San Diego's startup funding train has slowed significantly. Local companies raised about $590 million in venture funding in the third quarter of 2025, the region's leanest quarterly total in eight years. That pullback is leaving founders and local investors competing for fewer checks and smaller pools of growth capital as big money pursues deals elsewhere.
The $590 million Q3 total, spread across just 48 deals and down sharply from a year earlier, was reported by The San Diego Union-Tribune, which cites PitchBook and National Venture Capital Association data for the local haul.
Why The Slump
Part of the story is national: a handful of giant AI deals are soaking up a big share of available venture capital, leaving less for regional rounds. Anthropic's blockbuster $13 billion raise this year is one of several oversized financings that concentrated capital in a small set of companies, according to coverage of the funding surge. Tech.eu reported on the Anthropic round, and PitchBook analysts note that fundraising continues to lag amid ongoing market hesitancy, a point highlighted in the PitchBook-NVCA Venture Monitor. Technical.ly relayed the PitchBook commentary.
Where The Money Did Flow
Even with the chill, a few San Diego-area startups still managed to bring in sizable checks. Defense and expeditionary-manufacturing company Firestorm Labs raised about $47 million in a Series A round, according to a company release. PR Newswire reports NEA led the round with several defense-focused investors participating.
Logistics software startup Alvys announced a $40 million Series B late in Q3, and Carlsbad-based infrastructure firm GigaIO closed a $21 million Series B to scale its AI inferencing products. VCAonline, AI Journ, and company statements documented those deals.
Startups using AI to simplify government and benefits navigation have also found some backing. Turnout closed a $21 million seed round in September, according to the company's release reported by PR Newswire.
M&A Helped Shape The Quarter Too
Mergers and acquisitions stepped in to do some of the work that venture capital did not, returning cash to the market and reminding founders that exits are still possible. Boston Scientific agreed to acquire the remainder of Nalu Medical, a Carlsbad-based company, for approximately $533 million, a deal expected to close pending approvals, according to Reuters, which also cited company commentary on anticipated growth for Nalu.
In a major biotech move, AbbVie struck an agreement to acquire Capstan Therapeutics for up to $2.1 billion, according to the companies' announcement. Capstan Therapeutics provided transaction details.
Local investors and founders told reporters that the Q3 numbers reflect a tougher fundraising environment and a market that increasingly rewards companies with clear revenue paths or strategic acquirers in sight. The region's smaller rounds and reduced deal count, they say, make runway management and early commercial traction more important than ever for San Diego startups. The San Diego Union-Tribune reporting captures that local perspective.
What happens next will hinge on whether Q4 deal flow rebounds as IPOs and M&A continue. Any sustained return of exits would recycle capital back into the regional venture capital market. In the near term, the outlook favors companies that can stretch their runway, show real revenue momentum, or position themselves as attractive M&A targets for strategic buyers in medtech, defense, and AI infrastructure.
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