The investment climate for Tri-Valley companies continues to heat up and is expected to remain strong in 2018, according to a recent report from Mirador Capital Partners. "The opportunities for venture investment are plentiful as Tri-Valley companies continue to produce innovative technologies, receive increasing levels of funding, and validating exits," notes the report called The Mirador View: 2018 Perspectives on the Tri-Valley.
Notably, both private and public Tri-Valley companies are thriving. According to the report, 2017 "saw over $370 million of venture capital invested across 41 Tri-Valley companies, with an additional $50 million invested across five companies in the first quarter of 2018. Median deal size has grown in the Tri-Valley over the last five years, increasing from $2.1 million in 2013 to $6 million in 2017, and over $7.3 million in the first quarter of 2018."
In 2015, Mirador began an interesting experiment. The firm compiled an index of companies headquartered locally and began tracking their development and comparing their growth to that of the Standard & Poor's (S&P) 500 stock market index. An index of Tri-Valley companies "would have annually outperformed the S&P 500 by 15% over the last 10 years and 22% over the last five years," according to the report. "This trend continued over the last year, with companies in the Mirador Tri-Valley Index on average exceeding the equally-weighted S&P 500 by 14% in 2017 and 15% in the first quarter of 2018."
The Tri-Valley clearly offers a business-friendly environment. What makes it possible for so many businesses here to succeed? A combination of many factors makes the Tri-Valley a fertile area for companies, according to Don Garman, Founder and Chief Investment Officer for investment firm Mirador Capital Partners.
One important factor is the local commercial real estate market. The Tri-Valley is attractive to new and relocating businesses in part because it offers a variety of different property types at considerably lower cost than in San Francisco or Silicon Valley. "The economics are pretty unassailable compared to the rest of the Bay Area," he says.
The Tri-Valley's two national laboratories are another important factor, together making up a "several billion dollar annual research and development engine that brings in talented people." The region's talent pool is undeniable. The percentage of Tri-Valley adult residents with a Master's degree or better rose to 26% in 2017 from 16% in 2000. Outsiders may be surprised to learn that the percentage of Silicon Valley adult residents with a Master's degree or better is somewhat lower, at 22%, while the rate for the Bay Area as a whole is 19%.
As Garman sees it, the benefits of Tri-Valley's flexible, affordable commercial real estate market is "multiplied by the engineering talent and highly educated workforce" of the area. Those factors have helped create a strong foundation for many companies. As new companies are created and grow in the Tri-Valley, opportunities to invest grow as well.
Many of those who decide to invest in Tri-Valley companies are executives who were part of the first generation of successful businesses here, notes Garman. After their initial successes, they may choose to invest in new companies, harvest from those newer successes, and reemploy those funds in the community.
Last year and the first quarter of 2018 saw a record level of merger and acquisition activity in the Tri-Valley, according to the report. Pleasanton-based companies lead the Tri-Valley success story as measured by the size of investment deals over that 15-month period. Of the 15 largest Tri-Valley venture capital deals during that period, 11 involved companies located in Pleasanton. Six of the seven Tri-Valley companies involved in venture-related mergers or acquisitions in that period are also in Pleasanton.
Many of the successful companies who have received multiple millions of dollars in investments or been involved in a large merger or acquisition deal are located at Hacienda. They include AEye, IronPlanet, NeoTract, Purigen Biosystems, ServiceMax, SlashNext, and SmartZip.
"Hacienda really is a central area of innovation for the Tri-Valley," says Garman. "Hacienda is a really elegant place to work, and if you happen to live nearby, you can have a really great life."
One of the benefits Hacienda offers is proximity to large, successful companies that are part of the SAS boom in the Tri-Valley. Veeva, which has its headquarters at Hacienda, is one of the local, large companies that "bring in other companies that want to be near them," says Garman. Veeva and others "become ecosystems that fuel other downline innovations" as startups move in to build products and services that complement the ones offered by the larger companies.
Garman is convinced that the Tri-Valley investment boom is still in a relatively early stage, with more growth to come. That is easy to believe. By the end of 2017, according to Mirador's report, the Tri-Valley region led the entire state of California as measured by job growth, income, growth in venture capital investments, and quality of life. In short, these are promising times for both Tri-Valley companies and those who invest in them.