San Diego’s Startup Pace Strong Despite Economic Chills

Xconomy San Diego — 

A survey of technology startups in San Diego County shows 76 new companies were launched here during the second quarter of 2008, suggesting entrepreneurs kept busy despite broader economic declines locally and nationwide.

The study released by Connect, a local non-profit that supports innovative technology and life science businesses, found that San Diego County ranked second in startup activity statewide from April through June.

The 159 new companies launched in Los Angeles County during the second quarter eclipsed San Diego’s strong showing, however. Santa Clara County, in the heart of Silicon Valley, ranked third with 71 startups during the same period.

Of San Diego’s 76 startups, the two biggest categories were in the biomedical sciences and software. Each accounted for almost 28 percent of the total.

Connect’s data show a 36 percent increase in new tech businesses throughout California: from 430 started in the first quarter of 2008 to 585 such businesses in the second quarter.

A statewide trend in last year’s startup figures showed a huge surge in new companies formed during the second half of the year. The first and second quarters of 2007 saw 428 and 510 companies formed, respectively, while 922 companies launched during the third quarter and 1,367 businesses started in the fourth quarter. “Given the pattern established in 2007, the creation of tech businesses may still significantly increase in the 3rd and 4th quarters of 2008,” said Kelly Cunningham, Senior Fellow & Economist at the San Diego Institute for Policy Research.

On the other hand, Cunningham noted that venture capital was flowing near record levels in the second half of 2007. “With the nation’s credit and housing markets in turmoil, consumers are drastically cutting back spending,” Cunningham said. “Business investment had been one factor supporting economic growth for the nation, but with liquidity also drying up, investment dollars are likely to be tight as well.”