Tri-county tech scene taking off
The tri-county tech scene is buzzing at a rate unseen since the dot-com boom of the late 1990s and early 2000s.
Invoca, the Santa Barbara-based telephone marketing automation firm, has joined the ranks of companies in the Tri-Counties on the path to an IPO.
Invoca’s announcement June 25 capped a whirlwind spring for tri-county tech companies.
LinkedIn bought Carpinteria-based Lynda.com in April for $1.4 billion, Kythera Biopharmaceuticals, based in Westlake Village, is being bought by Allergan for $2.1 billion and, on June 19, San Luis Obispo-based MindBody started trading on the Nasdaq. At press time, Goleta-based Appfolio was slated to start trading on Nasdaq on June 26.
On top of all that, Goleta-based Transphorm, an early stage semi-conductor company focused on creating ways to convert electricity more efficiently, received a $70 million investment this week. Global investment firm KKR led the funding round.
Invoca also hired Mark Woodward to replace Invoca founder Jason Spievak as CEO.
The company plans to target 2017 for the first public listing of its shares.
Spievak will stay at the company as the executive vice president and chairman and run the company’s strategic and businesses development initiatives.
“At our current growth rate, I want a partner to help Invoca maximize growth and to provide experience building for massive scale,” Spivak said in a news release.
“When I met Mark, I knew we had found the right leader for this next chapter of our rapid growth and global expansion.”
Woodward came to Invoca after he led E2Open, which provides cloud-based software to help companies manage their trading networks, through its IPO.
Silicon beach moment
The Highway 101 corridor has long been thought of as an emerging tech hub. The nickname Silicon Beach has been used to describe the area’s tech potential since the dot-com era.
“Although not as well-known as Silicon Valley or Irvine, our region has always attracted entrepreneurs due to our climate, way of life, and our colleges and universities,” said Chris Chirgwin, CEO of Goleta- based IT support company Lanspeed. He said the excitement in the area reminds him of the buzz surrounding the area during the dot-com boom.
“UCSB and Cal Poly, in particular, have spawned numerous successful technology companies, which in turn have attracted investors and capital into the region,” he said.
Mike Manchak, president of the San Luis Obispo Economic Vitality Corp., said several Silicon Valley companies are looking at opening offices in SLO.
Manchak believes the Tri-Counties are becoming more of a destination as people increasingly want to find a balance between the quality of life and business.
“I think people are tiring of some of the large metros where high property prices and traffic is out of hand,” Manchak said.
On June 12, the region got a boost on national television when Electronic Arts founder Trip Hawkins said in an interview on Bloomberg West that the Santa Barbara area has a lot of promise.
“I’ve been in Silicon Valley a long time, and I see in Santa Barbara a lot of what I saw in Silicon Valley when I first got here,” he said.
Room for improvement
A new wave of tech companies were already making waves when Invoca announced its plan to go public in 2017. They include MindBody’s IPO on June 19, and Appfolio’s expected IPO on June 26.
MindBody connects users and small gyms with each other. MindBody sold 7.2 million shares on June 19, and raised
But MindBody’s life as a public company started out rough. After CEO Rick Stollmeyer rang the opening bell at the Nasdaq, shares of its stock dropped 17.4 percent from $14 to $11.56 per share. The shares regained some of the lost ground as the stock market bounced back on June 22 and 23.
At press time, Goleta-based Appfolio, a cloud-based property management software company, was expected to start trading on the Nasdaq on Friday.
Appfolio was expected to sell 6.2 million shares priced between $12 and $14, raising between $71.4 million and
Analysts gave mixed reviews as to the long term prospects for both IPOs.
Investment research firm Zacks said that MindBody has to fix a long history of unprofitability for the stock to be viable.
If it does, Zacks offers some hope, at least for MindBody.
“If the company can fix its profitability issues and tap into the substantial growth of its industry over the next few years, this company’s stock will definitely be one to watch for investors,” Zacks said.
Don Dion of Florida-based DRD Investments said investors should use caution when they consider investing in Appfolio because of its short operating history and history of losing money.
“We suggest caution, given lack of profitability and relatively small syndicate, APPF could be overshadowed by the other offerings this week,” Dion said in a comment posted on the website Seeking Alpha.
Unlike their predecessors, though, which burst with the dot-com bubble, these new companies may be here to stay.
One element in their favor is that despite losses they have a history of rapidly rising revenue, making them potentially far more profitable than the dot-com era disasters where revenue was more of a dream than reality.
“They’ve grown in a more realistic fashion, and they’re not just riding a lot of hype, which you saw during the dot-com days,” Chirgwin said.
“There’s more maturity, more stability and we’ve learned from experiences in the past that make them more suitable for success.”