CONNECT’s newly released Third Quarter 2011 Innovation Report shows the dynamism of San Diego’s innovation economy in new tech company creation, patent activity growth and attraction of federal research grant dollars in the third quarter of 2011. In the Report, VC funding shows an increasing move to early stage San Diego companies.
The Report shows that 91 technology start-ups were established, compared to 76 in the previous quarter, an increase of 20 percent. In all, 237 new tech companies were established in the first three quarters of 2011. These ventures translate into 200 new jobs in the third quarter and 500 for the first nine months of 2011. Throughout California, tech start-ups created more than 1,690 jobs in the third quarter and 4,300 for the first three quarters.
This data shows that 2011 may be shaping up as the best year for startups in San Diego since 2007. Software companies were the most prevalent start-ups in the third quarter of 2011, with 27, while pharmaceutical/biotech/medical companies showed the sharpest increase with 22 new companies – twice the number formed in the second quarter of 2011.
According to the research commissioned from the National University System Institute for Policy Research by CONNECT, there were more than 6,050 tech companies in San Diego during the quarter, employing more than 140,000 people and providing $3.7 billion in total payroll. While technology companies represent 6 percent of San Diego employers, they provide 11 percent of all jobs and make up 23 percent of all payrolls.
Tech employment was estimated to be up slightly in the third quarter. “Employment and income gains among local tech businesses are key drivers in the region’s economic prosperity and employment base,” said Kelly Cunningham, Economist and Senior Fellow at the National University System Institute for Policy Research (NUSIPR).
Venture capitalists invested $202 million in the San Diego region in the third quarter, a slight reduction from the previous quarter. However, VC investment in the software sector surged to $98 million, a 92 percent increase. Investment in early stage companies jumped to $71M (seven deals) in the third quarter while investment in seed stage companies fell to only $1 million.
Patent activity in San Diego hit an all-time high, with 1,185 patents granted, compared to 1,037 in the previous quarter. Patent activity increased across California. Federal research grant funding was $327 million, with funding from the National Institutes of Health (NIH), by far the largest component, down 12 percent from the second quarter. The San Diego region leads the state in grant awards received from the NIH. San Diego also received a record amount of funding totaling $37 million in the third quarter from The National Science Foundation.
The Report also highlights the Da Vinci Index, which measures the economic impact of biomimicry—adapting nature’s solutions to technical problems. The index reached a record high in 2011. It is estimated that biomimicry could account for as many as 1.6 million U.S. jobs by 2025.
Merger and acquisition activity where San Diego companies were targets of acquisition almost doubled to almost $2 billion in the third quarter compared to the previous quarter.
In a significant victory for the tech economy, Congress passed the Small Business Innovation Research/Small Business Tech Transfer Program Reauthorization Act, which will allow more start-up and emerging companies to compete for grant funding.
The Executive Summary and Full Report, including all data, are available at http://www.connect.org/programs/connect-track/