FINANCE
“ For a long time , VCs had a lot of bargaining power . … I see more and more founders negotiating and declining offers from even top VC firms in order to retain more of , not just the money , but the decisionmaking power within the company .”
AYAKO YASUDA Professor of finance , UC Davis Graduate School of Management
“ Agriculture was prioritized , if anything . Robotics was the best place we could have chosen to be if we had a crystal ball back then .”
The global pandemic led big thinkers to reevaluate the food system . Automation and sustainability became concepts with real-world , problemsolving potential as the industry faced challenges with labor and supply chain disruptions . Because of this , Cobb says investors with an interest in disruptive technology were drawn to ag-tech . In the same vein , Yasuda expects climate change to continue to be a huge driver of investments .
“ I think we could play a bigger role in climate change-related investment , whether it is a startup or PE ( private equity ) investment ,” Yasuda says . “ That means Sacramento , as the seat of the state , will implement big policy change . Any time there ’ s a big policy change , that opens the door for new business opportunities .”
Growth potential
The Capital Region has come a long way , but still has a ways to go , says Edris Bemanian , CEO of Engage3 , a Davis-based startup that uses big data and artificial intelligence to measure and optimize price image ( how consumers perceive a company ’ s prices relative to the competition ) in retail . Five to 10 years ago , he says , locally-based options for financing startups were minimal . This presents a challenge for any startup trying to get off the ground .
From the investors ’ perspective , with so many different companies out there , they have to pick and choose where to focus . They rely on their eyes and ears in the market “ to identify diamonds in the rough ,” Bemanian says . Founders and investors in the same region might have overlapping networks , which makes it easier for them to find each other . Not that it ’ s impossible to get financial backing beyond your home base . Entrepreneurs do it all the time . But a startup ’ s location might deter some investors . Case in point : Bemanian recalls people in San Francisco telling him flat-out that if they couldn ’ t bike to his office , they weren ’ t interested .
The thinking was , “ If you ’ re not here , you ’ re in Podunk , Nowhere ,” he says . “ The fact that you have to defend why the state capital is a great place to launch a startup is kind of befuddling .” In many ways , COVID-19 helped dissolve geographical boundaries . With virtual meetings and online communication bigger than ever , the “ where ” became less important than the “ what .” Engage3 raised $ 12 million in Series C financing , with two investors , Moneta Ventures and The March Fund , based jointly in Davis and Hong Kong , which invests in breakthrough technologies around food and global health . As Engage3 enters the growth equity stage , Bemanian isn ’ t familiar with nearly as many options based in Sacramento . But he looks forward to a future when more private equity firms choose the region as its base and those outside the region are no longer deterred by the location .
As for Hemant Sikaria , he didn ’ t have to look far for support with his brother Lokesh at Moneta Ventures . But it would have been a conflict of interest for Lokesh to be involved , so he brought the opportunity to the investment board and removed himself from the process . The committee saw potential in Sibros , investing about $ 1 million in its seed round . Now , Sibros is fundraising for a Series B , looking to raise $ 50 million by year ’ s end . The Sikaria brothers believe in the potential of Sibros , but both admitted feeling pressure for the startup to perform well . For younger brother , Hemant , he worried that failure would impact the reputation his brother worked to build .
“ My brother is 16 years older than me , very well established in his career and well known in the Sacramento Region ,” Hemant says . “ Since his VC firm was an early investor in Sibros , maintaining and building his reputation and making him proud have always been key drivers for me and that continues to help me achieve greater heights .”
Russell Nichols is a freelance writer who focuses on technology , culture and mental health . On Twitter @ russellnichols .
56 comstocksmag . com | December 2021