Over the past year and a half, more than 760 technology-related companies were launched in San Diego County, according to data released yesterday by San Diego Connect, a nonprofit organization dedicated to helping high-tech entrepreneurs.
Although many of those startups were minuscule – often made up of single individuals working out of their homes – Connect says the formation of the nascent companies indicates how healthy the region's technology industry is.
Yesterday, Connect launched an “index of regional innovation” to measure how many startups are created each quarter and to track fluctuations within various high-tech sectors, including communications, software development, and biomedical products and pharmaceuticals.
“These companies are San Diego's future. Some of them might be the Qualcomm of tomorrow,” said Kelly Cunningham, economist with the San Diego Institute for Policy Research, who compiled the index using new business filings compiled by Dun & Bradstreet and InfoUSA.
The index is designed to help entrepreneurial support groups, such as Connect, figure out how to provide better, more targeted support for their nascent ventures. It is intended to help provide an indicator of the strength of the local tech community.
“We live largely in the shadow of other well-developed regions, such as Boston and the Bay Area,” said Joe Panetta, who heads the biotech industry association Biocom. “But we continue to be ranked high for innovative technology. That's all about the creation of new companies and investment in new companies.”
According to Connect's calculation, an average of 112 technology-related businesses have been created in San Diego each quarter over the past year and a half, ranging from a low of 67 in the first quarter of 2005 to a high of 133 in the third quarter of 2005.
During the most recent quarter on the index, from July to September 2006, 119 companies were launched. The index does not specify how big any of them were.
Duane Roth, who heads Connect, said there had been a certain amount of debate about whether to include home-based businesses in the index. But he said that some high-powered tech businesses, including Yahoo and Hewlett-Packard, were started as home-based businesses.
Connect's definition of high-tech companies is broad. For instance, the index includes some golf-equipment makers, since many golf clubs use high-tech composite metals developed for the aerospace industry.
“Instead of beating our swords into plowshares, we're beating our missiles into golf clubs,” Cunningham said jokingly.
According to Connect's calculations, 45 percent of the high-tech startups created in the past year were in the communications sector, including Web site design boutiques and Internet services. Nearly 30 percent were software companies and computer services. About 15 percent were involved in the pharmaceutical and biotech industry.
The rest included electronics, transportation, recreation and environmental technology companies.
Marnie Cox, economist with the San Diego Association of Governments, said that even if the companies are small, they represent an important part of the economy, especially since they typically pay above-average salaries.
Annual salaries in the tech sector range from an average of $52,000 per year for recreation companies to $112,000 at communications companies. In comparison, the median income in the county is roughly $39,000.
Cox said jobs in high tech “have the ability to impact jobs throughout the region. The role they can play in helping us grow our standard of living and rebuild our middle class is very important.”
On the other hand, a growth spurt among entrepreneurial companies is not necessarily an indicator of the health of the broader economy. A boom in startups occasionally occurs during an economic downturn.
At the end of the Cold War, for instance, a number of entrepreneurial companies were created by defense workers who had been laid off by military contractors.
“If the economy goes bad, some people might decide they might as well try to start their own business,” Cunningham said.
