In a recent Sacramento Business Journal article titled “Money flows into Sacramento growth companies at record pace,” Mark Anderson wrote that in the past four quarters, $1.6 billion in venture capital and private equity investments has been made in companies in the Sacramento area, more than the total previous four years combined. The wave of investment money flowing into the region could have major implications in the future as local companies mature further and then have significant capital to grow and employ more people.
Ben Harrison, president of financial services at Intapp Inc., offered the following insight in the article:
“For the past 30 years, private equity investments have outpaced the performance of public equities equivalents nearly every year, and that is including some surging years in stock markets. Private companies are also a more target-rich environment, as the number of private companies with more than 500 employees has grown by 60% over three decades, while the number of public companies has declined by about 36% in the same period.”
Harrison also noted that private equity investing is “pretty red hot out there now” and dealmakers are out hunting for companies to invest into, and it’s not just companies in New York or San Francisco. He added that the middle market, investments in the size range of roughly of $20 million to $500 million, “is white hot.”
Private equity investment is also generally better suited to grow smaller companies than capital from selling stock to the public, Harrison said. Private equity tends to be more patient capital that comes in to support a business’s growth, he said. That contrasts with when companies go public, which puts them under pressure to beat quarterly earnings projections.
Click here to read the full article in the Sacramento Business Journal.
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