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How Startups Survive and Thrive in Santa Barbara

Beyond the IPO, Companies Started and Built Here Endure


Much like the rains that intermittently reach the Central Coast, the influx of capital that fuels our high-growth startups can seem to pour in and then leave us with long dry spells. In recent months, the financial markets nationwide have had their share of heat waves and droughts as well. The private markets for startups seemed too hot, overvaluing massive startups like Uber and Snapchat, while the public markets dried up due to global economic storm clouds, slowing the debut of newly public companies to a near stall.

Yet as tough as the current conditions may seem, area companies have actually fared quite well. In just the last few years, more than $300 million has been raised by innovative Central Coast companies from initial public offerings (IPOs) of their stock. Three area companies, MindBody (NASDAQ: MB), Appfolio (NASDAQ: APPF), and CytomX Therapeutics (NASDAQ: CTMX), raised a combined $250 million from public investors when each IPO’d on the NASDAQ.

Today each company is being valued at more than half a billion dollars by the public markets. Combined with the fact that startups in the 805 raised more than $200 million last year from private investors, and the Central Coast boasts nearly twice the per capita investment in innovation than the greater Los Angeles area.

Even though the larger L.A. region pumps an average of about $1 billion into startups in each financial quarter, our startups here know they are building something special in a special place. While some local entrepreneurs feel the pull to startup in either Silicon Valley or Hollywood, many fight hard to create significant businesses beyond the bright lights and big dollars of those regions.

Dozens of new, promising companies have been started in recent years, many coming directly out of UC Santa Barbara, whose New Venture Competition gave us Inogen (NASDAQ: INGN), TrackR, and Salty Girl Seafood and whose professors and research labs spawned AppScale, LastLine, and many others.

Call it the Greater Santa Barbara area, the California Central Coast or just the “805,” but this region continues to be a healthy place to start, launch, and grow remarkable biotech, medical, technology, and scientific startups. As a further sign of this ecosystem’s health, startups grown here often reach a sustained scale large enough to warrant being acquired by national or global industry leaders.

Of the acquisitions that have played a major part in the region’s growth story, by far the biggest exit was LinkedIn’s acquisition of Lynda.com for $1.5 billion. Late last fall, Santa Barbara’s Ansible Works was snapped up by RedHat for a cool $100 million. A trend it seems, as Hewlett-Packard reportedly paid the same amount in 2014 for Goleta’s Eucalyptus Systems.

Maybe it’s the fact that the waters of finance never flow quite as freely on the Central Coast, but companies started and built here, the ones that stay and persist despite less than ideal conditions, are companies that endure. While the fluctuations of the global economy or the U. S. financial markets may give you pause, know that there was never a better time than now to start or join a startup in the 805.

This Wednesday, March 16, at 5 p.m., the MIT Enterprise Forum Panel “Startup to IPO and Beyond” takes place at the Cabrillo Arts Pavilion in Santa Barbara. I will be moderating a discussion with Lise Buyer, IPO advisor from Class V Group; Ida Kane, CFO of AppFolio; Alison Bauerline, CFO of Inogen; and Jim Andelman, managing partner at Rincon Venture Partners. Learn how startups not only survive but thrive on the Central Coast of California. More at mitcentralcoast.org.

Matthew Stotts (twitter.com/tenorllc) is a lecturer in UCSB’s Technology Management Program and a strategic advisor to startups, investors, and innovative philanthropists.



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