By Mike Freeman, Young San Diego companies sometimes bemoan the difficulty of raising investment capital locally, which forces them to court venture firms in hotly competitive Silicon Valley or elsewhere.
Can the rise of equity crowd-funding websites give these entrepreneurs an additional avenue to raise money?
There’s a movement afoot to find out. At a San Diego Venture Group event this week, former Qualcomm executive Jeff Belk said he’s joined with Israeli crowd-funding firm OurCrowd as a venture partner targeting San Diego companies.
Belk’s new venture, Bright Light Management, aims to find and evaluate early stage firms, bringing them to the OurCrowd online platform for accredited investors.
To start, Belk will evaluate startups in the mobile health, wearable device, wireless, genomics, big data and consumer software industries.
“What’s really clear is if you’re not in Silicon Valley, Boston or New York — with the shrinking of the venture capital model — markets like San Diego are left out in the cold,” Belk said. “I think what’s emerging in the equity crowd-funding market is hopefully a new way of bringing capital into San Diego.”
For the past several years, poor returns have made it difficult for venture capital firms to raise money from institutional investors. As a result, there are fewer venture capital funds. And those that remain are not doing as many far-flung deals.
In San Diego last year, the amount of venture capital raised by young firms plunged 34 percent from the prior year — falling to its lowest level since 2003. Nationwide, venture capital invested actually increased 7 percent over the prior year.
Wealthy angel investors, including Tech Coast Angels in Southern California, have stepped in to replace venture capital firms.
Angel groups tend to be relatively small regional organizations, however, with a handful of members backing each young firm. Online equity crowd-funding websites aim to attract investors worldwide, managing money from many investors who put in relatively small amounts.
OurCrowd is one of several online crowd-funding platforms that aggregate high net worth individuals to invest in young companies. Run by venture capitalist Jon Medved, OurCrowd has 4,000 investors from 53 countries. Accredited investors must have a net worth of at least $1 million excluding their home or annual income of at least $250,000.
So far, OurCrowd has done most of its 35 deals in Israel. But it’s aiming to expand. This month, OurCrowd launched a campaign for San Diego’s StackIQ, which provides software for managing big data systems.
“Having an equity crowd-funding platform active in San Diego will give the community a big boost in getting more accredited investors in San Diego involved in the venture area and potentially investing in exciting San Diego companies,” said David Titus, executive director of San Diego Venture Group.