Business Startups Venture

A Road Trip Through The Low-Buzz Funding Hotbeds Of The East Bay

San Francisco, Palo Alto and San Jose are probably the best known Northern California cities for startups. But those aren’t the only places in the region where companies are springing up and raising gobs of venture capital.

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Well-funded startups are scaling up all across the nine-county region known as the San Francisco Bay Area. That includes many cities and towns not commonly considered tech havens.

We’re not talking about a couple of small early stage rounds either. The region’s startup funding machine is so vast that towns non-locals have never heard of boast venture investment tallies larger than most U.S. states.

In an effort to track funding growth in some of these other Bay Area towns, Crunchbase News is highlighting stats for four cities in the East Bay: Berkeley, Emeryville, Hayward and Fremont. We’ll focus on Oakland in a separate story publishing shortly. Join us on the road trip.

Berkeley

First stop is Berkeley, a city of 120,000 famed for its prestigious university, liberal politics, and inventive cuisine.

While best known as a university town, Berkeley is pretty good at churning out funded startups too. Over the past three years, companies based in this sunny locale have brought in $880 million across at least 257 known rounds. That’s more than much larger cities like Miami and Phoenix.

So far this year, the startup machine continues to chug along, with just over $280 million invested across nearly 70 funding rounds. The deal mix is an eclectic one, spanning food, data security, and healthcare, among other sectors.

Berkeley is particularly strong as a hub for food-related businesses. Three of the 10 largest 2019 deals have ties to the space: Bellwether Coffee, a maker of smart electric coffee roasters, Perfect Day, a maker of animal-free dairy proteins identical to cow’s milk proteins, and Wild Earth, a maker of high-protein, meat-free dog food.

The city has its share of heavily funded startups too. Standouts include, Rigetti Computing, a quantum computing play, d.light, a maker of solar lighting and power products, and 3D Robotics,  a drone company that’s seen its share of troubles.

Resources for seed-stage abound too, and the city’s proximity to the even deeper capital pools of San Francisco and Silicon Valley don’t seem to hurt.

Emeryville

Next stop is Emeryville, a city of 2 square miles just across the Bay Bridge from San Francisco. Most locals know it as a good place to get stuck on twelve lanes of highway or go to Ikea.

Startups and mature companies alike seem to like this little concrete-covered patch of a town. It’s the headquarters of Pixar Animation Studios, along with Peet’s Coffee and Clif Bar.

Emeryville has its share of high valuation venture-backed companies too. Several that have raised over $200 million in venture and growth financing are based there, including Zymergen, a custom microbe developer, Tanium, an enterprise security provider, and Bolt Threads, a developer of high performance fabrics.

Across all stages, the funding totals are quite high. Over the past three years, at least 48 private, Emervyille-based companies pulled in $1.53 billion in venture through growth financing, per Crunchbase data. In dollar totals, it’s actually ahead of major cities like Dallas and Portland, Oregon, per Crunchbase data.

Yet while Emeryville still maintains a busy startup scene, funding has slowed down some in 2019, with seven companies raising a combined total of $163 million so far this year. While that’s still a big number for a little city of 12,000, it indicates funding may have passed its peak.

Hayward

If you spend countless hours staring at venture funding data, occasionally something really surprising pops up. Hayward is such a thing.

Over the course of decades spent to some extent covering the Silicon Valley startup scene, I have never heard anyone say: “Hey, check out Hayward. It’s a real hotbed of startup activity.” In fact, I’ve never heard anyone in startup circles say much of anything about Hayward, a city of about 150,000 inhabitants located just north of Fremont.

Yet if you look at the venture funding numbers, Hayward is really cleaning up. Over the past three years, companies in the city raised a total of $2.07 billion in seed, venture and growth funding, across 40 rounds. In dollar terms, that’s bigger than the entire state of Oregon and nearly double the state of Tennessee.

In many respects, these numbers look like a fluke. So far in 2019, Hayward-headquartered companies have pulled in just $142 million across six known rounds. Nearly 40 percent of the three-year total, meanwhile, comes from a single, $790 million Series C round for Farasis Energy, a lithium ion battery maker. While that’s technically a venture round, Farasis was founded in 2002, so it’s not really a startup.

Still, flukiness aside, Hayward’s venture scene is a lot more happening than its lack of buzz would suggest. It’s a sizeable hub for biotech, home to Intarcia Therapeutics, a heavily funded developer of therapies for chronic diseases, Arcus Biosciences, a cancer immunotherapy company that went public last year, and RefleXion Medical, which develops radiation therapy technology. For 2019, meanwhile, the biggest funding recipient is Kinestral Technologies, a maker of smart-tinting glass.

Part of the reason Hayward has less buzz than its numbers would support may be that it’s not a hub for consumer-facing apps. Also, high-valuation companies based in the city aren’t overnight unicorns — they’ve grown a bit more slowly.

Fremont

For our next stop, we’re driving south to Fremont, a sprawling city of 235,000 known for being reasonably commutable to virtually all the major Bay Area tech employers.

Yet while Fremont is best known as a place to commute from rather than commute to, it has an extensive tech and startup scene of its own. Its largest private employers – Tesla, Lam Research, and Western Digital – are a pretty techie bunch. Quite a few up-and-coming tech players are setting up shop in Fremont as well.

Over the past three years, Fremont-headquartered companies have raised a total of $1.33 billion in seed, venture and growth financing. That’s about on par with Houston and Philadelphia.

So far this year, Fremont funding volumes appear to be holding steady, with $360 million across 16 known rounds. Large funding recipients include Royole, a maker of flexible displays, THINK Surgical, a developer of computer-assisted surgery technology, and Pony.ai, a self-driving car startup with headquarters in both Fremont and China.

Key assets for Fremont includes its size and its centrality. The city boasts the second-largest land area of any municipality in the Bay Area, providing plenty of space for startups to bloom.

The Significance Of Capital Moving A Few Miles East

So why are we tracking East Bay funding, and why might it matter?

For the broader San Francisco Bay Area economy, it may not matter that much if a company sets up shop in the center of Silicon Valley or 15 miles east in a city like Hayward. But for the region to sustain its status as the leading global startup hub, such decisions are significant.

One takeaway is that Northern California is more flexible than critics might contend in providing room for both startups and established tech companies to grow. In this respect, maybe corporations aren’t too different from people. When we’re priced out of one neighborhood, chances are the next place we look will be one nearby.

Photo by Xan Griffin via Unsplash.

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