For venture capitalists, San Diego has long been a nice place to visit, but the problem has been getting them to actually stay there. The biotechnology trade group BIOCOM has been trying to change that.

 

Long a leading center for biotechnology, San Diego boasts a strong base of research institutes, industry talent, and entrepreneurial zeal. But unlike biotech hotbeds Boston and San Francisco, which also have the VCs to nurture fledgling companies, California’s second-largest city has lacked a critical mass of life science-focused venture capitalists. Forward Ventures and Enterprise Partners Venture Capital are the among the few that have long made San Diego their home.

 

“San Diego has always been known as a sleeper-surfer town, not a financial capital of the world. It’s nothing like San Francisco, Boston, or New York,” said Ian Wisenberg, senior vice president of business development and CFO of BIOCOM, the region’s biotechnology trade association. “It’s never been a financial hub and there’s been the rub—trying to get a good base for financial markets to evolve within the local community here.”

 

Wisenberg himself is a reflection of the change. BIOCOM brought him on in 2004 to spearhead the effort to attract venture capitalists to this city of 1.25 million and help attract capital to its biotech community. 

 

One key piece of that plan has been creation last year of VC executive suites within the BIOCOM office to allow-out-of town venture firms to establish a presence in San Diego. The group now counts five tenants, including Thomas McNerney & Partners, Pappas Ventures, Latterell Venture Partners, Lilly Ventures, Sofinnova Ventures. The firms pay BIOCOM’s $5,000 year membership rate for VC firms and an additional $10,000 a year for an office in the suites.

 

“With these folks being here they get to see a lot more than they would otherwise,” said Wisenberg.

 

Word seems to be getting out. San Diego in recent years has seen the arrival of other firms such as Amgen Ventures in 2004, Biogen Idec New Ventures in 2005, and Domain Associates and Paramount BioSciences, both in 2006.

 

“We’re seeing more money coming in,” said Rich Mejia, partner and director of life sciences for the Pacific Southwest region for Ernst & Young. 

 

BIOCOM is also trying to do more to showcase the companies in the region. The organization will host its second annual investor conference starting October 31 through November 2. The group expects about 400 attendees at the event that will showcase 56 public and private life science companies from the area. And the Biotechnology Industry Organization is slated to hold its

 

It’s difficult to say how the presence of new venture capitalists has had an effect since many of the players are recent arrivals. In the first quarter of 2007, San Diego biopharmaceutical companies raised $399.2 million—setting a new record for dollars raised in a single quarter. But the action was considerably tamer in the second quarter, with companies netting $69.4 million, less than the $73.2 million in the same period a year ago.

 

The venture capital firm Domain, which has $2 billion under management, said about 40 percent of its deals are now in San Diego. Domain partner Bob More said a number of firms outside the area have long co-invested with it in the region. The lack of VCs on the ground in San Diego hasn’t seemed to be a barrier to companies getting funding, he added.

 

“If you speak to a broad swath of entrepreneurs, I don’t think you will ever find satisfaction that everyone is getting funded to the degree they want to get funded,” said More, who noted that San Diego is second only to the Bay Area in biotech venture financing. “Business plans that have merit seem to be evaluated and judged, and a significant number of them funded.”  

 

But David Kabakoff, an executive in residence with Sofinnova Ventures who works out of the BIOCOM suites, said he believes the efforts will make it easier for San Diego firms to win the attention of venture capitalists and foster new relationships between firms. He said while a venture firm may not need an office in San Diego, it does facilitate the making of connections and closer relationships between investors and executives.

 

“When you are talking about VCs investing in pre-formed companies that have entrepreneurs and a management team, develop a plan, and then go looking for money, it’s probably less critical that somebody is here,” he said. “When you are talking about starting new companies and creating new companies from scratch, a local presence helps that a lot.”