For San Diego’s Hometown VCs, It’s Déjà vu All Over Again

Robert Kibble’s arrival in San Diego in 1996 was celebrated as a kind of watershed in some quarters of the region’s emerging information technology community.

While a couple of prominent biotech VCs already were established in San Diego by the early 1990s, some local software executives viewed the region as semi-arid when it came to venture firms that specialized in IT deals. And they viewed the 1995 IPO of Silicon Valley’s Netscape Communications as the starting gun in a race to join the Internet revolution. So local business leaders organized a delegation that persuaded Kibble to relocate to San Diego from Menlo Park, CA, where he had been a longtime partner at Paragon Venture Funds.

Now the combined effects of the recession and a contraction that was already underway among San Diego’s VCs when the recession started has prompted some talk that we’re back where we were in the early 1990s. Venture funds invested in in the region, at least in the first quarter of this year, fell to a low unseen since the mid-1990s—and IT deals were conspicuously lacking. Yet even in 2008, before the market plunge sent VCs into their bunkers nationwide, out-of-town VCs accounted for almost 90 percent of the deals and dollars invested in San Diego startups.

Robert Kibble

Robert Kibble

So it seemed only apropos to visit Kibble at Mission Ventures, the San Diego firm he co-founded with David Ryan 12 years ago, and get his take on whether San Diego’s tech community really needs locally based VCs. After all, recent data suggests that out-of-town VCs have long been providing most of the capital for San Diego’s startups.

Kibble says the committee that brought him to San Diego had 11 members, including software execs Charles Gaylord and Bob North. But John Denniston, who then headed the venture capital practice of the Brobeck, Phleger law firm’s San Diego office, was the key figure in the effort. “He’s the reason I’m here,” Kibble says. But Denniston is unlikely to reprise his role as recruiter, since he is now a partner in the Menlo Park, CA, office of Kleiner, Perkins, Caufield & Byers. And the Brobeck law firm no longer exists.

Still, Kibble believes it’s vital for San Diego to have locally based VCs. “It’s different when a company gets bigger and you’re doing Series B or C rounds,” he says. “But in early stage rounds, it’s just difficult to get on airplanes, and still have the contact base, and be there when you need to be.

“I find I can’t get the Bay Area firms I’ve co-invested with to come down,” Kibble adds. “It becomes a phone-call board meeting, and you lose something. There’s just a lot of heavy lifting with some of these deals, particularly on the other side, for example, when you want to change management. Then you have to coordinate with a lot of people—the lawyers, the recruitment guys. It’s more difficult.”

Kibble adds, “Without a doubt, the environment we’re in is unprecedented.” While part of that reflects the poor state of the economy generally, he says, the venture capital community is also undergoing an industry-wide reset of the business, “and the basic reason is that the returns have not been good.” With no IPO market, many venture funds have been unable to … Next Page »

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Bruce V. Bigelow was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Follow @bvbigelow

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