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The Matchmakers

Author: Richard Paul Hinkle
June, 2008 Issue

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Santa Rosa’s award-winning Venture Communities Program is like speed dating  for entrepeneurs and investors.

    Sorry, but the phrase “speed dating” in a business sense sends me into minor hysterics. And yet, upon further review—that’s a football phrase—one must accept the accuracy of analogy. You see, the triumvirate of the City of Santa Rosa, the Santa Rosa Chamber of Commerce and Golden Capital Network has come up with a program designed to connect emerging growth companies with investors as diverse as the big guns (venture capitalists) and individual “angel investors” who have smaller resources to offer.

    The idea of bringing better financing opportunities to the local level is hardly a new one, but it’s gained an immense amount of credibility over the last few years. The United Nations declared 2005 the International Year of Microcredit. The following year, farsighted microfinance instigator Muhammad Yunus was justly selected for the Nobel Prize for his enlightened approach to funding the smallest fledgling businesses—mostly run by women—in Asia. His successes are legendary.

    The Santa Rosa project goes under the name Venture Communities Program (I still like “speed dating” better), and the program won two awards for its efforts to connect area entrepreneurs with venture capitalists and angel investors. The City of Santa Rosa won an Award of Merit from the California Association for Local Economic Development (CALED) and an honorable mention for the program from the International Economic Development Council in the population category of 50,000 to 2 million.

    “The Venture Communities Program is a nonprofit network that’s working to stimulate our local economy,” says Nancy Manchester, a third-generation Oklahoman who’s been with the City of Santa Rosa’s Department of Economic Development and Housing since 2005. “The program was put together for this area the year I came on board, and the idea was to take a good look at the strengths and weaknesses of the local economy and see what we could do to make it stronger, more vital. We noticed we were losing manufacturing jobs, and we wanted to turn that tide around a bit. We needed a better direction. We needed to support new ventures and grow our own innovative companies, so the city and the Santa Rosa Chamber partnered to implement the Venture Communities model. That’s exactly what this program is doing.”

    “Innovative companies selling to global markets are key components of Santa Rosa’s economic equation,” says the city’s vice mayor Lee Pierce. “The fact that several of these companies received connections to critical resources from this program—including capital—makes us very pleased with how it’s progressed.”

Grow ’em local, keep ’em local

    One of the problems in the past was that when many successful Sonoma County companies began to grow, they opted to move elsewhere—not good for the local economy to inculcate success, only to see it dissipate into thin air. “One great thing about Venture Communities is, it helps replace companies that have grown or merged and moved,” says Chris Lynch, executive vice president of the Santa Rosa Chamber of Commerce, a Georgetown University grad who served as a U.S. diplomat in Europe and Latin America before moving to the Bay Area in 2002. “It’s like speed dating for angel investors and entrepreneurs. The traditional approach is to offer incentives to big companies in an effort to bring them here. This program starts from the other side of the fence. We’re trying to help bright entrepreneurs get started here because of the positive business environment we offer.”

    Lynch sees Venture Communities as a forum that brings those who most need one another together in a situation where money can meet ideas and real work can get going. “Over $1 billion has been invested through the Golden Capital Network program since 1999,” he says. “All the money used to be focused on the Silicon Valley, but interesting people are doing interesting things up here as well. It’s funny, we’re so close to San Francisco, yet many of those who have money to invest see us as a sort of terra incognita. It’s like it’s OK for them to come here for the wine and food, but it’s somehow daunting for them to see this area as a source for new ideas, technologies and industries.”

    He reminds us that some of these are “early stage companies yet to earn their first dollar. Some are pre-launch, some have gotten started but need additional money to expand. These are what you might characterize as ‘growth’ companies—ones that offer products or services that can be expanded nationally or even internationally. You’re not going to find the local dry cleaners or a new law firm here. We’re looking to help companies who are aiming for a much wider exposure. We’re looking for the next Google.”

    Lynch says nearly 30 companies have taken advantage of the program in the last 18 months, and seven companies have received (and spent) $20 million to get their projects underway or expanded. “Some have learned to do it on their own,” he notes. “Solar Power Partners [in Marin County] installs solar arrays on commercial buildings, then leases them back to the building owners. They’ve really taken off. They were aiming at $4 million in sales last year—and did $30 [million]!”

    Not so large is Wind Sail of Rohnert Park, a company that builds a more subtle, quieter wind turbine for electricity production for off-the-grid applications. They’ve been successful enough to earn grants from the Department of Energy, but are still awaiting input from private investors. (The turbine windmill that Wind Sail builds is quiet, smooth and efficient. But as engineer Rick Halstead notes, “It’s very hard for people to install a wind turbine at their homes. Even in fairly rural circumstances, it often takes two or three years to get the use permits necessary to make the installation.”)

    Red Condor of Rohnert Park offers spam protection and email security solutions, and has been a beneficiary of Venture Communities. “We raised more than 14 million in private and venture capital,” says CEO Ron Longo, who’s been with the company since October 2005. “We also work with the North Bay Angels, a private group of a half-dozen local investors. Red Condor was founded in 2003 and spent three years expanding the technology of message protection, anti-spam, anti-virus and protecting against massing email attacks. Now we have new products and are into national distribution. We’re experienced very high growth the last few years. When I joined the company, we had 9,000 end users; now we have more than 600,000 end users and 8,000 businesses. That’s significant growth.” Not to mention a significant contribution to the local economy.

The rotary valve that saves the world?

    It may not be the next Google of this or any other world, but David Slemp’s Aeres Motors is one of the small, local companies poised to take advantage of Venture Communities. “We’re working on a rotary valve for engines,” says Slemp. “Rotary valves have been around for decades and, although they offer many benefits, they have a tendency to burn a lot of oil, which is unacceptable for modern engines. We believe we’ve solved that problem with a technology that enables vehicles to run cleaner…and get up to 30 percent better gas mileage!”

    Prior to starting Aeres Motors, Slemp was an engineering project manager and program manager at Agilent Technologies. Then, in 2004, he got his layoff notice. So he decided to combine his love of automobiles with his background in engineering to create a product that might beneficially change the way we drive. “The geometry of rotary valves gives smaller, more efficient engines additional peak power. We all want cleaner-burning engines, and better gas mileage, but we also want performance. I believe the valve we’re working on will allow both. We’re this close [think Don Adams] to having the prototype ready and operating, and then we’ll be able to make our presentation for funding to Venture Communities.”

    WaveTrack Systems is CEO Bill Linstrom’s venture into saving the world from retail theft; he’s developed a merchandise theft prevention system that’s effective against employee thieves, organized retail theft and shoplifting. The Hollywood-born Linstrom made his presentation to the venture capital and angel investors at Venture Communities’ June 2007 conference at the Flamingo Hotel in Santa Rosa. “It was a wonderfully professional experience,” says Linstrom, who was once an engineering executive with Alcatel and marketing executive for Tellabs. “I recognized many Sonoma County investors in the audience and the forum was most effective. You have to understand that putting pre-revenue companies together with potential investors is a long and ongoing process, and we’re very pleased with where we are on that road. We’re definitely making progress.”

    Linstrom, who’s lived in Sonoma County for two decades now, notes that at least 60 percent of retail theft comes from employees and says the system his company has developed can put an end to it. “It’s an information-based technology whereby a tag attached to a piece of merchandise can be tracked to within one foot of its actual location. You put in the ‘risk profile’ for the item, and you can be notified in near real-time when that item has been moved in a manner that’s consistent with being stolen. That notification can come to an in-store or headquarters’ computer console, PDA or cell phone. You get video that’s immediately useful, unlike existing video systems that are only effective after the fact.”

    Marin County-based RedwoodAge.com isn’t about saving the world, but rather about informing the growing over-40 audience—local and national—that’s tired of “news” centered around celebrities. “We know that people of a certain age aren’t interested in celebrity-driven news and information,” says chairman and editor-in-chief Tom Murphy. “They want national news along with information keyed to health, family, finance and the spiritual side of life.

    “We believe we represent the ethos of the North Bay, which is more mature than most markets. So we’re looking north of the Golden Gate for accredited investors in what we anticipate will be a very successful communications venture. We’re very pleased with the number and quality of investors we met at the Venture Communities forum. We got a lot of publicity out of the meeting, and we expect to be very successful in raising money. I helped start and wrote the strategic plan for [the financial news website] MarketWatch.com. But I feel so strongly about Redwood Age that this is the first time I’ve actually invested my own money in a project.”

    (The most recent Venture Communities forum took place in April, when 38 companies made their presentations to some 100 potential investors here in Santa Rosa. “There are an incredible number of innovative companies here,” says Lynch. “Their only obstacle is finding the right kind of financing.”)

Golden Capital Network

    The idea for the Venture Communities Program came out of Chico-based Golden Capital Network. “We were looking for a tool that would foster economic development through entrepreneurship and private equity investment,” says Jim Mikles (pronounced “Michaels”), vice president and program director. “The idea is to focus on local and small companies with the potential to progress into the national or even international marketplace. Growth companies and entrepreneurship are especially important because 70 percent of all new jobs come from small, new businesses.”

    A Santa Clara native (and baseball lover—he’s a Giants fan), Mikles’ family moved to Sacramento where he graduated from El Camino High School and then studied journalism at California State University Chico. “I spent 10 years working for newspapers and magazines,” he says with a chuckle, “gradually sliding into trade publications focusing on technology and finance. I even went back to school to get a broader background in accounting and business, because I enjoyed that side of it so much.”

    In 1999, he became one of the triumvirate—Jon Gregory is CEO, Dan Nguwen-Tan is vice president and general partner—who founded Golden Capital. “We’ve worked with more than 1,000 companies over the last nine years,” he says, obvious pride fairly crackling over the phone lines. “We’ve worked with companies in all sorts of industries, but they do have to be companies that are producing something. We don’t work with ‘lifestyle’ companies. We’ve worked with companies that are working on cures for Parkinson’s disease; working to prevent strokes during operations; working on biodiesel fuels; alternative energy sourcing; and finding a cure for breast cancer. That’s all exciting stuff!”

    Mikles calls Ventures Communities a “spoke and hub” entrepreneurial-and-investor network. “We’re currently cultivating that network on a region-by-region basis,” he explains. “We’re working with regions in the North Bay, Sacramento, Monterey Bay, San Luis Obispo and northern Santa Barbara County, the Yolo-Davis area, Stockton, Fresno and the Inland Empire [San Bernardino and Riverside counties]. We’re aiming to reach 18 communities within the next 18 months—which means expanding into most of the Western states—and to become a national presence within three to five years. Remember, the innovative ideas from these new or growing sustainable-growth companies—these ‘most likely to succeed but don’t yet have the funding’ companies—are high-value drivers of local, regional, state and national economies. Getting them connected with those who have the money is a winning situation for everybody.”

    Mikles says the city of Santa Rosa and its Chamber of Commerce were instrumental in helping Golden Capital refine the program, and that the city is reaping the benefits of its efforts. “The city has acted in a leadership role in that it was the first to adopt Venture Communities. The city also puts itself in the forefront of private investing and entrepreneurship. The big question is: How do we build high value entrepreneurship and early stage investing capacity in our region? This program, which brings all these elements together under one roof, does that. The companies that are ready to take advantage of this ‘speed dating’ opportunity will bring their goods and services to a much, much wider audience—and, ultimately, create more and better jobs that will foster regional economic prosperity.” It doesn’t get any better than that.



 

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