These South Bay and Peninsula cities are raking in venture capital

Though the region known as Silicon Valley covers dozens of municipalities, a few cities get outsized attention in tech circles. Everyone knows Palo Alto, Mountain View, San Jose and San Francisco as hotbeds for startup innovation.

But theyre not the only ones.

Less-talked-about cities in the region are also raking in funding, beating out major cities in other states for total venture investment.

A few days ago, we looked atcities in the East Bayof the San Francisco Bay area with a high concentration of funded startups. Today, we turn our attention to the Peninsula and South Bay regions, looking for whos attracting well-funded startups. Here are some of the cities that topped our list.

South San Francisco

This city of 60,000 is well-known as the last place you drive through when going from San Francisco to the airport. Coming back, its also hard to miss the famousSouth San Francisco hillside signthat reads South San Francisco, The Industrial City. The motto is outdated, though, as South San Francisco, a city founded by the meatpacking industry in the 1880s, has since transformed into a biotech powerhouse.

The transformation began in 1976, whenGenentechopened there, and it has been on a roll ever since. More than 40 South San Francisco biotech and healthcare companies have raised funding in the past five years, and at least 12 brought in $40 million or more in their last rounds.

The biggest funding recipient, cancer therapy developerStemcentrx, also delivered one of the largest biotech exits ever last year when pharma giantAbbVie agreed to buy it for $5.8 billion up front and up to $4 billion in milestone payments. Other heavily funded biotechs includeNGM Biopharmaceuticals, a developer of drugs to treat cardio-metabolic and liver diseases, andFreenome, a developer of non-invasive cancer-screening tools.

In total, South San Francisco companies have raised more than $1.1 billion in venture funding over the past three years. Thats more than the entire state of Connecticut and about eight times as much as Rhode Island.

Sunnyvale

While Sunnyvale is known as the home of Yahoo, its real estate market is sometimes viewed as more dependent on nearby Apple than the former internet darling. Million-dollar homes with fewer rooms than your first apartment could be the motto of this quiet burb.

But aside from high housing costs, Sunnyvale boasts a sophisticated startup ecosystem that pulled in more than $1.4 billion over the past three years. That means this city of 140,000 has raised more than the entire state of Arizona and more than double the VC funding for the state of Oregon over the same period.

Sunnyvales startup scene isnt dominated by any one sector. There are heavily funded companies in security, hardware, biotech and even autonomous vehicles.Illumio, a cybersecurity provider, raised the most capital of any local startup over the past three years, followed byQuanergy, a developer of LiDAR sensors and software for 3D mapping.

The city has plenty of startups that have grown into multi-billion-dollar companies, too. A few of those sold to acquirers in recent years, including security provider Blue Coat Systems, which Symantec bought last year for $4.65 billion, and network infrastructure providerAruba Networks, whichsold to HPtwo years ago for $3 billion.

And, of course, theres Yahoo.

Milpitas

Milpitas fought a battle for independence 56 years ago, and it won. It faced annexation by a land-hungry neighbor, the city of San Jose, and a group known as the Milpitas Minutemen came together to fight for the towns independence.

Since then, Milpitas has evolved in a sprawling, tech-infused town dotted with office parks and newish housing developments. Its likely thanks to the Minutemen that Milpitas, and not San Jose, can now claim itself headquarters ofSanDiskandLSI Logic, two companies swallowed up in some of the biggest semiconductor acquisitions of recent years. Thanks to them, Milpitas can also call itself home to startups that have raised more than $650 million over the past three years.

A city of nearly 80,000, Milpitas drew more VC funding over that period than Indianapolis (population 850,000). A single company,View, is responsible for over half of the total funding haul, having raised $400 million in the past two years to commercialize a line of dynamic glass that automatically changes tint. Next biggest isBeamreach(formerly Solexel), a developer of solar panels that raised more than $200 million in venture funding before filing for bankruptcy earlier this year.

The rest of Milpitas venture-funded companies represent a wide variety of sectors, including biotech, VR and enterprise software. The mix is somewhat reminiscent of its larger neighbor, San Jose. But make no mistake; this isnt San Jose.

Santa Clara

Santa Clara, home of Intel, Applied Materials, the new San Francisco 49ers stadium and a lot of expensive houses, is a major hub for venture-backed startups. Companies in this city of 120,000 have raised more than $1.4 billion over the past three years.

The central pillar of the startup ecosystem here is enterprise technology. Think security, cloud storage, software-defined networking and deeply geeky, complicated technologies that benefit from a talent pool filled by Cisco, Intel and others. The biggest recipients of funding in the last couple of years includeCloudMinds, a developer of distributed computing technology for AI-enabled robots, andCohesity, developer of a hyper-converged platform for storing backup data.

Despite its heft as a technology powerhouse, however, Santa Clara doesnt get a lot of specific recognition as a tech hub. Its generally lumped in the greater sprawl known as Silicon Valley. A contributing factor may be that the other cities it borders, which include Sunnyvale, Milpitas and San Jose, are no slouches in tech, either.

Where have all the orchards gone

The technology prowess of all these Peninsula and South Bay cities is all the more impressive when one considers what a short time theyve had to grow. Prior to World War II, the area was best known as a center for fruit harvesting and canning. Today, the most valuable company here may bear the name of a fruit, but it focuses on (much) higher margin products.

Illustration:Li-Anne Dias

Read more: https://techcrunch.com/2017/07/08/these-south-bay-and-peninsula-cities-are-raking-in-venture-capital/