a week. “We really just want to be there to solve a problem.”

Beyond the animal hospital project, the Humane Society has worked with a coalition of animal groups to seek legislative changes designed to expand veterinary care options. One new law now in effect allows registered veterinary technicians and veterinary assistants to perform any medical task not expressly prohibited by law. A second bill allows registered veterinary technicians to give vaccines and parasite control measures in shelters without requiring a supervising veterinarian to be on site.

There are other steps being taken to expand veterinary care in San Diego County.

UC Davis is building a state-of-the-art medical center in University City that will offer specialty care, create veterinary teaching and training opportunities, and facilitate clinical research studies.

According to its website, the Janice K. Hobbs UC Davis Veterinary Medical Center Southern California will feature “a pharmacy and dedicated suites for radiography, cardiology, surgery, medical oncology, 24/7 emergency and critical care (ER/ICU) and nephrology/urology.” It is expected to open later this year in a business park on Shoreham Place.

The new facility will take the place of a 3,000-square-foot medical center run by the university in Sorrento Valley in operation for more than 20 years. The new hospital will be eight times the size of the current facility.

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UC Davis is also working to expand the number of veterinarians in its training pipeline. It has pledged to expand the number of doctor of veterinary medicine students enrolled from 600 to 800, adding 50 additional students per class beginning in 2029. The university also plans to build a new veterinary education pavilion on campus.

“We are the premier veterinary school in the country and California is facing a veterinary shortage, so with public and donor support we are committed to meeting the needs of the state’s pet parents, agricultural producers, animal shelters and other care providers,” Tom Hinds, a UC Davis School of Veterinary Medicine spokesperson, said in a statement.



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Judge sentences rapper to time served in 2023 San Diego arrest

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Judge sentences rapper to time served in 2023 San Diego arrest


Federal courthouse in downtown San Diego. (File photo by Chris Stone/Times of San Diego)

Rapper Boosie Badazz was sentenced Friday to credit for time served in the case stemming from his 2023 arrest in San Diego for being a felon in possession of a firearm.

The 43-year-old, whose real name is Torence Ivy Hatch Jr., was arrested in Chollas View after police found two guns inside a vehicle in which he was riding.

Hatch was in town to shoot a music video and perform at a Gaslamp Quarter nightclub.

In a social media video clip recorded during the video shoot, Hatch was spotted with a gun in his waistband. Police then used a helicopter to track down his vehicle, after which officers conducted a traffic stop and discovered the firearms.

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He pleaded guilty to a federal gun possession count last year. As part of his sentence, Hatch will also serve 300 hours of community service.

Defense attorney Meghan Blanco said in a statement released after Friday’s hearing, “The resolution brings a sense of relief, allowing him to finally put this chapter behind him. He can now focus on continuing his music career, dedicating time to his family, and being a positive and inspiring presence for his children and the wider community.”

Federal prosecutors sought a two-year prison sentence, arguing in court papers that custody was warranted due to Hatch’s “insistence on carrying a weapon despite his status as a convicted felon” and allegations that he threatened his security detail shortly after his arrest.

Blanco, in her sentencing memorandum, denied any such threats occurred, noting that the statements are not included in any police reports stemming from the arrest and that no recorded evidence of the threats exist.

The defense attorney wrote that Hatch’s gun was never fired, brandished or used to threaten anyone. She also said there have been no allegations that the weapons were intended for any other offense and that Hatch’s last criminal case had occurred around 10 years prior.

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“The case represents an isolated lapse in judgment, not a pattern of ongoing criminal conduct,” Blanco wrote.

Hatch was initially charged by the San Diego County District Attorney’s Office. His defense attorneys have stated that Hatch intended to plead guilty at the time and was expected to be sentenced to probation, but the state’s case was dismissed before that plea deal could be reached and federal prosecutors took up the case.

U.S. District Judge Cathy Bencivengo, who sentenced Hatch on Friday, previously dismissed the case against him following a 9th Circuit U.S. Court of Appeals ruling that said it was unconstitutional to prohibit convicted felons who served sentences for nonviolent drug offenses from possessing firearms.

But a larger panel of the 9th Circuit overturned its earlier ruling and San Diego federal prosecutors re-filed the charges against Hatch.

Hatch was previously convicted in Louisiana of marijuana possession. He also was indicted in an alleged murder-for-hire plot, but was acquitted by a Baton Rouge jury in 2012.

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Mayor Gloria defends Balboa Park paid parking, blames council for rocky rollout

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Mayor Gloria defends Balboa Park paid parking, blames council for rocky rollout


San Diego will put off issuing citations for paid parking in Balboa Park for about one month while improvements are made, but Mayor Todd Gloria says the new system is functioning well and being “actively adopted.”

In a long and harshly worded memo released Thursday, Gloria said recent calls by City Council members to suspend the program were politically motivated and examples of bad governance and erratic decision-making.

Gloria also deflected blame for the chaotic way enforcement began Monday, when city officials raced to put stickers about resident discounts on parking kiosks and lobbied a vendor to deliver crucial missing signs.

The mayor said the council had “shaped, amended and approved” paid parking in Balboa Park and contended an accelerated timeline chosen by the council made it hard for his administration to implement it flawlessly.

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The mayor’s memo came in response to a Tuesday memo from Councilmembers Kent Lee and Sean Elo-Rivera in which they called implementation of paid parking “haphazard” and “not ready for prime time.”

Lee and Elo-Rivera said the process for city residents to get approved for discounts was so complex, cumbersome and confusing that Gloria should waive fees for residents until they have had time to adapt and learn.

While Gloria rejected that suggestion in part of his memo, he later said “enforcement remains focused on education, not punishment, during this early phase, to ensure park users are aware of the new parking fees.”

Dave Rolland, a spokesperson for Gloria, said Thursday that no specific date had been set for when the city would shift from education to enforcement. But he added that “about a month” would be an accurate timeline.

City officials have already corrected one key mistake: Signs that were missing Monday — alerting drivers that the 951-space lower Inspiration Point lot is free for three hours — have since been installed.

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Lee and Elo-Rivera in their memo decried “an inadequate effort to educate the public on how to use this new system.”

They said San Diegans had not been clearly informed about when a portal for city resident discounts would go live or how to use it.

And they complained that residents weren’t told they couldn’t buy discounted parking passes in person, or when enforcement with citations would actually begin.

City residents must apply for discounts online, pay $5 to have their residency verified, then wait two days for that verification and choose the day they will visit in advance.

Lee and Elo-Rivera called the city’s efforts “a haphazard rollout that will surely lead to San Diegans missing out on their resident discount and paying higher parking rates than they have to.”

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Gloria said the city collected $23,000 in parking fees on Monday and Tuesday and another $106,000 in daily, monthly and quarterly passes — mostly from residents who get discounts on such passes.

“Early data shows that the program is functioning and being used,” he said. “These are not the metrics of a system that is failing to function. They are the metrics of a system that is new, actively being adopted, and continuing to improve as public familiarity increases.”

While Gloria conceded that some improvements are still necessary, he rejected calls from Lee and Elo-Rivera for a suspension, citing his concerns it would jeopardize city finances and confuse the public.

“Your proposal to suspend paid parking for residents two days into the new program would have immediate and serious fiscal consequences,” Gloria said. “This reversal could introduce confusion among park users and would disregard investments already made to establish the system, potentially compromising the program’s effectiveness.”

Paid parking in Balboa Park is expected to generate about $3.7 million during the fiscal year that ends June 30, but revenue is expected to rise substantially when the fees are in place for a full fiscal year.

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Gloria said the money is a small part of the city’s overall solution to recurring deficits it faces of more than $100 million per year.

“What we will not do is reverse course days into implementation in a way that undermines fiscal stability, creates uncertainty, and sends the message that addressing a decades-old structural budget deficit that has plagued our city is optional because it is politically uncomfortable,” he said. “That kind of erratic decision-making is not good governance, and San Diegans deserve better.”

Meanwhile, a spokesperson for the San Diego Zoo said Thursday that paid parking there has continued to go smoothly since it began on Monday.

The zoo, which is using Ace Parking for enforcement, opted for immediate citations instead of an educational grace period.

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