The rallying behind San Diego’s tech scene — a once loud and growing segment of local business — has cooled this year, but there’s a glimmer of activity on the horizon.
A pair of La Jolla investors have closed a $15 million fund, from which it’s already fueling local software upstarts, a group that’s been starving for capital during the first half of the pandemic-hit year.
Denise and Steven Longley, a married couple and co-founders of Longley Capital, used to be known in San Diego as active angels who were new to the local tech scene. Although they both attended grad school at UC San Diego’s Rady School of Management, the duo had moved to New York City after school where they built careers on Wall Street. Denise, 39, has a background in financial modeling and investing strategy, while Steven, 43, has experience in corporate development.
In 2015, however, they returned to San Diego with a new goal to help build up (and hopefully profit from) the local tech scene.
“The reason we’re focused on this region specifically is that we identified an inefficiency in the market,” Denise said. “When it comes to software, (San Diego) lacks institutional capital and yet has a tremendous amount of investment opportunities. It’s a fast-growing market that no one’s paying attention to.”
In the years since, the couple has ponied up their own cash as angel investors to fund promising local companies. They’ve provided funding for some of the most well-known upstarts in San Diego’s tech scene, including Lab Fellows, Manscaped, LeadCrunch and GroGuru.
Now, the duo has taken local investment a step further, moving from angels to venture capitalists. Longley Capital closed $15 million of their first fund in February, and expects to close an additional $10 million to $15 million before the year is out. And just last month, the couple’s nascent firm was the lead investor in one of the most competitive tech deals in San Diego so far this year.
GoSite, a local software company that’s booming with new business, chose Longley Capital to lead its $16 million Series A round. That’s a big deal, said Connect CEO Mike Krenn, who’s best known in San Diego for connecting entrepreneurs with venture capitalists both in and out of the region. The GoSite deal, Krenn said, was ultra-competitive, with tier one VC funds vying for the opportunity to lead the round.
“I had a bunch of investors say they blew it, they waited too long and the deal had become too expensive,” Krenn said. “Then a bunch of bigger VCs came in. Then, surprise, little ol’ Longley Capital beat out the top VCs for the deal. Kind of crazy.”
Neal Bloom, a local angel investor and leader in San Diego’s startup scene, said leading the GoSite deal was likely a boon for the Longleys.
“Winning a lead on something means you get to dictate more ,” Bloom said. “Clearly (GoSite) wanted them around — wanted them on the board; wanted them on for the long haul. It’s compelling when a company chooses you.”
Alex Goode, CEO of GoSite, said he had lots of reasons for choosing the Longleys as lead investors. First off, he’s worked with them before. The Longleys were early angel investors in GoSite, and they’ve been sharp partners from the start.
“They work hard for their portfolio companies,” Goode said. “They’ve been high impact partners for us, helping us network, helping us with executive hires and finding potential partners for us.”
Goode said the Longleys and GoSite also share a special goal: building up San Diego’s tech scene.
“They’re local and they’re really ionate about building a tech company and a tech ecosystem in San Diego,” Goode said. “That’s something I’m ionate about as well, and sharing that ion was a big part of our decision.”
GoSite was also interested in appointing sharp women to its board, Goode said, as diversity at the top was important to him.
“I wanted to add a really strong female leader to our board with Denise Longley,” Goode said. “Diversity and inclusion should spread across the whole organization, including board level.”
But choosing Longley Capital as its Series A investor comes with some risk for GoSite.
“There’s a lot of value in getting a tier-one VC from Silicon Valley in your Series A,” Krenn said, explaining that well-established investors provide more capital and a network of well-heeled for follow-up rounds of fundraising. “Longley doesn’t have that pedigree yet.”
The Longleys are also betting a big chunk of their new fund on GoSite, meaning the investors haven’t diversified as thoroughly as typical VC funds do.
“If you have a winner, go all in,” Steven Longley said.
The Longleys plan to spend the next 12 months finding new companies to add to its portfolio, about 80 percent of which will likely be from San Diego. The company currently has six startups in its portfolio and plans to have roughly 15 within a year.
“The companies we’re looking at investing in now are seed-stage, and all are in technology, sustainability, or women-led,” Denise said.
