It’s Personal: Tri-Valley Venture’s Co-Founder and Managing Partner Greg Hitchan

Jan 12, 2022

Episode Season 1 - Episode 5

Host Brandon Cardwell speaks with Pleasanton resident and Tri-Valley Ventures (TVV) co-founder and managing director, Greg Hitchan, about their fund’s investment thesis and what it means to build a vibrant startup community in their own back yard.

A lawyer and formal Naval Academy graduate, Greg has worked for private equity companies, including as COO of Blum Capital Partners, before he decided to focus on building the startup economy locally via investment. He currently manages Tri-Valley Ventures, an early-stage venture firm, providing capital as well as strategic and operating advice to startup ventures primarily in the Tri-Valley area of Northern California.

Deeply committed to our community, Greg also serves as a Board Member of Innovation Tri-Valley Leadership Group and participates as an advisor to Lawrence Livermore Labs Industrial Partnership Office.

Read the Episode Transcript
Brandon Cardwell  0:02
This is the Startup Tri-Valley podcast, featuring in depth conversations with the leaders who are making the Tri-Valley the go to ecosystem for science based startups. I’m your host, Brandon Cardwell, Executive Director of the i-Gate Innovation Hub and Daybreak Labs.

Welcome back to the Startup Tri-Valley podcast. I’m your host Brandon Cardwell. My guest today is Greg Hitchan, co-founder and managing partner at Tri-Valley Ventures the Tri-Valley’s first and only venture fund, Greg, thanks for coming on.

Greg Hitchan  0:27
Thanks. Great to be here. And great to do this after I’ve known you for so many years. Yeah, for larger, larger audience,

Brandon Cardwell  0:33
Yeah, fair warning. For listeners, this conversation feels a little inside baseball, it’s because we’ve probably had this conversation about 100 times over the last six or seven years. So I just want to start off just with some of your background. We’ve done a lot together already. And a lot of people who are likely to listen to this podcast, probably have interacted with you, just given your role in the startup community here. But let’s go back a little bit further and talk about how you came to be involved in the startup community here based on what you did before.

Greg Hitchan  1:02
Yeah, great. And part of that answer is why in the Tri-Valley as well. So, I grew up in Pittsburgh, Pennsylvania. Love that area, ended up going to the Naval Academy for undergrad, which was kind of my exposure to the world from a kid from Pittsburgh, Pennsylvania.  I was a Naval Intelligence Officer for about six years up and down the East Coast, got to travel in parts of the world as well. During that time, I met my wife, now, fiance, then, who grew up in Pleasanton, Julia Goodrich. You know her, she’s kind of a local figure on the news. But part of my agenda, I knew I wasn’t going to be a Naval Intelligence Officer for a career, I knew I wanted to get to the west coast, to be with her and pursue my business interest. So I left the military and came out here to go to law school on the peninsula. Got out of Stanford practice for about six years in a little under six years in a big New York law firm that did nothing but private equity, venture capital and hedge fund work. So to me as a practicing attorney, wanting to get on the business side was the perfect place. You worked hard, but you were inside on how funds were organized, how investments are made, what capital sources think about. So I parlayed that into a stint with – one of our clients was Blum Capital, which is a pretty iconic San Francisco based longtime private equity hedge fund venture fund, run by Dick Blum for about 40 years who happens to be married to Senator Feinstein. So as you might imagine, they live in, run in different circles in San Francisco, which was a great opportunity for me to become a partner, learn how to operate funds, raise funds, and most importantly, make investments. So I had about a 10 year stint there. Great experience. A great run. About eight years ago, there was an opportunity to leave Blum, as a lot of those firms evolve and people move on, I had the opportunity to to leave.  My children were in –  we have three kids – our children were in middle school and elementary school here. I fortunately was in a position where I didn’t have to commute to the city, or Palo Alto or the Peninsula anymore. A common theme among a lot of people, we run into with you, right. But I knew we wanted to continue to make investments. So I kind of dove into the local ecosystem or what existed then.  One of the big things was you and i-GATE and what that team of early visionaries were doing to create a startup ecosystem and resources for entrepreneurs. So I got involved with you guy,  got involved with the labs, still to this day, sit on there as one of the advisors on their industrial partnership office, which you know, all too well, is basically their group to try and commercialize these wonderful, wonderful early technologies from the lab. So in 2014, I’d made probably a half dozen angel investments in the area found really interesting companies really interesting teams knew there was something here, if you remember in 2014 i three of the companies we’re working with who’d come from your old warehouse on long yard road needed another place to work out of those guys plus another half dozen who needed some kind of facility so kind of dove in again, like like most business people do and took a pretty big building in Pleasanton that you guys helped with. We made it really just co-working space, no programmatic incubation piece or anything like that. And I think you know the reason for that as well, as the demographic here is pretty experienced, technical and executive leadership. They really didn’t need a 12 week course on basic business plan 101. So we ran that place for three years. And during those three years, almost 40 companies worked in their or out of their–anything from a one-person entrepreneur with an idea to companies that had received some funding or were planning on bigger rounds of funding. So it did two things for me. It confirmed that there was a great opportunity to be part of that ecosystem with a dedicated source of capital. And fortunately, I’d met Don, who you’ve talked to before Don Garman,  from Mirador, who’s the co-founder of Tri-Valley Ventures with me. I had met him, he was doing through Mirador a bunch of research on the Tri-Valley, from a public company down perspective, right, really getting into the weeds of the ecosystem, and why this area’s so ripe for innovation. It has this incredible demographic. I was doing it individually and through entities I own from the ground up. Early-stage companies investing in and helping them, we kind of met in the middle shared the idea that we’re going to be here for a long time, there’s a great demographic to invest in, and what we could do best to help that was raised a dedicated source of capital to fund them, particularly at the early stage. So in 2017, we raised the first Tri-Valley Venture Fund, which was about $10 million of really friends and family money, right? You know, most of the LPs in that a great group of executives, operators, and really talented already kind of knew the Tri-Valley story and knew there was something here, and we’re willing to put up some capital and participate in funding a cohort and tranche of early-stage companies. So we did that in 2017 invested that in 14 companies, a great good percentage of which have done really well as you know, so to be in their fifth, fifth year of a fun now, to already have had four liquidity events, I assume we’ll talk about some of those companies, but two of them public tomb acquired. And a lot of great potential in the portfolio, really kind of validated that there’s a really good opportunity to be a kind of a local, regional VC presence on early stage of companies, that’s led to what’s now a second fund, that it’s already made its fifth investment in a regional company. So we’re loving it. And we appreciate you guys and what the cities in the labs have done over the years to kind of foster that ecosystem in a whole bunch of ways. That even allowed a venture fund and a private capital source to participate and be part of that. So…

Brandon Cardwell  8:09
That was a great answer. You know, the, the arc is one that obviously your personal arc goes back prior to the TVV work and our relationship, but even just since 2013, when we met and started working together on things. It’s just been such an interesting time. And to be in this region, and to be working on and with the startup community here. And I think right around 2017 was this big inflection point, obviously. You took the work that you had done at Innovate Pleasanton and bringing together this group of founders. And really, I think, learning about and capitalizing on the demographic of this kind of experienced operator, which I still think is the greatest unfair advantage that we have as a region as the people like you. And many of the serial founders that you’ve invested in, who have been building companies from the ground up for a long time is Tim Harkness and the Jason Novi’s, these types of people. And they live here and they built companies often in other places in the Bay Area. So they’ll build them on the Peninsula or in Santa Clara, wherever. But it seems like right around that kind of 2015 to 2018 stretch was when you started to see people like you really focusing back on this place where they live. I don’t know exactly what the catalyst for that was. But the evidence of that is I think really present. So with when you went to raise the first fund, is that the community that you found, is interested in this it’s this sort of operator community who really understands what this opportunity is and their LPs but you know, potentially are part of that ecosystem and other ways beyond just providing care. Capital.

Greg Hitchan  10:00
Yeah, that that’s really what it was. And as we as we continue to develop the firm and do more and more investments, you recognize to your point that’s the key source of your real value add right fund capital at some level becomes fungible space space to Absolutely, absolutely. So to your point on the timing, as I look back on it now as well. Yeah, kind of right place right time, you know, the changes that were happening here in terms of additional business being registered, some kind of spin-off company from the, from the real presence companies right there, the old PeopleSoft group, the Workday group, the Veeva, the Ellie Mae, Blackhawk Networks, these public companies, really accomplished companies that we’re now creating this next generation of residents and entrepreneurs. And you also saw Mirador Capital and Don, and Lauren, and Jonathan, who do that annual report every year with a lot of kind of putting concrete data behind what you and I anecdotally know and have felt for years. I assume that data backs us up. But just in terms of the influx of people and talented people, right, the whole heart of this demographic was always incredible executive and technical talent, who are raising families here, in the old days used to work in the city or the peninsula, as things evolved, and you know, giving somebody back three to four hours of their day because they have a family and have to get to soccer and baseball practice. But they still don’t want to sacrifice professionally. That really was an impetus to do things around here. And the elements for that, beyond talent, which is the obvious one are kind of capital to help and space, which you guys and others have done a great job of trying to create those other parts of the ecosystem. So to your question. Our LPs are mostly executive in tech talent, regionally who, who were in companies we all know, who recognize that that stage of their career where they not only want to invest and grow the region, economically, and from a business perspective, but their incredible sources of expertise, right. And that is the key because we, we have not made an investment out of the 19 or 20 companies  we’ve committed to over the last couple of years, where we haven’t had a couple of our investors and friends who know that space. They’re domain experts in that space. So we go into an investment and evaluate investment with a handful of investors, friends, LPs, who are domain experts to facilitate and help us evaluate an idea, I think, in the aggregate and over time, that helps us make better decisions about the companies and the teams we get involved with early.

Brandon Cardwell  13:00
It also seems like and you see this now, within this sort of venture narrative, there’s this real push toward operators, right that the traditional VC fund is antiquated. And now it’s operators who are making these investments. And I don’t disagree with that. And what’s interesting is that, while Tri-Valley Ventures structurally, is a VC fund. It was you know, four-plus years ago that you were tapping the operator community to be a value add beyond simply capital, you just were doing it in a place based on a geographic way. But the ability to make connections between those people, and the startup community that’s already here, and this is what’s so interesting to me and why I was so happy to see you start the fund in the first place. And then in raising the second fund, is everybody I would talk to, and I conducted a ton of interviews when we were really struggling in the early days to try and figure out how to add value to this community. I went and talked to a bunch of successful founders who lived here but had companies and other places. And the common theme from all of them was this place should have all of the elements of Silicon Valley proper. It should be a great startup hub. There’s incredible talent here. The facilities are high quality, transportations, pretty good. The cost of living still is relatively lower than other places. It’s it’s not as affordable as it once was. But it’s so more affordable than than the Valley. And none of them could articulate. You know why that hadn’t happened yet. And I think there there had to be this catalyst, this coalescing force that really I think was the fund and Innovate Pleasanton. It was the kernel of that which I think let you foster this community and really pull people in to get that. That initial community established Mirador doing the work that they were doing at the same time and recognizing that and then being a vehicle for bringing all those people together to do that, and I said this, when I spoke to Don and Lauren on the podcast, i-GATE would not exist today without the angel investments that you made in our companies back in 2013, because it provided, while we had a facility that was a nucleation point for some of this talent that was here, we needed the validation of the outside investment community,  you individually at first, and then you know what was going on after that. So I think it was this sort of, there was all this matter swirling around, and it needed something to pull it together. And I think it was the fund that really helped to do that. And bring that operator community that were individually telling people like me, we should have all of these things here, we should have this startup community here, I don’t know why we don’t. Now they all got to talk to each other, and join together to help create this catalyst, which is not just the capital, which as you said, and we’ve talked about this at length, Tri-Valley companies have not historically struggled to raise venture capital, there’s been a lot of capital here. But when that capital is always coming from some other place, and those people aren’t necessarily invested in the founders, and the company’s growing here, and then holding on to the success of that investment in this area. So what TVV is doing to me, and this is sort of my expanded verbal thank you note to you, I guess, for the work that you’ve done to support this community over the years, I think that’s the inflection point that we’ve really now are coming through to the other side and and hopefully are going to be scaling through with fun, too. So I think it’s a super exciting time to be building a company here for sure. But even just to be a broader, you know, part of the ecosystem and seeing that work is going on. So it’s really it’s exciting,

Greg Hitchan  16:44
It is pretty cool to see what we talked about seven or eight years ago. And, you know, when you do that you want a fund that has a success like ours, and now is scaling, to your point. You look back and you remember those early days. And, you know, we’re fortunate to be in a position what we did was have good timing, and pulled a handful of really good people and some capital together. But it took advantage of what you guys that I gave what the cities have done for years, right, kind of thanklessly and without, you know, the prompters of economic success with just doing that day to day work of building the elements of an ecosystem, right, those networks, those facilities that that Don now calls the primordial soup, yeah, right, you knew all the elements were here.  A lot of people were thanklessly working on it for years. And to your point, you know, the thing we did right as a business and as a fund was recognize, the one piece we could do to maybe add a little fuel, or stir that soup, was was to be ready to raise a dedicated source of capital and particularly where we invest, right, though, we we know exactly where we fit in the broader scope of venture capital. And, you know, the amounts and sizes of funds that are being raised has just been inflated over the years and growing it kind of like a breakneck speed, we’ll see for how long. What we did right was recognize that we’re not those guys. Right? We’re not out raising, how much can we raise, and just throwing capital at companies, I think it’s because of the operator DNA, you mentioned. Don’s wealth management background where, you know, he always says I don’t know if he said it on the podcast. But the first rule in investing money for clients is, “Don’t lose it.” So you may mirror that with the venture opportunity early stage. And it kind of creates a philosophy where you’re not just chasing, you know, the next Airbnb or the next multi billion-dollar company, we still invest in companies that build something that are doing something that may not be a multi billion-dollar company, but they’re doing something really special and good than the exit, they’re employing people and the exits going to be economically successful for everybody involved. Right. So that kind of goes to know if we touched on this. But the verticals that are kind of reflective, we’re talking about the demographic here and the people, which is really the key. The first one was pretty opportunistic, right? We grabbed everybody we could from an operational perspective, who agreed that there was an opportunity here and we all kind of dove in. And I think over the last couple years you’ve seen while we still have a regional connection, which in our book, originally was, was there a headquarters here, is there some kind of nucleus. Over the years geography goes away pretty quickly to some extent, and it’s really some Nexus to the tribe. And the reason that’s important is, that’s our Our only differentiator from 1000 other funds out there, we have a local presence that I think founders appreciate, right? It’s connections, it’s networks, in addition to the capital we provide, that’s really key to what we do and why we’ll stay in this early stage, which you know, is takes a bunch of different semantic names, but all forms of investment that you typically go beyond the first friends and family money that a founder founding team can typically raise. And then before they get to a level where traditional venture capital and other sources will fund, you know, it’s post product, getting some revenue, we’re playing in that whole middle space. And I like to think  that we’re kind of bridge capital for those funds for those companies. Right, a little extra capital, it’s institutional in the sense that we’re a fund. And it comes with a whole bunch of business connections, business savvy operators, who will get involved and help teams figure it out, and then introductions to that next level of capital.

Brandon Cardwell  21:06
Yeah, one of the things I think is really interesting about a regionally specific fund, and that differentiator is that differentiator might not be obvious to people who don’t invest that way. To me, I’ve always looked at it like you and the founders, you invest in, sort of live together, in a sense, right? You share, you literally share the same communities, oftentimes, and so the ability to do due diligence, not only on the technical aspects of what someone’s doing, but on how they do business, on their character on, you know, past performance and what they’re like, you know, to work alongside, you get, I think, a closer look at that, which I think is really interesting, and maybe under-appreciated. value from being in the same community, with founders.

Greg Hitchan  21:57
And I think it’s a really good point. Fundamentally investing at this stage is investing in people, right, in addition to the, the technology in the market has,

Brandon Cardwell  22:06
It’s gonna change too much before it actually gets to market for exactly the investing in this product,

Greg Hitchan  22:11
The business plan, the financials you’re looking at at this stage, we all know are not going to work out the way projected. Yeah, that’s from experience and all us all having done it. So you’re really relying on that team, and betting that that team will be able to figure out the pivots that turns the unexpected market conditions, the delays in manufacturing, etc, etc. So it is really all about all about the people and your points a good one that, you know, we joke that this is this was personal to us, right? We weren’t investing, you know, cow capital from another state that you reported on once a quarter. These were our friends and people, our kids, friends, people we see in the grocery store every week, people we coach sports teams with. So when it’s personal like that, you make sure you do it well. I’ve always joked with Don, my co-founder, that if it didn’t work, we’d probably be moving away from the area. Because there’s no getting around it right?

Brandon Cardwell  23:13
You’ve got skin in the game in a totally different way. Yeah, people that you know, and your community,

Greg Hitchan  23:18
And you do get to know the founders, because we’re not, we’re not just showing up while the company’s raising capital, we get to know them personally over a long period of time. So for some of our investments, we’ve known the team and helped them with iterations of the business plan or the product for a couple years before they’re at the point where it even makes sense or becomes investable. So that is a real advantage of being local, right? We’re not rolling in for a weekend pitch event. Right? And doing kind of agnostic diligence on the space, we get to know the people necessarily, and I think it’s once again, one of those things that helps us over time make better decisions than your average investment group.

Brandon Cardwell  24:04
So maybe now’s a good time to talk about some of the companies specifically you’ve invested in and how those investments came to be and then what it’s sort of been like what I mean Unchained is one that I think about, AEye is one I think about you know, some of some of the… Cowbell is one that’s been really fun to watch. Just this incredible kind of rocket ship trajectory they’ve had So talk about some of the portfolio companies

Greg Hitchan  24:27
Yeah, so the high profile ones that you know about like Unchained Labs was really opportunistic through Tim [the founder] right. Yeah, having that personal relationship him helping us with fund one enabled an investment in that company that they weren’t talking to other venture groups. Those are inside kind of deals the the people who are already invested know what the company’s doing. To the extent they’re raising additional capital, they’re funding it. So those deals don’t get shot. So it becomes a personal relationships. We’re able to do that. You know it’s a great profile investment for the Life Science segment that exists here. Right so

Brandon Cardwell  25:09
Yeah it’s it’s a perfect archetype for that is deeply innovative technology but inside of a tool that has to be built,

Greg Hitchan  25:15
Yep. And there’s I think we have three or four life science companies in the first fun one portfolio which you know about like AEye and AEye I’ve gotten trained to instead of saying AI I say AEye , because people just naturally assume AEye means artificial intelligence. But you know, that company we found through you guys, early on, you were letting them use your space as they were just figuring it out was two people at that time. I got to know them as well and invested. They followed us to the space we helped introduce them to people and team members. One of the founders, you remember Jordan Greene?

Brandon Cardwell  26:01
Oh, God. Yeah. So I met Jordan when he was in college. The Kairos Society. Yeah, that’s right. Brook Van Muijen. So this is the inside baseball part, folks. I apologize. But Brook Van Muijen who is working for Deepak at Kalptree introduced me to Jordan and Jeremy Fiance and Jeremy’s now running The House Fund now. Yeah, exactly. Yeah.

Greg Hitchan  26:20
So Jordan, after he left college and was involved with a with a startup. I got to know him. I can’t remember how maybe through you guys are somehow but he ended up coming in helping us at the building, making make investments. He was smarter than all of us. Because very early in AEye’s life, they needed somebody like him. So he went full time as a founder of AEyeI early in its life. And, you know, the company’s had incredible success. And so it becomes a pretty small network. So that company is, you know, all too well, we help introduce them to their series a lead, they’ve gone on to raise successive rounds of capital. They do a LIDAR autonomous vehicle technology and associated software. They’re one of the four or five a month and a half ago or so they went public on the NASDAQ. So we got to go out and do the ceremony. And that was pretty fun

Brandon Cardwell  27:25
We talked to Don [Garman] a little bit about that. And he was on the pod. And so it’s really gratifying

Greg Hitchan  27:29
When you know, to see that success for people you knew every day, right? Luis and some of the the founders, Jordan. Barry Belkin, another founder, Just to see them through all those years of when you kind of know how the sausage is made, or

Brandon Cardwell  27:50
Every every near-death experience.

Greg Hitchan  27:52
Absolutely, which every company goes through and becomes part of your fiber to see that be such a local success. And when we expect and hope with the pathway just starting right for, for what that company can do in the future. So great to be associated great to invest in a company like that great to be associated with them. And, you know, those, there’s a handful of those guys that are investors in fund to their operating partners, we see deal flow from those companies now. So it becomes a very kind of a flywheel network effect from the companies we invest in our LPs who are who are operators and domain experts. you couple that with a with an organized fund making investments in short, short point is there’s no shortage of opportunities for us, regionally as a fund our size so//

Brandon Cardwell  28:47
And that said, in a fund, too, you’re not going out and going from a $10 million fund to $100 million fund. Right. So how do you think about how do you think about maintaining a level of excellence within a fund when you’ve had I mean, you said for liquidity events in the first round for liquidity events in four years for a $10 million fund is a pretty good track record feels like you probably could raise about as much capital as you want on that right now. So how are you thinking about that?

Greg Hitchan  29:18
Yeah, it’s good with the inflation in funds and how big funds have gotten [Brandon- so frothy].  Yeah, it is. And it was always important to Don and me and the other partners involved that, instead of raising assets, we’re fortunate to be in a stage of our career where we don’t have to chase assets for fees. And in a lot of the criticism that funds get for just raising enormous amounts of capital. We’re fortunate to be in a position where we’re letting the opportunity set as we define it, which is Tri-Valley companies or companies with a nexus here. Let that opportunity set and define the amount of capital we raised. So you’re right, we could raise a different amount of capital. Now, during fund one’s life, as we looked at the opportunity set, we have a pretty good network and informational advantage, I think of what’s here what’s coming, who’s here going to do something over the next couple of years to make an assessment of what our investment opportunities will look like, over the next couple years. We also have two great analysts, Jonathan Ting, and Bryce Sonsteng, who’s a newer analyst, that literally grind away and look at every business filing done in the cities, regardless of what they’re related to will filter through those. So through that, through the work Mirador does, in our own network, we’ve done some really detailed analysis of what the deal what we think the deals will be over the next couple years, what size they’ll be, and how, what’s the right amount of capital for us investing in the stage we invest with some ability to do follow ons in the ones that work well. And kind of 30 million is a good ballpark number for this state. We’ll we’ll deploy that given the pipeline pretty quickly over the next two years and most given what we see in the pipeline, and then we’ll be considering what makes sense for the next stage, they’re always with the always with the goal, let the opportunity set and drive the amount of capital, not the other way around.

Brandon Cardwell  31:27
Yeah. So do you take any kind of specific sector or vertical approach to the fund? Or is it is it still not the opportunity set sort of drive that

Greg Hitchan  31:42
It’s both. But the opportunity set is as it evolves, kind of gravitates to the couple sectors that really make up the the demographic and areas we have experienced. So those are software, right software as a service, enterprise software companies, that’s a broad swath, but half of our investments are in software-related companies. That’s reflective of the area. Yeah, another big chunk are  life science companies, right? Once again, what this demographic with this opportunity set looks like. Then the third category is related to kind of the lab post PhD and the educated, talented entrepreneurs around here, we call we call deep-tech, right? You know, that means different things to different people. In my mind, it means somebody who’s still building something, right kind of deep science, early R&D, things that have a potential commercialization path. So those three verticals are really what make up our opportunity set. And there used to be one, you remember this from a couple years ago, called artificial intelligence. And now that applies to every company. So in my mind, that’s just an overlay to every company, regardless of sector. Collecting data is an enabler. Right?

Brandon Cardwell  33:02
Yeah, I mean, I think that’s one of interesting things about that is that it’s sort of like software eating the world. It’s like, so many companies are using machine learning or AI everyone to find that to just improve well…

Greg Hitchan  33:16
Even even hardware come traditionally defined hardware companies we, we know, invest in, they all have software, and they all collect data around it. So…

Brandon Cardwell  33:27
One of the most challenging things  because of the size of its role for a lot of the life science companies is to fill our data scientists and software engineers, because a lot of data scientists and software engineers don’t think about life science, especially life science tools and device companies as being places where they want to go and have upward trajectory, but it’s a huge part of what they do, especially within diagnostics, where you’re, you’re running software to be able to detect what is actually in the sample and not in the sample. And if you have a workflow that is attached to that, so yeah, it’s all it’s all baked in now. Yeah.

Greg Hitchan  34:01
So so it’s part you probably remember a couple years ago, you would look at a bunch of early pitches or startup decks with us and remember the days when, regardless of what the company was doing, it was kind of in vogue to put in one slide in the deck that was AI machine learning slide regardless of how.

Brandon Cardwell  34:20
For them that switch to blockchain it’s like we’re doing x y&z on the blockchain, and we are whatever is trendy, right? Yeah. Maybe actually a good a good indicator of what to avoid? It is. Yeah, I mean, so obviously, I run Daybreak Labs and we’re in the process of establishing this new facility that’s really going to be exclusively focused on life sciences and deep tech companies. And such a huge part of that. Why we’re moving away from the kind of office space provision near really is informed by a lot of conversations we’ve had over the years and then COVID illuminated this us This for us that when a lot of our office space users couldn’t come to the office anymore, because COVID shut all nonessential industries down. It wasn’t that impactful for them or for us. And so that sort of fungibility of where do I work, if I’m primarily working in code or sales, or you know, something that isn’t very specific. It’s like, okay, maybe we don’t need to be focused on this. And where we really can help is going back to our roots, you know, where we first started interacting, which was at that time, it was like a big warehouse. So it wasn’t particularly sophisticated, but giving people a place to do things that they really can’t do in their garage, or in a friend’s conference room, either they can’t, or they can’t. Yeah, you and I both know enough people that that’s not always the same. So for us, and we’re going from, you know, likely from a 16,000 square foot facility down to something more like 5000 to 6000 square feet, but hyperfocused on biological research facilities and instrumentation, R&D facilities, because we want to create more AEyes and Unchained Labs and as S2 Genomics, and folks like that, so yeah, that’s something that I definitely see where obviously, Software-as-a-Service is a huge part of the economy and has been, you know, really, I guess, since the PeopleSoft you know, era. And so you have the kind of PeopleSoft exit that led to a big ramp-up in SaaS companies here, and the demographic fits that pretty well, right. SaaS is here to be, it’s highly execution driven. And now I think in the sort of post-QuantaLife, the Tri-Valley startup ecosystem in kind of 2011. And after, when QuantaLife founders went on to found 10X Genomics and HealthTell and Purigen and all these other companies. I think we’re seeing a similar kind of ramp-up. And I’m curious to see, you know, what does a post-AEye economy look like in terms of deep tech expertise, filtering out through the rest of the economy?

Greg Hitchan  37:09
Yeah, that’ll be interesting in will have a front-row seat, yeah, obviously, to see and be helped cultivate the spinoff related technologies that are vertical or industry-driven, which you can ever replace, in my opinion, is kind of the anchor tenant companies, they create the nucleus for that, right? It’s people, it’s facilities, it’s that primordial soup again, that if you can organize it, if you’re in that flow, and know the information, not only to help companies and help the area, but it’s really compelling investment returns, when you can do that, which is, which is what we’re doing. And we’re thrilled that he knows this, but I don’t know if the audience does. We’re excited to be that kind of sponsoring fund with Daybreak Labs, right?

Brandon Cardwell  38:01
Yeah, we haven’t, we haven’t talked about it at length yet. This is good time as any with you on the pod. So you know, for our listeners, we’re opening this life science and deep tech incubation facility, which is really focused on founders who are at that same stage that you were talking about, which is I’ve got a technical insight that I think can become a valuable product and a profitable company. And we are providing not the bridge capital, but the bridge facilities, and you are able to provide the bridge capital to help those companies come in and do the R&D that they need and get the data that they need to demonstrate that it’s actually going to work and through the partnership that we have with our our city partners and our lab partners, we’re able to provide that space at no cost for these companies. So as soon as we get our new facility buttoned up, we’re gonna open up an application portal, and companies will be able to apply for capital from Tri-Valley Ventures and facility investment from Daybreak Labs for up to a year to be able to go from this technical insight through to the point where they can actually raise that first round of more institutional capital that they need. So I’m incredibly excited and, and thankful for the partnership that we’ve been able to build with your team, you know, seven years in now on this relationship that we have, and I think we’re gonna be able to create some really incredible companies out of this with the founder community that’s here.

Greg Hitchan  39:26
We’re looking forward to you, you know, this over the years as well. But in addition to capital networks, what those kind of companies need is access to equipment facility where they you know, or hooded space that they can, they can work and create something and the other the other valuable thing beyond that, I think is, in my experience, founders and entrepreneurs like like, like to be around other founders and entrepreneurs, even even in a COVID world, right? There’s no substitution. For being in person, the what, you know, water cooler effect, the any cliche you want to use is I always valued that. I think companies, particularly engineering, deep tech life science companies like to be around others. And you I think what part of you you’ll build, hopefully with our help is a is an ecosystem like that where they leverage off each other, use each other’s networks, equipment.

Brandon Cardwell  40:30
Service providers and all kinds of stuff. Some of it is really basic, right? It’s like, I need to do X today. And when somebody else did X yesterday, than doing X today becomes a lot easier. And from a facility standpoint, I think the one kind of facility space that is still valuable to figure out how to provide in a shared way is that incredibly expensive lab space, because if you and we we kind of came into this by accident again, back in 2017. It was really when we started the TriValley Bio initiative, started holding NextTech Speaker Series events, which you’ve been a part of, just to try to connect with this life science professional community that was here. And we saw that there were some interesting companies that we’re we’re coming up and getting started and having some success. And we really wanted to see how big is this ecosystem of talent? Who are the kind of pre-entrepreneurs who might benefit from connecting with some of the successful founders here, the Tim Harknesses, and Serge Saxinov’s of the world? And that really helped us to validate that like, yeah, we need to, we need a facility that serves these people. And the catalyst for us was actually an acquaintance of mine who was running the the QB3 incubator at UCSF, was sending me Tri-Valley residents who were coming to him in Mission Bay, and looking for space, it’s like,” No, you should go talk to this incubator that’s thinking about setting up this life science space.” It’s a pretty,

Greg Hitchan  41:54
Pretty good indicator.

Brandon Cardwell  41:56
But put some space. Yeah, if you’re wanting to drive from Pleasanton to the Mission Bay to start a company, that’s the kind of dedication we’re looking for. And so we ended up doing some rent trades with folks who were like, I gotta buy $15,000 worth of equipment, and I don’t have a place to put it. And so we ended up acquiring some equipment that way. And it was just it was their response was pretty remarkable, because you just can’t do BSL2 level, you know, biological R&D safely in, you know, some random spot, you definitely can’t do it at Starbucks, and you shouldn’t do it in your garage. So yeah, that’s that’s one things we realized was, and I don’t yet know how large that market is going to be for us on the incubation side, because there’s a lot of folks in this region who will skip the incubation step entirely. No, go straight to work, the leasing space, though, they do all that. And that’s great if they can do that do that. But we definitely see people in this area are saying, I think this is gonna work. But I’ve got an SBIR grant for $150,000, I need to make that go as far as it can. So I can get data for a face to SBIR to go raise some seed capital, I got a friends and family round to solve this problem together, and I need to keep my burn low. And that’s something that we can help them do. So and then, you know, being in partnership with those companies through TVV and your extended operator network. And, you know, that might be the source of their first board advisor, their first hire their new CEO, as they move to a CTO position, we’ve seen that quite a bit of the companies. So I think it’s our partnership is the next evolution of what we’re seeing in this ecosystem of people discovering each other and ways to collaborate. And just the the density of those high-value connections seems to be increasing every year and COVID really didn’t slow that down at all. Which

Greg Hitchan  43:47
I would argue I would argue COVID accelerated a little bit, right? When you were we have one, one chart, I don’t know if you’ve seen in our in our information, showing during COVID. You know, everyone heard the big exodus from California, people go into Texas and other states. Well, we have one data slide that shows people who weren’t leaving the state. They were going to the suburbs, yeah, Alameda and Contra Costa County. So COVID did a couple things that I think accelerated that made people realize, wait, I shouldn’t be spending three to four hours in a day commuting. I don’t need to. And for me, it also it also made you appreciate the value of existing relationships. Yeah. And the network, right? Because you weren’t really going out over the last year and a half and making new and we’re going to conferences and the traditional network building. But if you had a relationship already, it really exaggerated the power of that. So we’re seeing that on a local level.

Brandon Cardwell  44:52
That’s really interesting. I hadn’t thought about that. But yeah, there was a galvanizing function. On this –  existing networks that you had because it was hard to be thinking about expanding that landscape. And then I think I’ve talked about this before on the pod that the shocking rise in home values in the Tri-Valley over the last year, I mean, 30% year over year increase in home values, which, you know, creates challenges and different dimensions. But I think it’s, it’s, at minimum, a lagging indicator of an increase in the talent concentration in this area. These are people who are moving in from other parts of the Bay Area, because you’re not moving from Peoria into the Tri-Valley and outbidding somebody who already lives here, you know, $200,000, over asking,  that’s somebody coming from a home sale in a different part of the Bay and saying, okay, I can get more house for my money. And I’m only going to the office two days a week anyway, now I can be out here. And I think the challenge that we collectively have now, and having the fund and what we’re doing with Daybreak, I think is gonna make this easier is to say, okay, you’re still working over there. But now you’re living over here. How do we take all of your skills and your ambition and your networks and focus them even a little bit on what’s going on right here in this region and broaden that community of operators, who now is living here and connect them to opportunities to flex that muscle locally?

Greg Hitchan  46:23
Yeah, that’s a great point. We certainly see that trend. And the other element that, you know, we’re seeing with the success of our portfolio companies, is think of how many people they’re hiring. Yep. Living here, drawing, drawing from even outside the area, depending on, you know, the issues you have to deal with on an economic level with the city’s housing traffic. Yeah. Those kinds of things. So all those schools. Yeah, so we’re certainly seeing, you know, even more accelerator on that, that regional activity, because not only coming from the outside to your point, but now it’s being generated. internally. Yeah. AEye will have hundreds of employees. Monarch Tractor, yeah, who know well, we’ll have hundreds of employees, right in Livermore. So that I hope that doesn’t become an issue you guys at the cities have to have to deal with our hope, I hope it’s a good problem to have. It’s…

Brandon Cardwell  47:22
It’s a great problem to have. And, and I think my economic development compatriots and the other cities see at the same way, and I think most of the elected officials see it the same way, which is, these are the problems you pray for, right. So if you are a place that is so desirable, that it’s now hard to find a place to live there. Well, we need to figure out how to make more places to live in ways that aren’t tremendously disruptive to the communities as they are now.  In Livermore, that’s one of the things that I’ve been working on with the Isabel neighborhood is let’s build a dense urban neighborhood and a part of town that doesn’t, doesn’t disrupt a lot of the surrounding neighborhood. And then maybe we can stave off, you know, single-family zone neighborhoods from having to up zone for a couple of years. So we got to be thoughtful and strategic about how we do it. But I wouldn’t trade it. I mean, that, you know, the idea of the other problem, which is people are leaving your community and there aren’t enough jobs and all of that, I mean, prosperity, the kind of prosperity you get from rapid growth in these kinds of, you know, tech sectors, trade-in sectors, comes with management costs. But I think, through other organizations that are working regionally and the Tri-Valley cities are incredibly collaborative, and well-governed and sane, which is just an enormous advantage in ways that I never thought,

Greg Hitchan  48:51
Probably something we living here and having to deal with a we might even take for granted, totally did given given how other areas operate, right? It’s just part of the fiber and culture here. And we all hopefully do it almost as second nature.

Brandon Cardwell  49:06
I think there’s also there’s an underlying, there is an underpinning current of pragmatism that runs through both the public sector and the private sector here. I mean, we’ve talked about this forever, like one of the one of the big advantages we have is experienced founders, building rational businesses, right? And when you have, when you have adults, running companies and adults running cities, then you can do really great things. And so I think we need to continue that collaborative spirit from a community standpoint and work on work the problem instead of either pointing fingers or you know, wishing it wasn’t, so we’re trying to stop growth or doing all those kinds of things. We make

Greg Hitchan  49:47
You make a good point, it’s a problem, but it’s a problem at a different level. And you kind of have a different set of options when you have resources. Absolutely. As opposed to the flip side of that coin.

Brandon Cardwell  49:58
Yeah, it’s much harder to be in the…

Greg Hitchan  50:00
Well I look at, you know, anxious or what you’re planning in Isabel because we look at that from an regional ecosystem perspective as it’s great that cities are planning and for a younger generation of workers, that next generation of workers who hopefully a lot of our portfolio companies will employ, I’m anxious to see what Alex Mehran at Bishop Ranch is doing with the developments, right? Real mixed-use, you probably know details more than me, but we have seven or eight companies at Bishop Ranch. And we hope and expect who they’re going to be hiring over the next five to 10 years and it’s exactly that people who need a place like that they don’t want a big residential home. No, they want eventually they may eventually but but they need those transition levels of housing which you know, in the old days around here were pretty hard to get

Brandon Cardwell  50:56
Very hard to get and, and that kind of mixed-use multifamily product wasn’t close by anything anybody wanted to be next to either. And so as the Bishop Ranch project with City Center right there, Dublin’s been doing this for years and years right building this kind of higher density. They just approved the bridge housing affordable project too, they’re showing a lot of leadership on the on the subsidized housing front. Pleasanton has had a lot of denser housing product type pop up within the Hacienda Business Park, which is putting people in proximity to jobs. So they’re good and bad ways to do anything, right. And then you got to plan for growth in ways that you keep the buy-in from your community. But the fact that we have these companies who are saying to us, we need to be able to hire employees of different ages who have different needs, in terms of housing, this is all about choice, right? And that’s for me, like, I love markets, because markets provide choice. And that’s true within the home market as well. And so if our communities can provide different types of housing for different types of people, and all of those folks can come and work at the companies that you’re investing in, and that we’re incubating. And we can all figure out how to, you know, live together in a community that’s growing and prospering while not losing its values. That’s the best case scenario.

Greg Hitchan  52:11
You’re you’re you’re painting a dream scenario, that a lot of areas in the country would probably hope to hope to copy. Yeah. Right, in terms of the nature of the business driving economic opportunity for people who wouldn’t necessarily live there on their own. Right, right, you see that with the companies, we’re funding I know, a lot of groups you deal with on the incubation side, it’s bringing in a demographic that needs to be in this area that should be in this area, right farther east. That’s just all so healthy, when you think longer term of what this place is going to look like. And you know, where we all do it in a selfish way, in the sense that we all want this to be a place where our kids come back there, right? You have kids, we have kids in college, and I hope 5-10 years from now, I may have just answered your next question. Are you good that this is a place where our kids look at it as enough of a vibrant economic ecosystem and lifestyle choice where they make the choice to come back and live and work here? that would that would be my dream? Yeah. Because I know we’re staying here for a long time. And if our kids can be in the same area, then I’m happy. My wife and I are pretty happy.

Brandon Cardwell  53:33
So you just answered the challenge and opportunity question looking 10 years out? Yeah, that that opportunity is, is I think there for us if we can continue to work collaboratively. I mean, even outside of just the sort of economic influence that we try to have in this area, but you know, making sure that there, there are places and opportunities for those kids. And the challenge. You know, I think I see this too is how do we keep parochial interests at bay? Right? One of the things for me, sort of answering my own question is, how do we make sure that the people who live in this community take pride in the fact that we have all of this economic growth and prosperity and don’t see it as a cost that they have to pay by virtue of something changing in a way that they’re not? They’re not comfortable with? Right, next, I think we want them to look at a 10X Genomics and Unchained Labs, a Veeva systems, an AEye and say, “See that masthead up there” and say, “my company was part of creating this economic success. And I’ve got two friends who work at that company and my sister-in-law works at that company. And maybe my kid who’s come back and just graduate from college is doing an internship at that company” and that helps to bring those those elements together, that the economy and the community are hand in glove, not in contention with each other.

Greg Hitchan  54:59
It seems you you deal with it on a different level than than we have to. But from our perspective, it feels like people do that and appreciate it now, at least at our level, yeah, right to you made the point earlier the cities get along. There’s not doesn’t seem territorial to us. They’re in the companies and AEye  was in Livermore, Pleasanton, then Dublin. Yeah, right? So those lines don’t matter to us, I hope, like you say that they don’t matter in people who make decisions about that stuff. And we’ve always commented, you know, Mayor Marchand, we always joked witht him and the other mayor’s early on how they didn’t look at just Livermore or their city, they really did look at it as a region. And they’d go anywhere and talk about anything and didn’t care if a company came within their city.

Brandon Cardwell  55:50
They go back together, and yeah, being as a group, John, yeah, Marchand, the former mayor Livermore, used to say to me, and I take great inspiration from this, when we talk about, okay, you’re the largest funder as the City of Livermore in the incubator, and you got a company that leaves and goes over to Pleasanton, because they got BART, talent access, and all that. And he would say to me, I’d rather a Livermore resident have access to a good job in Pleasanton than a good job in Palo Alto, which is just an amazing perspective for a local Mayor to have. I mean, that kind of leadership is not rare.

Greg Hitchan  56:20
But you have a perspective in areas outside of here to probably evaluate how rare it is go back to the point that I hope people around here don’t take that for granted because it is one of the one of the real facilitators of what we all do there. Right. Without that we’d be in a cocoon to some level and, you know, working with individual cities, we have the fortune of being able to think regionally and not within those kind of parochial guidelines. So..

Brandon Cardwell  56:52
Now that positive-sum mentality compared to the zero-sum political environment that you see all over the place is just something that is a huge advantage. And one that’s not to be taken lightly. For sure.

Greg Hitchan  57:03
I think with with people like you involved in the others, we know on the on the governmental side, it doesn’t feel like that’s changing anytime soon. So do your thing on on, opportunities going forward to the extent more people get involved in that appreciate and operate that way, and hopefully so as a fund as well as our portfolio companies. It just paints a brighter and brighter future for this area, in my mind.

Brandon Cardwell  57:31
There’s no better place to leave the conversation than right there. Greg Hitchan, thank you for coming on the Startup Tri-Valley podcast.

Greg Hitchan  57:37
My pleasure. I look forward to doing it again.

Brandon Cardwell  57:42
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