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As our regulars know, I spend a fair amount of time writing about how the economic crisis has hit San Diego’s innovation economy. Specifically, I’ve focused on how traditional funding sources for tech and biotech companies are drying up, and the need for new funding models.

Some are saying that angel investors — wealthy individuals who fund early stage companies — must step up during these tumultuous times. This week, Xconomy’s Bruce Bigelow had a chat on the subject with Ralph Mayer and Mike Elconin of Southern California’s Tech Coast Angels.

The most interesting observation, I thought, came from Elconin. Here it is:

I have no data to back it up, but the VC “industry” in San Diego seems to be a shadow of what it was five years ago when measured solely by VCs doing new deals. In my opinion, this is a result of two trends: One is that VC activity nationally, and especially in California, is migrating to the San Francisco Bay area, something we detect not only in San Diego, but throughout the Tech Coast Angels’ footprint, which includes Orange County and Los Angeles. The other trend is that VC activity was trending down even before the current recession. I think both trends are painfully obvious and continuing.

Expect more from me on this issue in the coming weeks.

DAVID WASHBURN

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