San Diego's 5 Hottest Startups

Every now and then, a San Diego startup manages to create enough noise to drown out all that Silicon Valley buzz.

Homegrown GoFundMe recently agreed to sell a majority stake of its company to investors. The sale price remains unknown, but the deal put a $600 million value on the company, according to the Wall Street Journal. GoFundMe is a website that lets people to crowdfund everything from pricey medical procedures to dream honeymoons.

Another fairly recent San Diego success story is ecoATM, which builds and operates automated machines that pay customers for their used electronics. It was acquired for $350 million.

It’s not really a mystery why Silicon Valley sucks up all the oxygen: Year after year, the amount of investor money reaching Silicon Valley startups easily dwarfs what their San Diego peers manage to raise. Young companies in California’s tech center racked up more than $9.1 billion in venture capital in the second quarter alone, compared with $141.1 million raised locally, based on one industry report.

As Lisa Halverstadt noted last year, there’s a sort of Catch-22 at work that tends to benefit Silicon Valley and hurt places like San Diego – more funding breeds more success, and the cycle continues:

Regions with big success stories get more venture capital money and more venture capital firms.
“Venture capital is mostly interested in home runs,” said Jeb Spencer, who leads a San Diego-based venture firm focused on software startups. “They’re interested in billion-dollar exits. That leaves the majority of software companies without funding.”

Here are five of the most buzzworthy San Diego-based startups to keep an eye on, based on several factors, including investor funds raised, industry chatter and milestones.

5. Mogl

Headquarters: San Diego

What it is: An app that rewards customers for dining at select restaurants in San Diego. Users can receive cash back, or points that can be used toward hotel stays or flights. The company also has a charitable bent. Users can opt to donate all or some of their cash-back reward to local charities. Co-founders Jon Carder, Jarrod Cuzens and Jeff Federman created Mogl because they felt existing rewards programs lacked fun and imagination, according to Mogl’s website.

Why it’s hot: The fledgling company has received more than $42 million in investor funding, with its most recent round of $5.2 million in April, according to Crunchbase. Mogl says thousands of restaurants – from local favorite Hodad’s to chain restaurants like Jack in the Box – participate in the rewards program. Another self-reported company milestone: The app has donated more than 761,000 meals to the needy.

4. Classy

Headquarters: Downtown San Diego

What it is: A website where nonprofits and other social-good groups can set up fundraising campaigns that are visually appealing and easy to use. Co-founder Scot Chisholm said he and his friends launched the company four years ago after realizing the process of donating to charities online was disjointed and outdated, he wrote on Classy’s website. With Classy, nonprofits can create their own online space, where they can describe their missions and raise funds for projects in a more personal way. The site also offers a peer-to-peer feature, which allows nonprofit supporters to run and share their own mini-fundraising campaigns.

Why it’s hot: Classy’s top brass says it has helped 1,500-plus social-good groups, including Oxfam and Teach for America, raise $130 million, as of last fall. The 80-person startup last month raised $18 million in investor funding, which will be used to grow its engineering team and expand its business.

3. TakeLessons

Headquarters: Downtown San Diego

What it is: A website that lets people search for certified teachers offering lessons in specific disciplines, including dance, foreign languages and music. How it works: Type in which lesson you want to take and a ZIP code to get a list of the closest instructors. Users can sort by reviews, cost or distance.

Why it’s hot: TakeLessons originally specialized in brokering music lessons but has since expanded to other types of classes. Company officials say the site has facilitated more than 1.2 million lessons. The startup has snagged $20 million in investor funding in its nine-year history. Last year, TakeLessons acquired competitor Betterfly, which allowed the San Diego firm to expand its online offerings to resume writing and public speaking, among other subjects.

2. 3D Robotics

Headquarters: Formerly San Diego, now Berkeley (The company still has a big presence here – manufacturing and other operations are out of San Diego and Tijuana.)

What it is: It’s billed as the biggest commercial drone-maker in North America. The company designs and manufactures open-source, unmanned aerial vehicles meant for personal and business use. Former Wired magazine editor Chris Anderson, a big DIY proponent, co-founded the company with Jordi Muñoz, an engineer raised in Tijuana. They met and clicked on a drone-enthusiast website that Anderson created while he was still with the tech magazine.

Why it’s hot: This spring, the startup received $50 million in funding in an investment round led by San Diego mobile chip giant Qualcomm. In all, the company has raised $99 million. The match makes sense. 3D Robotics has the drone innovations, while Qualcomm has the capital and mobile technology.

“By working with Qualcomm Technologies Inc., we can bring advanced computing to the skies at an increasing pace,” Anderson said in a company blog post.

1. Biotech startups

What they are: These ventures use living cells to research and develop products, mainly medications, to try to improve quality of life. Many aim to treat or prevent diseases.

Why they’re hot: OK, this is actually an entire sector rather than an individual company.

But based on this area’s funding performance during the past two years, it deserves its own entry. Out of the roughly 200 venture capital deals in San Diego recorded since the second quarter of 2013, more than half of the money has gone to younger biotech firms, according to data from a leading industry tracker. This area tends not to attract much mainstream attention. Coverage usually skews toward startups that provide consumer services, such as Uber or Facebook.

Yet biotech is one of San Diego’s strongest sectors. Take aTyr Pharma, a San Diego-based late-stage startup that went public this year. The company specializes in physiocrine biology, which it describes as the study of a “class of naturally occurring proteins” that company officials hope can help treat rare illnesses of the immune system. It raised $125.2 million in venture capital, the most of any startup in San Diego County in the last two years.