Entrepreneurial Sacramento Valley

Regional Economic Impacts and Implications

Sacramento Valley Entrepreneurship Project

Completed most comprehensive documentation of the region’s base of entrepreneurial firms ever done

Interviewed region’s entrepreneurs, assessed national entrepreneurship research and experience, and collected data on the region’s “habitat” or environment for entrepreneurship

Worked with local public and private leaders and organizations to explore how best to promote entrepreneurship in the region

Targeting entrepreneurship in the Sacramento Valley

Habitat

Potential

Firms

People

About one in five workers is self-employed, higher than the nation

10%

12%

14%

16%

18%

20%

22%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

California

Sacramento Valley

US

Non-Farm proprietorships as a share of total full and part time employment, US, California and the Greater Sacramento Valley Region, 1990 - 2002

Source: US Bureau of Economic Analysis

Self-employment is growing faster than wage and salary employment

0.8

0.9

1

1.1

1.2

1.3

1.4

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Wage and salary employment

Non-farm self-employment

Indexed regional farm and non-farm self-employment compared with total wage and salary jobs in the Sacramento Valley Region, 1990 - 2002

Source: US Bureau of Economic Analysis

Firm creation and closure responsible for most “churn” in regional economy

139,181 firms created (1989-2002)

109,589 firms closed (1989-2002)

11,406 firms relocated or expanded into region (1989-2002)

6,448 firms moved out of the region (1989-2002)

15,526 firms moved within the Sacramento Valley from 1989-2002

All counties have experienced net growth in firms

Almost half of Valley companies operating in 2002 were created in just the last five years

Share of firms that were started before 1990

31%

Share of firms started between 1990 and 1996

22%

Share of firms started between 1997 and 2002

47%

Most new jobs are from new firms

New Jobs from new firms68%

New jobs from firm relocations/expansions into

region22%

New jobs from existing firms10%

Distribution of Job Creation Within the Sacramento Valley, 1989-2002

Jobs created by new firms comparable to those of existing and relocating firms

$-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

Operations of Outside Firms that Relocated or Expanded into the Valley Firms that Started in the Sacramento Valley

Firms that existed in the Sacramento Valley pre-1989 Headquarters that moved into the Sacramento Valley since 1990

NUMBER OF INDUSTRY SECTORS ACCOUNTING FOR 50% OF JOBS

Firms Employment Revenues

1989 127 sectors 125 sectors 120 sectors

2002 162 sectors 154 sectors 131 sectors

% Change1989-2002

+27.6% +23.2% +9.2%

Entrepreneurship has helped regional economy diversify

The potential for entrepreneurship in the Sacramento Valley

Population growth, mostly through in-migration, has expanded the talent pool and could continue to fuel entrepreneurship in the Sacramento Valley

Increases in educational attainment and household income could portend growing entrepreneurship in the future

The region has grown its entrepreneurial diversity over time, with top performers constantly changing

The region is successfully participating in venture capital and other, nationally competitive funding

Sacramento Valley’s population has grown steadily

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 20026.7%

6.75%

6.8%

6.85%

6.9%

6.95%

7%

7.05%

7.1%

7.15%

7.2%

Sacramento Valley

Sacramento Valley as a share of CA

Sacramento Valley Regional Population and as a share of California’s population, 1990-2002

Source: U.S. Census Bureau

Sacramento Valley Population

Share of California’s population

Most recent population growth is mostly from in-migration

19,486 19,955 18,327 16,921 16,651 15,162 13,839 13,628 13,049 13,648 14,538 15,163

49,314

21,095

14,523

3,6797,499 11,388

19,76115,222

44,201

54,352 51,21243,687

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Natural Increase Net MigrationNatural population increase and net migration to the Sacramento Valley Region 1991 - 2002

Source: State of California, Department of Finance, CaliforniaCounty Population Estimates and Components of Change, July

68,800

41,050

32,850

20,60024,150

26,550

33,600

28,850

57,250

68,00065,750

58,850

Growing numbers of more highly educated residents

90377

158662

322753 324941

115444

184765

8568495,642

151,761

344,265

402,812

128,438

241,425

120,847

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

Less than 9th Grade

9th to 12th no diploma

HS graduate

Some college: no degree

Associate Degree

Bachelors Degree

Graduate orprofessional degree

1990 2000Population > 25 years by educational attainment level in 1990 and 2000 in the Sacramento Valley

Source: US Census Bureau

Growing proportion of households at the highest income levels

Annual Income Level(% of households)

1990 2000

$75,000 or more 9% 24%

$40,000 - $74,999 27% 31%

Less than $40,000 64% 45%

Top performing industry sectors keep changing thanks to entrepreneurship

A comparison of the top fifty industry sectors (i.e., those at the 8-digit SIC level with the most total firms) in 1989 and 2002 shows that:

34% of the leading sectors in 1989 had been displaced by 2002

Shifting venture capital investments suggest areas of future potential

1995

Business Products and Services

11% Computers and Peripherals

4%

Media and Entertainment

11%

Software26%

Telecommunications48%

Venture capital investments in Sacramento Valley companies by industry, 1995.

Source: PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association: MoneyTree Survey

2003

Biotechnology14%

Healthcare Services1%

IT Services14%

Medical Devices and Equipment

43%

Semiconductors18%

Software4%

Telecommunications2%

Financial Services4%

Venture capital investments in Sacramento Valleycompanies by industry, 2003

Source: PricewaterhouseCoopers, Thomson VentureEconomics and the National Venture Capital Association: MoneyTree Survey

Region’s venture capital investment has grown substantially

$47.25

$21.31$18.27

$77.31

$120.64

$335.72

$152.58

$111.12$93.47

$0

$50

$100

$150

$200

$250

$300

$350

$400

1995 1996 1997 1998 1999 2000 2001 2002 2003

Venture Capital Investment

Annual venture capital investment to Sacramento Valley companies, 1995 - 2003 in millions of real dollars

Source: PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association: MoneyTree Survey

(In

$ M

illio

ns)

Federal research funding has alsogrown substantially

$182.54

$308.85

$-

$50

$100

$150

$200

$250

$300

$350

1993 2002

Total Federal R&D dollars

Federal R&D dollars allocated to the Sacramento Valley, 1993 and 2002, in millions of real dollars

Source: RAND

$ M

illio

ns

UC-Davis patent production rising

8.9%

11.0%

9.8%9.1%

7.5%

10.6% 10.3%

14.3%

0

20

40

60

80

100

120

140

FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 20030.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Patents filed

Patents issued

Davis share of system patents filed

Number of patents filed by UC Davis compared to the number of patents issued, FY 1996 - FY 2003

Source: University of California Technology Transfer Program

Despite track record of business creation and indications of future potential, few firms

achieve sustained, high growth

(Companies with at least 250k in annual revenue, that grew by at least 10% for four consecutive years)

Source: NETS Database

0

20

40

60

80

100

120

140

160

180

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

The Entrepreneurial Sacramento Valley

FROM TO

Individual entrepreneur success stories Identity as an Entrepreneurial Valley

Top contributor to economic development Top priority in economic development

Producing innovations with commercial potential

Rapidly converting innovations into companies

Patchwork of entrepreneurship programs System of entrepreneurial support

Local leaders helping local entrepreneursRegional stewards of innovation and entrepreneurship