Two tri-county technology firms garnered $58.5 million in venture capital in recent weeks, deepening the region’s reputation as a hidden gem for growth-capital investors seeking proven entrepreneurs.

Transphorm, the Goleta-based company focused on energy efficiency in electronics, has raised $35 million from a group backed by the Japanese government, bringing its total investment raised to date to $104 million. It has also secured a mass-manufacturing alliance with a Japanese firm. The founding team there built Nitres, an LED firm, and sold it to Cree, which maintains a facility in Goleta to this day.

Thousand Oaks-based wireless firm Xirrus has raised an additional $23.5 million in venture capital, bringing its total funding to an estimated $122 million. The founding team behind Xirrus formerly founded Xircom, took it public and built it to 2,000 employees before it was sold to Intel.

Both companies say that the money will be used to hire new workers and scale up their technologies. Though not all of the new jobs will be created within the Tri-Counties, California Lutheran University economist Bill Waktins said that the success of venture-backed firms such as Transphorm and Xirrus, with seasoned founding teams, solidifies the region’s place on the map for investors from Silicon Valley, the East Coast and even abroad.

“Venture capital doesn’t like to go where they have to travel a long way. You’re sort of building an infrastructure for it, and having an infrastructure locally is probably the biggest impact,” Watkins said.

Here’s a closer look at each deal.

Transphorm

Transphorm was founded by UC Santa Barbara professor Umesh Mishra and longtime business partner Primit Parikh. The company previously raised money from funds connected to Google and George Soros.

The new financing is a Series E round led by Innovation Network Corp. of Japan and Nihon Inter Electronics Co. Innovation Network is public-private group composed of 27 private Japanese companies and the Japanese government that has up to $25 billion at its disposal to invest. As part of the investment, Transphorm is forming a business alliance with Nihon to potentially mass produce Transphorm’s products.

In an email interview from Japan, where the company was announcing the investment news, Parikh said that Transphorm is now meeting its demand with production from Goleta. The deal with Nihon broadens the firm’s distribution channels in Asia and provides a potential second source for production, which most big customers require in the volatile world of electronics manufacturing.

“We just got to over 100 people in Goleta,” Parikh said in an email. “It has been very productive doing our business from Goleta, with our regional talent pool as well as the proximity to UC Santa Barbara and UCSB’s associated resources.”

Transphorm makes gallium-nitride-based power electronics. In electronic devices such as Internet servers, power must be converted from its raw state on the grid to a more useable form. A great deal of the electricity is wasted as heat during the conversion process, but Transphorm’s products can cut that heat waste by up to 90 percent, the company says. The technology is brand new and untested at scale, and Parikh said the backing of the consortium of the Japanese government and industry heavyweights brings more than just money.

“I think the key thing is that [Innovation Network Corp. of Japan] investing brings Transphorm and [gallium nitride] solutions a significant credibility in Japan and Asia. INCJ has a premier reputation for backing innovation and strong companies,” Parikh said in an email.

The newest funding round for Transphorm also includes participation from existing venture investors Kleiner Perkins Caufield & Byers, Foundation Capital, Google Ventures, Lux Capital, Bright Capital and Quantum Strategic Partners, a private investment fund managed by Soros Fund Management.

The New York Times recently ran a lengthy investigative series detailing the massive energy use — and waste — in data centers at the Internet’s largest companies. While some of the most egregious practices in the series are obsolete, there’s little question that energy efficiency in the technology sector is coming to the public spotlight. “Transphorm is right in the middle of it and we hope to add a very meaningful contribution in addressing the energy requirements of data centers, for example by enabling more efficient power supplies,” Parikh said in an email.

Xirrus
Xirrus makes heavy duty Wi-Fi systems designed to replace wired networks in places like office buildings and college campuses. The lastest funding round was led by existing investors August Capital, Canaan Partners, InterWest Partners, QuestMark Partners and US Venture Partners.

CEO Shane Buckley, who recently joined the firm from Netgear’s commercial productions division, said the funding will be put to use by expanding in Europe, Asia and Australia.

“We’ve achieved great results in the United States — we’re in over 2,000 school districts,” Buckley told the Business Times. “Now we need to expand outside the U.S.”
The company recently opened an office in Germany. “It’s certainly the largest market in Europe, and one could argue also the fastest growing,” Buckley said.

Buckley said that several factors in Europe help boost Xirrus’ product. First, historic buildings can be torn up to run cable, so wireless Internet is ideal. Second, higher densities in Europe and Asia mean that Xirrus’ ability to support more users per square foot of coverage is a big selling point. “One of the things we find all the time is that more mature societies have higher occupancy densities,” Buckley said. “Some of the existing technologies just don’t work.”

The economies of both Europe and Asia face headwinds. But with millions of mobile devices that connect wirelessly sold each day, Buckley said the time is right to invest in expansion.

“Remember, these are multi-billion-dollar markets, and there’s always an opportunity to disrupt those markets. The value proposition of Xirrus is countercyclical,” Buckley said. “The devices are being bought in huge quantities, and they have to connect to something.”