San Diego Attracts Investment Capital. Could more be Done?

Investment is the lifeblood of our economy that provides nourishment for our cities. Without investment we don’t grow, business doesn’t expand and people don’t get hired. Everything comes to a standstill and in and good fortune ceases. Cities like Los Angeles, San Francisco and San Diego are attracting investments to their unique industry clusters.  Letting the world know what San Diego has to offer in terms of investment opportunities can be a catalyst to greater growth.

Nationally, the last quarter experienced $13.4 billion dollars in investments and about a third of that took place in San Francisco, Los Angeles and Orange County (as cited in Somerville, 2015).  According to the Venture Capital Association and Price WaterhousCoopers a total of 19 San Diego companies received around $270 in late stage venture capital funds (Money Tree, 2015). Not the largest share but certainly a sizable one.

Much of the money comes from large institutional investors that are looking for solid growth opportunities. Of these large investment opportunities around 36% were from hedge funds and mutual funds (As cited in Somerville, 2015).  There is still plenty of room to draw new investments from international investors that are also seeking high probably income outcomes. 

Companies invest in late stage start-ups because they can reduce their risks. Another option is to invest in a basket of companies to hedge the potential of loss on any one entity. The problem is that without knowledge of local investment opportunities investors are unlikely to fulfill to help businesses reach their full potential.  

Ensuring that emerging companies are easy to find and the proper mechanisms for investment are available will help further international investment in San Diego. Ensuring information is on public display via websites, is easily accessible from outsiders and targeted to both small and large investment entities helps to keep new industries budding and growing in a way that encourages local economic development.  

 

Freeman, M. (April 17th, 2015). San Diego start-ups net more venture capital. UT San Diego. http://www.utsandiego.com/news/2015/apr/17/MoneyTree-Dow-Jones-VentureSource-ATyr-pharma/

Somerville, H. (2013). Tech companies continue to land mega VC deals. San Jose Mercury News. Retrieved http://www.mercurynews.com/business/ci_27932457/tech-companies-continue-land-mega-vc-deals

The Money Tree. Retrieved April 18th, 2015 from https://www.pwcmoneytree.com/

San Diego Employment Numbers Trip But Could Regain Footing from High Technology Firms

2014 wasn't a great year for job creation in San Diego as employment numbers left much to be desired. According to the Employment Development Department 30,208 jobs were added to the San Diego economy in 2014 missing economist projections (1). Despite slower than expected growth in construction, professional, health, and scientific jobs the service industry added the most jobs with a 4.86% increase. Employment rates may be on the rise if San Diego focuses closely on high growth industries that already have a solid present in the area.

The numbers are not dismal and could indicate a upward swing for 2015. Service jobs are relatively easy to add and mark a level of rising consumer spending on travel, restaurants, and leisure services that mark optimism. These are some of the first jobs added to the economy before higher paying jobs also make their way onto the market.

Higher paying employment comes after lower skilled service jobs have made their initial appearance. Industries that have higher paying positions add significantly to income and wages in the area but take a little longer to kick in. Companies making larger investments in skill, recruitment, relocation, compensation and salary only add jobs when needed.

There has been a healthy discussion of encouraging technology firms in San Diego. This discussion, in addition to other high growth fields, helps in improving the future labor market by aligning the economy to industries in demand. For example, small business accounts for 2/3 rds of job creation and high growth firms 35% of job gains during the years 2009-2012 (Clayton, et. al. 2013).

Technology industries are in hot demand around the world and gaining high levels of investment. Companies that are in the high technology sectors of pharmaceutical, chemical, communication, navigation, agricultural equipment, science, etc... find themselves growing faster than many other companies. Their abilities to obtain new resources, based on market demand, pushes them forward.

San Diego has a  solid high technology based that can be used to create stronger platforms for growth. Cities that put in place policies that encourage the development and investment in growth industries often magnify growth in these sectors (Jenkins, et. al., 2006). The policies should help funnel international investment into industries that are currently, or will soon be, in high demand globally.

Encouraging those industries that are likely to provide the highest paying jobs and greatest amount of overall economic growth is smart government. It provides an opportunity to employee more people and raise the standard of living for a lot of people. Likewise, investors want a return on capital and high growth industries offer that opportunity. Making sure legislative hurdles are lowered and letting the world know of the local investment offerings in San Diego can make a huge difference in industries that are ready to break out onto the international market.

Clayton, et. al. (2013). High-employment-growth firms: defining and counting them. Monthly Labor Review, 136 (6).

Jenkins, et. al. (2006). Do high technology policies work? High technology industry employment growth in U.S. Metropolitan Areas, 1988-1998. Social Forces, 85 (1).