News & Events > Feature Article

By Jeff March

Ten Sacramento-area companies engaged in the fields of electronic communication, data storage and biotechnology have emerged as the hottest investment prospects in an exclusive poll of financial experts conducted by Prosper. The 10 companies constitute an honor roll of Baby Blue Chips: start-ups and emerging businesses currently in their infancy, which have potential to grow and mature into highly valued publicly traded companies.

The Baby Blue Chips were identified and ranked through nominations by 10 of the Sacramento region's most prominent venture capitalists and investment advisers. The field was open to public, as well as private, companies, those in their formative pre-revenue “quiet” stages, and companies that are already established and experiencing healthy growth.

After weighing competitive position, marketing strategies, proprietary technologies, vulnerabilities and management-team composition, the financial observers we consulted collectively identified 40 companies within the Sacramento region. Repeat mentions separated the 10 that emerged, which are presented in alphabetical order.  

AgraQuest Inc.
AgraQuest is a venture-financed biotechnology company that develops natural pest-management products for the agricultural, institutional and home markets. The company, which is preparing to go public, entered the consumer market with Serenade Garden, the first organic-certified pest and plant disease-control product on Wal-Mart shelves. AgraQuest also sells Rhapsody Biofungicide and Biotune Adjuvant to commercial agricultural and ornamental growers and Serenade Garden disease control to home gardeners.

Comment: “Its business model and the way it goes about producing pesticides is intriguing.” — Corley Phillips

CustomerLink Systems Inc.
CustomerLink, a venture-financed Roseville company, offers customer-retention and loyalty services for the automotive service and repair industry. CustomerLink's customer relationship management (CRM) system automatically sends reminders to customers of automotive service and repair at service intervals and generates coupons, promotions, surveys and thank-you letters to vehicle owners.

Comment: “CustomerLink is growing at a rapid rate and it has some very large customers. It's helping clients communicate with half a million customers a month.” — Roger Akers

Digitalpath Networks
Digitalpath Networks delivers wireless broadband services at economical prices in more than 15 Northern California markets through its patented technology. The company markets services directly to consumers and small businesses, as well as to Internet service providers. Funded by venture capital and “angel” investors, Digitalpath intends to build a national network through licensing.

Comment: “Digitalpath has a business model that makes economic sense — broadband speeds for dial-up prices through a combination of innovative technology and very clever network topology and architecture.” — Scott Lenet

KeyEye Communications
KeyEye Communications, based in Sacramento, designs and produces integrated “EchoWave” circuits that for the first time enable internal corporate copper-wire Ethernet networks to achieve data-transfer speeds that rival those of fiber-optic cabling. “Fiber is an expensive technology that was invented for long distance, so it's misfit for applications within corporate data centers,” says Harvey Scull, KeyEye’s chief executive. He cites a 10-to-1 cost-saving differential that companies can achieve by displacing fiber-optics with EchoWave technology.

Comment: The $15 million in Series B funding that KeyEye recently secured, led by a buy-in from prestigious Bay Area financier Menlo Ventures, is “a significant round for a Sacramento company. We think KeyEye is very worthy of interest.” — Steve Nilan

Lipomics Technologies Inc.
Lipomics Technologies Inc. is a privately owned, venture-funded company that specializes in analyzing potential food and drug responses by studying the body’s fatty acids, called lipids. The company's proprietary algorithms for mapping biochemical pathways can help pharmaceutical companies accelerate the drug discovery and approval processes. Lipomics specializes in assessing lipid metabolism associated with cardiovascular disease, obesity and diabetes.

Comment: “Lipomics has a good group of investors and is doing very interesting work. The company’s technologies have a broad range of applicability and value in streamlining the pharmaceutical R&D process.” — Andrew B. Hargadon

Meridian Project Systems
Meridian Project Systems (MPS) develops project management, budgeting and scheduling software for the real estate, construction and facility-management industries. Headquartered in Folsom, the venture-financed firm is generating earnings.

Comment: “(Chief Executive Officer) Jim Olsen has done a good job of developing the company and building channels in a good growth market. The company is very good at execution.” — Roger Akers

Serious Magic Inc.
Serious Magic Inc. produces video-production software that lets users create studio-quality video presentations with desktop computers. The company has two product lines: ULTRA, a video-production software application designed for video producers and broadcasters, and Visual Communicator, a self-contained presentation package that can produce video sequences for Web sites, DVDs and Microsoft PowerPoint presentations.

Comment: “Serious Magic is well-funded and in revenue-production mode.” — Roger Akers

Sierra Logic Inc.
Sierra Logic is a Roseville semiconductor company that develops and produces high-performance chips for manufacturers of data-storage gear. Formed by four former Agilent Technologies executives, this pre-IPO company is targeting a niche market — vendors of modestly priced storage systems — and helping them achieve performance equitable with far more expensive storage systems.

Comment: “Sierra Logic has a very competent and experienced management team. I expect them to be acquired or go public within the next two years.” — Gillian Parrillo

ThermoGenesis Corp.
(Nasdaq: KOOL) ThermoGenesis designs and manufactures compact robotic devices and sterile single-use disposable components that its customers use in production of stem cells for bone-marrow transplants. Also, surgeons can use blood-derived proteins to glue tissues or arrest bleeding. The company has pioneered development of systems enabling production and storage of therapeutic blood components.

Comment: “ThermoGenesis is not a one-trick pony; it offers multiple products in its area. I think it's executing very well in its market.” — Roger Akers

Varatouch Technology Inc.
Varatouch Technology is a privately held, venture-backed company in El Dorado Hills that has patented “resistive-rubber” (R2, or R-squared) software drivers. Varatouch produces variable controls that eliminate traditional mechanical parts and have applications in telecommunications, computers, toys and electronic games. Comment: “Bob Pepper (former CEO of Level One and KeyEye chairman) is on the Varatouch board of directors, and that's pretty significant. Varatouch is a restart company, but it has a track record and now that it's getting new breath of life, I like it.” — Jim Kitchel