ECONOMIC DEVELOPMENT AND REVITALIZATION
STANDING COMMITTEE MEETING
February 10, 2026
3:30-5:00 PM
City Hall – Conference Room 1
130 Cremona Drive, Suite B
Goleta, California
Councilmember Luz Reyes-Martín
Councilmember James Kyriaco
Jaime Valdez, Assistant City Manager
Shannon Kirn, Assistant to the City Manager
Blake Markum, Management Analyst
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AGENDA
I. Public Comment (5 Minutes)
II. 2026 Old Town Events (20 Minutes)
III. Equity Investment Fund Update (30 Minutes)
IV. Other Economic Development Updates (10 Minutes)
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MEMORANDUM
DATE: February 10, 2026
TO: Economic Development & Revitalization Standing Committee FROM: Robert Nisbet, City Manager
CONTACT: Shannon Kirn, Assistant to the City Manager
Blake Markum, Management Analyst
SUBJECT: February 10, 2026, Economic Development & Revitalization Standing Committee Meeting
ITEM I. Public Comment (5 Minutes)
ITEM II. 2026 Old Town Events (20 Minutes)
RECOMMENDATION
Provide feedback on 2026 Meet Me in Old Town and UCSB Arts & Lectures events in Old Town.
BACKGROUND
The 2023-2028 Economic Development Strategic Plan (Plan) includes an imperative to “Enhance the experience of Goleta for both residents and visitors by leveraging Old Town’s unique historical and cultural identity and investing in district placemaking.” Since June 2024, the City has partnered with the Santa Barbara South Coast Chamber of Commerce (Chamber) to put on “Meet me in Old Town” (MMIOT) block party style events in Old Town. The events draw residents to Old Town, contributing to the City’s placemaking efforts.
In 2025, the City funded three Chamber-planned MMIOT events which took place on May 8, June 5, and July 10, 2025. The 2025 MMIOT series took place on the lawn in front of the Goleta Community Center, and included live music, lawn games, and tables featuring Old Town businesses.
Attendance at the 2025 events was lower than in 2024. This may be attributed to several reasons, including the change in location, conflicts with other events, and increased community fear and uncertainty related to Immigration and Customs Enforcement (ICE) operations in Goleta and other nearby cities. Two ICE raids occurred in Carpinteria and Camarillo on the
same day as the final 2025 Meet Me in Old Town event, July 10, 2025. These actions caused fear in the community, particularly in Old Town where residents may have chosen to avoid large events like MMIOT seeing them as potential targets for ICE operations.
At the October 14, 2025, Economic Development & Revitalization Standing Committee (Committee) meeting, the Committee designated $45,000 towards Old Town events including a re-envisioned 2026 Meet Me in Old Town summer event(s), and other community events such as a collaboration between the City and UCSB Arts & Lectures (A&L).
DISCUSSION
For 2026 MMIOT, the Chamber has proposed three consecutive Wednesday evenings on June 17, June 24, and July 1 at the Community West Bank parking lot at Hollister and Pine Avenue.
Given the public safety concerns related to the ongoing ICE activity, staff recommend rethinking the format of the series. These events remain important for celebrating Old Town, supporting local businesses, and provide residents with a venue to enjoy the place where they live.
However, staff wish to remain mindful of the safety of residents attending the event as well as other events already going in the community such as the drone show. As such, staff recommend limiting the number of outdoor MMIOT events to only one or two and adding additional free indoor events in collaboration with A&L or another community partner at the Goleta Community Center later in summer 2026.
Staff explored adding Old Town to the ¡Viva el Arte de Santa Bárbara! (Viva) series but learned the 2026 scheduled is already set. However, staff will be working with A&L to include Old Town in the 2027 schedule, which will be finalized in May 2026. A&L has contracts with event venues to put on the Viva program and staff anticipate the contracted amount would cover staff time and facility rentals associated with any Viva programming. Staff are also continuing conversations with A&L to add other events later in 2026.
Staff will continue collaborating with the Chamber to refine the scope and theme of the 2026 Meet Me in Old Town events, keeping in mind the considerations related to staff capacity, public safety, and with an eye on capitalizing on regional economic opportunities such as FIFA World Cup 2026™ taking place in June 2026. Staff welcomes the Committee’s feedback on the location, themes, number and cadence of MMIOT for this year.
ITEM III. Equity Investment Fund Update (30 Minutes)
RECOMMENDATION
Receive a report on proposed governance structures, fund models, and funding levels for a publicly backed equity investment fund and provide any additional input to staff.
BACKGROUND
The Plan includes an imperative to amplify the reputation of Goleta as a world-class center of innovation and technology. The Plan identifies several strategies for accomplishing this imperative including studying and launching a publicly backed equity investment fund. The fund would fill the gap left by the lack of angel, seed, and venture capital for local startups.
At the October 14, 2025, Committee meeting, staff presented preliminary information about the fund’s purpose, potential fund governance structures, and key challenges. The Committee directed staff to further analyze creating this type of fund. Staff reached out to other cities that have experience in creating investment funds, and Sunstone Cities, LLC. (Sunstone), a strategic economic development partner, provided a memo outlining near-term actions for the City to take. The memo is provided as Attachment 1.
The purpose of this report is to provide information on proposed governance and fund structures and outline next steps for creating a publicly backed equity investment fund.
DISCUSSION
Fund Governance Structure
Based on staff’s assessment, the risks associated with direct City-led investment preclude it from being a viable option for the City to pursue. Direct investment by cities, counties, and other local agencies is heavily regulated by Government Code Section 53600 et. seq. These regulations strictly outline the responsibilities of local agencies when investing, reinvesting, or managing public funds, and would inhibit the City’s ability to choose investments in line with the Plan’s intent.
An independent third party-run fund (whether nonprofit-managed or based on a limited partnership agreement) allows for greater flexibility in investment options. Under an independent third-party structure, the City would set the investment policy and provide funds which would be invested by a third party according to the investment policy. The City’s role would be defined by a partnership agreement with the other participant or participants.
Model Fund Options
As described in Attachment 1, the memorandum from Sunstone, there are three different fund models for the City to consider. All funds may be implemented through an independent third party-run structure.
1. Community Development Venture or “Evergreen” Fund
A community development venture fund or “evergreen” fund is a type of investment aimed at high-growth startups or small businesses. As envisioned, the City would be involved in the initial creation of the fund. The City would provide either all or the bulk of the funds, which would be invested in a business in exchange for an equity stake.
Returns from the investment would be recycled into the fund for future reinvestment.
The fund would have built-in divestment timelines based on a set return on investment.
The evergreen fund model is particularly well-suited for investments in early-stage or growth-stage companies, where it works as an incubator or accelerator fund, respectively. It is also well-suited to technology firms – fitting into the Plan’s stated purpose of amplifying Goleta’s status as a world-class center of innovation and technology.
2. Revenue-Based or “Quasi-Equity” Fund
The second fund option is a revenue-based or “quasi-equity” fund. Under this model, the fund would provide capital to a business in exchange for repayment based on a percentage of revenue rather than dividends from an equity stake. This model is wellsuited for supporting retail businesses which are not designed for venture-scale growth but instead focus on revenue.
This fund model would be best deployed in assisting small businesses. As Sunstone’s memo contemplates, a quasi-equity fund could be used to align with the goal of supporting BIPOC and women-owned enterprises. The Plan includes establishing a micro-enterprise loan fund to close capital gaps for small businesses. This fund model could be used to support this strategy.
3. Fund-of-Funds or Sidecar Co-Investment Pool
The final fund model put forward by Sunstone is a fund-of-funds or sidecar coinvestment pool. Under this model, the City would not seek to create its own standalone fund. Instead, the City would participate in an existing fund (such as a regional innovation fund or other investment vehicle) as a co-investor, allowing the City to leverage the fund’s investment infrastructure and administrative capacity. This would reduce the cost of operating the fund and build upon the fund's existing relationships.
Functionally, this option could operate the same as an evergreen model. The key difference would be the City’s level of commitment to establishing the fund and providing the lion's share of the capital.
Preliminary Financial Feasibility and Fiscal Risk Analysis The City’s Finance Director has prepared a preliminary financial feasibility and fiscal risk analysis for a Publicly Backed Equity Investment Fund, which is included as Attachment 2. The analysis focused on minimum funding thresholds, portfolio diversification, governance feasibility, legal and fiduciary constraints, and fiscal and reputational risk. Key findings include:
1. A publicly backed, partner-managed equity investment model is not viable at small funding levels. Scenarios involving total platform capitalization below approximately $2.0 million (including $500,000 and $1.0 million scenarios) were found to be infeasible due to excessive concentration risk, inability to absorb normal investment losses, and disproportionate administrative and compliance cost burden
2. Total platform capitalization in the range of approximately $2.0 to $2.5 million was identified as the minimum viable threshold, with $2.5 million representing the preferred minimum, at which a publicly backed, partner-managed investment model can reasonably function with adequate diversification, loss tolerance, and governance capacity.
Recommended Governance Structure and Fund Model
Staff recommend further evaluation of a sidecar co-investment pool model managed by an independent, third-party governance under City Council (Council) adopted investment policy to limit City’s involvement in investment decisions. This model will support the Plan’s stated purpose of filling the funding gap for technology startups, thus amplifying Goleta’s reputation in the technology sector.
The sidecar co-investment pool offers a lower barrier to entry by leveraging an already existing fund’s infrastructure. With this model as a participant, the City would need to clearly set the goals and vision for the investments upfront to avoid any unintended outcomes. This model allows the City to achieve the Plan's goals while minimizing fiscal, administrative, and reputational risks.
As an alternative, the Committee could direct staff to further evaluate the evergreen fund. The standalone evergreen fund model offers the City the greater flexibility in defining the scope and mission of the fund and reinvestment objectives of the program, while still relying on independent management. However, it would necessitate much greater investment compared to the sidecar co-investment pool in terms of funding and administrative involvement, as it will have to be built from the ground up.
Next Steps
Under the sidecar co-investment pool model, staff will begin to pursue the following steps over the next six (6) to 18 months, depending on staff workload and Committee input:
1. Evaluate the use of targeted consultant support, as needed, to assist with implementation phase tasks such as partner outreach and governance documentation, in order to manage staff workload and supplement technical expertise. Any consultant support would be advisory and operate under City staff direction.
2. Conduct a targeted implementation and partner due diligence analysis, building off the preliminary financial feasibility analysis, evaluate appropriate internal and external funding sources and develop a comprehensive funding plan, in coordination with the Finance Department.
3. Draft the Investment Policy Statement (IPS) (if proceeding with equity model), in coordination with the Finance Department and City Attorney’s Office for Committee review and eventual Council adoption. The IPS will establish the parameters, including the “Goleta-Based” eligibility criteria, establishing fiduciary guardrails and conflict-ofinterest protections, and defining the “evergreen” reinvestment mechanics to support long-term fund sustainability.
4. Coordinate with potential local partners, including identifying qualified General Partners capable of managing the fund under a limited partnership structure and investment policy parameters, and gauge interest from local institutions, angel investors, and business partners willing to provide capital and invest in the fund.
Staff welcomes the Committee’s feedback based on the analysis provided. Staff will return at the next scheduled Committee meeting with any updates based on these action items and any further Committee input.
ITEM IV. Other Economic Development Updates (10 Minutes)
RECOMMENDATION
Receive updates on other economic development updates including: Old Town initiatives, preliminary 2025 Quarter 3 (July – Sept) sales tax analysis, workforce connection dinner, tech branding campaign, Goleta business guide, and website refresh.
DISCUSSION
Old Town Initiatives Business License Fee Waiver Program Update The Old Town Initiatives Business License Fee Waiver Program was launched on March 1, 2025, and is slated to end on February 28, 2026. The City’s Finance Department continues to implement the program. As of January 30, 2026, there are 141 active/pending general business licenses that have qualified for the license fee waiver.
Old Town Pride of Place (POP) Grant Program Update
Staff continue to provide support to all POP Grant recipients. Staff have been in contact with recipients regarding End-of-Program Reports which are due in June 2026 and providing a reminder about Women’s Economic Ventures’ (WEV) free consulting hours offered to all grantees. To date two businesses have utilized WEV’s consulting services in conjunction with their POP Grant. Staff encouraged more businesses to utilize these pro bono services when following up with grant recipients.
One grant recipient, Carpeteria Carpet One, is using their POP Grant to fund the installation of a mural on their building to act as the “entrance to Old Town.” As directed by the Council, this mural is not subject to the review and approval process in the City’s Public Art Policy adopted on October 7, 2025. Instead, it is subject to the previous public art review process which includes a voluntary demonstration to the Design Review Board (DRB). The mural is scheduled for review by the DRB on February 24, 2026.
Preliminary Old Town Sales Tax Analysis
Staff have prepared a preliminary analysis of Old Town sales tax trends in advance of the Hollister Striping update scheduled for April 2026. This report highlights overall geographic trends, and it excludes County and State Use Tax Pools (e.g. online sales); a more detailed analysis by major industry group for Old Town will be provided in the April presentation.
Figure 1 below illustrates year-over-year percentage (%) change in Quarter 3 (Q3) sales tax performance (July-September) for 2023-2024 and 2024-2025 across five geographic levels, from the Old Town “Triangle” to the Statewide. Citywide Core (Core) excludes Old Town data, allowing for a direct comparison between Old Town and the rest of the city. Across all levels, Q3 2025 sales tax exceeded Q3 2024. Old Town experienced the most significant growth, nearly 4% when adjusted for economic data.
Figure 2 below presents a 13-quarter trend by geographic areas within the City, including the four main shopping districts. Camino Real Market Place and Old Town consistently rank as the top two generators, but with the most variation from quarter to quarter.
Figure 1: Q3 (July – September) Sales Tax Percentage Change 2023 to 2025 Figure 2: Sales Tax by Geographic Areas1
1 Preliminary sales tax data provided by HdL Companies
-10.10%
-3.62%
-1.50% -2.45% -3.53%
3.95% 3.00% 2.72%
0.60% 0.85%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
OT Citywide Core County Statewide
Q3 (July - September) % Change 2023 to 2025
Does not include County/State Pool
Q3 % Change 2023 to 2024 Q3 % Change 2024 to 2025
Workforce Connection Event
The Chambers’ Workforce Connection Event connects local students with regional employers through structured, small-group conversations designed to build professional skills, expose students to local career pathways, and support workforce development goals.
The Chamber has started organizing this year’s event and securing an event space in Goleta.
It will include 10+ employer tables, featuring local Goleta and regional businesses.
Approximately 60-80 students from local high schools, SBCC, UCSB, and other institutions will be invited to attend. Students will be paired with employers based on interests and experience to engage in casual mock interviews focused on professional communication, career exploration, and practical advice from hiring managers. The Chamber will be responsible for all aspects of convening and administering the event, and the City will act as the event’s signature partner with a sponsorship up to $5,000.
Tech Marketing and Branding Campaign
Staff have drafted an agreement with a not-to-exceed amount of $15,000 with the Chamber for FY 25/26 to promote the TechTopia video and campaign for FY 25/26. Under the new agreement, the Chamber shall continue to promote the TechTopia video featuring the City of Goleta through a variety of advertising channels including the potential of a shortened version for PumpFlix at local gas stations. The Chamber will report on the outcomes of the advertising efforts including viewership through each advertising outlet. See Attachment 3 for the 2025 marketing report. In addition, the agreement includes a provision that the Chamber shall provide the City with tickets to the annual TechTopia event taking place this year on Wednesday March 18, 2026, at UCSB’s OASIS research and development facility in Goleta.
Goleta Business Guide
In December 2025, staff rolled out a new Business Guide to walk users through the steps of launching a new business in the City. The guide is designed to help make the process of starting a business which involves interactions with multiple state and local agencies easier to navigate. The guide is posted on the City’s website and pamphlets in both English and Spanish are available at the City Hall reception desk and Planning Counter. Staff intend to distribute pamphlets at future City events including the State of the City. The pamphlet versions of the guide are included as Attachment 4.
Economic Development Webpages Refresh
In addition to the newly created Business Guide webpage, staff have updated the existing economic development webpages to enhance usability and provide expanded tools and resources for businesses.
ATTACHMENTS:
1. Memo to the City of Goleta from Sunstone Cities, LLC.
2. Memo on Equity Investment Fund Feasibility Analysis
3. 2025 TechTopia Marketing and Branding Campaign Report
4. City of Goleta Business Guide
ATTACHMENT 1
Memo to the City of Goleta from Sunstone Cities, LLC
18881 Von Karman Ave, Suite 500, Irvine, CA 92612 • 949-771-1764 • sunstonecities.com
To: City of Goleta
From: Sunstone Cities, LLC
Subject: Near-Term Actions for a Publicly Backed Equity Fund and Related Ecosystem Activation Date: December 10th, 2025
PURPOSE
This memo outlines practical options for creating a publicly backed equity or an equity-like investment vehicle for the City of Goleta and recommends near-term steps the City can take over the next 6–18 months. The purpose is to frame realistic approaches that align with the City’s 2023–2028 Economic Development Strategic Plan and integrate effectively with its existing business development structure.
STRATEGIC CONTEXT
Goleta’s adopted Strategic Plan establishes a clear rationale for exploring targeted investment tools1. The plan emphasizes technology and innovation, support for small and underrepresented businesses, and continued attention to Old Town as a priority area. Together, these elements form a strong policy foundation for an investment initiative aimed at expanding access to growth capital. The City also has a well-organized platform of business development resources, including advisory programs connected to the Goleta Entrepreneurial Magnet, which already serve as the primary intake points for local firms seeking assistance2. This infrastructure can serve as the operational “front door” for any equity or quasi-equity mechanism, enabling capital to be paired with advising, referrals, and other services without building redundant systems. A pilot approach would reduce administrative burden while still providing meaningful support to local businesses.
MODEL OPTIONS FOR A PUBLICLY SUPPORTED FUND
Several fund models used by other cities and regions could be adapted for Goleta. One option is Cities considering public-backed investment vehicles typically choose structures that balance economic impact, administrative feasibility, and political risk. For Goleta, the most practical models are those that leverage external partners for fund management and underwriting while allowing the City to define priorities and target local businesses. Each of the following models offers a different level of complexity, risk exposure, and alignment with Goleta’s economic development strategy.
A. Community Development Venture or “Evergreen” Fund
A community development venture or evergreen fund is a pooled investment vehicle that targets local startups or growth-oriented small businesses. In this model, the City serves as an anchor investor, contributing capital that is then deployed through small equity stakes or convertible notes. Over time, returns—if and when realized—recycle back into 1 2023-2028 Economic Development Strategic Plan. 2 Goleta Entrepreneurial Magnet (GEM).
18881 Von Karman Ave, Suite 500, Irvine, CA 92612 • 949-771-1764 • sunstonecities.com
the fund, creating an “evergreen” effect where gains from successful businesses help finance future investments3.
This structure is particularly useful in regions aiming to strengthen their innovation ecosystem. Goleta sits along a larger Santa Barbara County innovation corridor, with ties to UC Santa Barbara and multiple technology firms. An evergreen fund could support early-stage or growth-stage companies that might otherwise leave the region for markets with more robust startup capital. The City’s involvement would signal long-term commitment to technology and innovation, aligning directly with strategic plan goals.
To limit political exposure, the City would not select investments directly. Instead, Goleta would contract with an experienced fund manager or CDFI that specializes in regional venture development. This partner would conduct due diligence, structure deals, and maintain the portfolio, while the City oversees high-level priorities and reporting. Because venture success is uncertain, the fund should be modest in size to start. A small set of targeted investments can still produce meaningful impacts in terms of business retention, commercialization, and job creation without exposing the City to disproportionate financial risk.
B. Revenue-Based or “Quasi-Equity” Fund
A revenue-based financing (RBF) model offers a flexible alternative to traditional equity.
Instead of taking an ownership stake, the fund provides capital to a business with repayment tied to a defined percentage of revenues until a predetermined return cap is reached. This model is often preferable for firms that have solid revenue potential but are not positioned for venture-scale growth4. That includes many small businesses, particularly in food, retail, services, and culturally relevant sectors with strong local demand.
For Goleta, RBF aligns with the strategic priority of supporting BIPOC- and women-owned enterprises and providing flexible expansion capital to businesses that lack collateral for conventional loans. The structure reduces pressure on firms because payments rise and fall with actual revenue performance. It also allows the City to support a larger mix of business types, not only startups but existing firms seeking to purchase equipment, expand space, add staff, or enter new markets.
RBF funds are typically administered by CDFIs or nonprofit lenders with experience in mission-driven lending. The City would establish eligibility criteria and impact goals while the intermediary manages underwriting. Because returns are more predictable than equity, RBF can be an attractive model for a pilot phase, giving the City early feedback on demand, repayment behavior, and administrative complexity. 3 SSTI: Public Equity Funds and Community Venture Structures. 4 Interagency Community Investment Committee SMALL BUSINESS RESOURCE GUIDE.
18881 Von Karman Ave, Suite 500, Irvine, CA 92612 • 949-771-1764 • sunstonecities.com
C. Fund-of-Funds or Sidecar Co-Investment Pool
A fund-of-funds or sidecar arrangement is the lowest-risk option for Goleta from an operational standpoint. Rather than building a full investment vehicle from scratch, the City partners with an existing regional intermediary, such as a CDFI, regional innovation fund, or state-connected capital program, to create a pool of dollars dedicated to Goleta businesses3, 4. When the partner fund identifies a qualified business, Goleta’s contribution is deployed alongside the partner’s investment.
This approach leverages the partner’s due diligence, administrative capacity, and investment pipeline, allowing the City to participate in deals without managing a standalone program. It is especially useful when a city seeks to support a broad set of businesses but does not yet know the volume or characteristics of deal flow. By building on an established fund, Goleta gains access to investment expertise, reduces overhead, and builds relationships with regional capital providers.
For a city of Goleta’s size, a sidecar fund could function as a bridge strategy, allowing the City to test demand and build experience before deciding whether to scale into an evergreen or revenue-based model. It also provides an avenue to align investments with specific geographic or sector priorities, such as technology firms connected to the local research ecosystem or small businesses in Old Town.
NEAR-TERM ACTIONS
Over the next 6–18 months, the City of Goleta can take several coordinated steps to evaluate and launch a pilot fund. The first priority is to clearly define the objectives, constraints, and legal framework that will govern any investment initiative. This may involve developing a concise Council directive that links the concept to the City’s strategic priorities and commissioning a legal review to identify permissible structures for a general-law city in California, including any fiduciary or conflict-of-interest considerations.
The City should also conduct a structured scan of potential partners and platforms. This involves identifying regional intermediaries such as Small Business Development Centers (SBDCs), Community Development Financial Institutions (CDFIs), and existing investment funds that could either co-manage or co-invest in local opportunities4. Engaging Goleta’s existing ecosystem, particularly the Goleta Entrepreneurial Magnet and its network, would help determine accurate funding needs, typical deal sizes, and the nature of the business pipeline2.
With that information, the City can begin shaping a pilot concept. An initial focus could center on an “Innovation and Inclusion Fund” designed to support both technology-oriented firms and BIPOC or women-owned businesses headquartered in Goleta. Establishing the preferred financing instruments, likely involving a mix of small equity positions, convertible notes, or revenue-based financing, will be a critical step. Given local business realities, initial investments would likely fall in the low six-figure range.
18881 Von Karman Ave, Suite 500, Irvine, CA 92612 • 949-771-1764 • sunstonecities.com
Governance and risk management structures will also need to be defined. The City’s role should focus on capital commitment, high-level policy direction, and monitoring of outcomes, while underwriting and portfolio oversight should be handled by a qualified external partner. The City can incorporate safeguards such as sector priorities, geographic eligibility, transparent reporting requirements, and data collection on job creation and demographics served.
Finally, Goleta should pursue external funding sources and technical assistance that support local investment initiatives. Federal and state programs cataloged by the U.S. Treasury, along with multi-jurisdiction partnerships such as the Municipal Investment Fund model, may offer planning resources, technical expertise, or matching funds that reduce the City’s financial exposure5.
RELATED ECOSYSTEM ACTIVATION
A public-backed fund will only be effective if it is paired with broader support for Goleta’s business ecosystem. The City already has strong partners, such as the SBDC and the Goleta Entrepreneurial Magnet, that can help prepare local businesses to successfully use investment capital6. By organizing these partners around shared goals, Goleta can build a clear pipeline of entrepreneurs who are ready for growth funding.
A practical first step is to establish regular investment-readiness training for small businesses and startups. This would help firms understand financial requirements, plan for growth, and confidently apply for funding. Strengthening business skills in this way increases the likelihood that a pilot fund will succeed and that participating businesses will expand and hire. The City can also align the fund with two priority areas already identified in the Economic Development Strategic Plan: innovation-driven companies connected to the region’s tech ecosystem, and small businesses that contribute to Old Town’s vitality. Reserving a portion of capital or technical assistance for these areas ensures that investments support community goals and have visible local impact.
Equity should remain a core consideration. Targeted outreach and support for BIPOC- and women-owned businesses will help ensure that the economic benefits of the fund extend to entrepreneurs who have historically faced barriers to accessing capital. Finally, improving coordination among Goleta’s business-support organizations will create a more seamless experience for entrepreneurs. A shared referral and tracking system would help the City and its partners understand business needs, monitor progress, and develop a predictable flow of eligible businesses for the pilot fund.
Collectively, these ecosystem activation strategies reinforce the City’s broader goals and ensure that a public-backed investment tool is not an isolated intervention but part of a cohesive and sustained effort to strengthen Goleta’s innovation economy, support inclusive business growth, and improve economic opportunity across the community. In summary, strengthening business 5 Municipal Investment Fund. Local Governments for Sustainability USA. 6 Capital Infusion Program (CIP) 2025-2026.
18881 Von Karman Ave, Suite 500, Irvine, CA 92612 • 949-771-1764 • sunstonecities.com
skills, aligning investments with priority areas, embedding equity, and coordinating partner organizations will ensure that Goleta’s investment efforts have a meaningful and lasting impact.
PILOT PATHWAY FOR GOLETA
A pilot approach allows Goleta to test the feasibility of a public-backed capital tool while maintaining clear parameters around cost, administrative burden, and risk. This kind of measured rollout aligns with best practices for municipal investment initiatives and gives the City time to deepen relationships with capital partners.
A suggested first step is to convene a local capital working group that includes representatives from CDFIs, regional funds, SBDC advisors, innovation-sector stakeholders, and business organizations. This group would help define the specific problem the fund aims to solve such as lack of early-stage capital, limited revenue-based financing options, or limited support for underrepresented entrepreneurs4. The group would also help the City refine objectives related to job creation, demographic inclusion, strategic sector growth, and Old Town activation. Once goals are clarified, the City can begin assessing which of the three fund models best meets the immediate need. This selection process should include a formal market scan of intermediaries willing to partner with Goleta, their capacity, the minimum capital required, and the types of businesses they currently support. The City can then develop a pilot structure with the selected partner, defining roles for underwriting, portfolio management, compliance, and reporting.
During this phase, the City should also establish financial parameters such as investment size, expected return structures, and risk limits.
With these elements in place, the City would prepare a detailed pilot proposal for Council review.
This document would outline the fund’s purpose, the recommended model, the governance structure, the role of partners, eligibility criteria, investment guidelines, and expected economic outcomes. The proposal would also identify reporting frameworks, timelines for review or expansion, and mechanisms to evaluate results during and after the pilot. If approved, the City and its partners could move quickly into implementation, beginning with outreach to local businesses, development of application procedures, and the creation of communications to ensure that entrepreneurs understand how to access the fund. During the early months of deployment, the City would monitor demand levels, application quality, and the types of businesses seeking capital. This real-time feedback would guide future adjustments, including whether to increase the size of the fund, broaden eligibility, or shift the financing instruments used.
Within 9–12 months of beginning the pilot, the City should have enough data to evaluate outcomes and determine whether the model warrants expansion. That evaluation could include business performance, demographic reach, alignment with strategic plan priorities, and partner capacity. This iterative process positions Goleta to scale responsibly, either by increasing its commitment to the selected model or by transitioning into a more advanced structure such as an evergreen fund once capacity and demand are fully understood.
18881 Von Karman Ave, Suite 500, Irvine, CA 92612 • 949-771-1764 • sunstonecities.com
CONCLUSION
A publicly backed equity or equity-like fund is within reach for Goleta if it is structured with modest scale, strong partnerships, and clear alignment with existing economic development priorities. By combining a well-designed pilot with targeted ecosystem activation and pursuit of external funding, the City of Goleta can expand access to growth capital for local businesses while managing risk and administrative demands.
ATTACHMENT 2
Memo on Equity Investment Fund Feasibility Analysis
MEMORANDUM
DATE: February 10, 2026
TO: Economic Development & Revitalization Standing Committee FROM: Luke Rioux, Finance Director
SUBJECT: Preliminary Financial Feasibility and Fiscal Risk Analysis for a Publicly Backed Equity Investment Fund
1. Executive Summary
Purpose of This Analysis
This financial feasibility analysis evaluates the fiscal requirements and operational viability at different funding levels when applied to a publicly backed, partner-managed equity or quasi-equity investment fund. The analysis builds upon recommendations provided by Sunstone Cities, LLC1 in December 2025, and provides the quantitative analysis necessary to determine which models can be implemented within fiscal parameters. This analysis focuses on:
Portfolio diversification and concentration risk
Ability to absorb expected investment losses
Administrative and compliance cost efficiency
Overall fiscal and reputational risk to the City
The analysis compares multiple funding scenarios to determine the minimum viable capitalization level to protect City investment while pursuing economic development goals.
Key Findings and Conclusion
Capital scale is the primary determinant of risk. Funds below approximately $2.0 million exhibit high concentration risk, limited diversification, and disproportionate fiscal and reputational exposure.
1 Sunstone Cities, LLC, "Near-Term Actions for a Publicly Backed Equity Fund and Related Ecosystem Activation," memorandum to City of Goleta (December 10, 2025).
Direct City-led investment structures are not viable due to statutory investment constraints under Government Code Section 53600-53609, increased fiduciary and conflict-of-interest risk, and significant administrative burden. Independent, third-party governance structures (including nonprofit-managed or limited partnership models) materially reduce legal, fiscal, and reputational risk by separating policy oversight from investment execution.
Financial returns cannot be assumed or relied upon. Any publicly backed investment activity must be justified primarily on the basis of public benefit rather than expected profit.
At smaller capital levels, alternative economic development tools, such as loans, guarantees, or grants, may provide more efficient, lower-risk public value.
Summary of Capital Scenarios
Across all scenarios, the analysis shows that fund size is the key driver of viability. Below approximately $2.0 million, high concentration risk and largely fixed administrative costs prevent the investment platform from operating effectively. At approximately $2.5 million, the portfolio becomes sufficiently diversified to perform as intended, while $5.0 million or more provides the strongest foundation for long-term stability and success. The table below reflects relative viability and risk, not expected financial returns, and is intended to inform policy decisions regarding scale and structure rather than profitability.
Table 1 - Summary of Capital Scenarios
Capital Level Financial Viability Risk Profile Overall Assessment $500,000 Not viable Very high risk Not recommended
$1,000,000 Marginal High risk Caution warranted
$2,000,000 Borderline Elevated risk Conditionally feasible $2,500,000 Viable Moderate risk Feasible with safeguards $5,000,000 Strong Lower relative risk Most defensible option Note: Definitions of financial viability, risk profile, and overall assessment are provided in Appendix A.
2. Core Assumptions & Risk Framework
Investment Size and Portfolio Construction
To maintain a conservative and fiscally responsible outlook, this analysis assumes:
Target Investment Size: $125,000–$250,000 per company. For the purpose of all financial modeling, a $200,000 weighted average was applied. Initial Funding Limitation: The model assumes that the fund would not provide “follow-on” funding (subsequent investment rounds), which limits individual company exposure.
Independent Fund Management: All investments are assumed to be managed by a qualified, third-party General Partner (GP) and not by City staff. City staff
roles are limited to policy oversight and fiduciary monitoring, and not individual deal selection.
Basis for These Assumptions
The assumed investment size range of $125,000–$250,000 reflects documented earlystage investment practices and is strategically calibrated to position the fund as a minority co-investor without governance obligations.
Data from the Angel Capital Association's 2024 Angel Funders Report identifies $265,000 as the median investment for participating groups in deals without board representation.2 Setting the City's maximum at $250,000 ensures our participation is consistent with market medians while avoiding the governance complexities and liabilities associated with larger 'lead' positions that typically require board seats, active oversight responsibilities, and heightened fiduciary exposure.
This investment sizing range is further supported by broader industry data. The Angel Funders Report shows average angel investments in seed-stage rounds of approximately $121,000,3 while the PitchBook-NVCA Venture Monitor reports median total seed-stage rounds of $3.1 million.4 At $125,000–$250,000, a publicly backed investment would represent approximately 4–8% of a typical seed round, positioning the City as a catalytic co-investor that leverages rather than displaces private capital.
Initial funding in the $125,000–$250,000 range is typical for:
Seed and early-growth stage companies
Public-private co-investment programs
Funds operating outside major venture hubs
The analysis does not assume that the City would act as a lead investor or provide large follow-on capital. This reflects both:
prudent public-sector risk management, and
the reality that follow-on financing is typically provided by private investors once companies demonstrate traction
Assuming third-party investment management is consistent with best practices to:
avoid conflicts of interest,
reduce political and reputational exposure, and
ensure professional underwriting and portfolio management.
Expected Failure and Underperformance Rates
The analysis assumes standard early-stage investment outcomes, consistent with widely 2 Angel Capital Association, "Angel Funders Report 2024," data from survey of participating angel groups showing median investment of $265,000 for deals without board representation. 3 Angel Capital Association, "Angel Funders Report 2023," showing average seed-stage angel investment of $121,000. 4 PitchBook-NVCA, "Venture Monitor Q3 2024" (September 2024), reporting median seed deal value of $3.1M.
cited empirical venture research and observed experience with professionally managed investment portfolios. Research by Harvard Business School Senior Lecturer Shikhar Ghosh, based on analysis of more than 2,000 venture-backed companies that raised at least $1 million from 2004 to 2010, found that approximately 75% of venture-backed companies never return cash to investors, with 30-40% liquidating all assets.5 For quantitative stress-testing purposes, this analysis applies a conservative 70% underperformance/failure rate to portfolio modeling.
For the purpose of this analysis, the following conservative assumptions were applied:
70% of portfolio companies are expected to:
o fail outright, or
o return less than invested capital
30% may return capital or modest gains
A small minority of investments (often fewer than 10%) may generate outsized positive outcomes that materially contribute to overall portfolio performance.
These assumptions are not pessimistic. They reflect normal market behavior and apply to professionally managed funds. The feasibility question is therefore not whether losses occur, but whether the portfolio is large enough to survive normal failure.
Basis for These Assumptions
These assumptions reflect well-documented characteristics of early-stage investment portfolios, including:
High business failure rates among startups
Highly skewed return distributions, where a small number of investments account for a disproportionate share of positive outcomes
Long time horizons before successful exits occur
These patterns are observed:
across venture capital markets,
in publicly backed innovation funds, and
in professionally managed seed and early-growth portfolios Importantly, these assumptions apply even when investments are professionally selected and managed. Failure is not a sign of poor management; it is a structural feature of early-stage investing.
Why this assumption is necessary for feasibility analysis The purpose of the feasibility analysis is not to predict which companies will succeed, but to test whether a proposed investment platform can:
absorb expected losses without destabilizing the program, and 5 Shikhar Ghosh, "The Venture Capital Secret: 3 Out of 4 Start-Ups Fail," Harvard Business School Working Knowledge (September 2012)
operate over a long enough horizon to allow positive outcomes to emerge Why this assumption is conservative
Assuming high failure and underperformance rates avoids overstating expected performance and prevents underestimating fiscal and reputational risk. Using lower assumed failure rates would artificially improve feasibility results and would not be appropriate for public-sector planning.
3. One-Time and Ongoing Cost Structure (Order-of-Magnitude Estimates) The tables below present order-of-magnitude estimates of the one-time startup and ongoing annual costs associated with implementing a publicly backed, partner-managed equity or quasi-equity investment initiative. The estimates reflect a consultant-led implementation approach with independent third-party fund management and limited City staff involvement focused on oversight and governance rather than day-to-day operations. Cost assumptions are based on comparable municipal legal, governance, procurement, and investment oversight activities and are intended to support feasibility and implementation planning, not to authorize expenditures or establish a budget, or imply the City’s funding portion.
Table 2 – Estimated One-Time Startup Cost
Cost Category Estimated Range Notes and Assumptions
Legal structuring and
agreements $40,000 – $80,000
Drafting and negotiation of LP or participation
agreements, side letters, conflict-of-interest
provisions, and legal review by the City
Attorney and outside counsel as needed
Governance and fund
formation documents $15,000 - $30,000
Development of governance framework,
investment structure documentation, and
Council-facing resolutions (Consultant)
Partner selection, due
diligence, procurement, and
RFP process
$15,000 – $30,000
Market scan, partner due diligence,
reference checks, and procurement activities
if required (Consultant)
Initial compliance and policy
development and review $10,000 – $25,000
Consultant-assisted development of
Investment Policy Statement, risk
parameters, reporting standards, and
alignment with City policies
City staff support (internal) $25,000 - $45,000
An estimated 150–300 hours of staff time
during setup (utilizing a blended fully
burdened labor rate). For oversight,
coordination, review of consultant work
products, interdepartmental alignment, and
Council engagement.
Implementation contingency $15,000 - $30,000
Allows for unanticipated legal iterations,
procurement extensions, or additional
governance refinement
Estimated One-Time Total $120,000 – $240,000
Order-of-magnitude estimate; actual costs
depend on partner complexity and final
structure
Table 3 - Estimated Annual Cost
Cost Category Estimated Range Notes and Assumptions
Fund management fees or
contract $37,500 - $62,500
Assumes 1.5%–2.5% of committed capital,
based on a $2.5 million total platform
capitalization. Lower end reflects sidecar
participation or standardized mandates;
upper end reflects customized or placebased investment criteria. Assumes custodian/trust accounts embedded in the
fee.
Legal review and compliance $15,000 – $40,000
Annual legal review of partnership or
participation agreements, conflict-of-interest
monitoring, compliance with investment
policy parameters, and periodic updates as
needed. Assumes no litigation or
enforcement actions.
Financial reporting review,
valuation, and periodic
external assurance/audit
$10,000 - $25,000
Limited external accounting or valuation
support as needed (e.g., agreed-upon
procedures). Does not include City staff
review time or routine reporting.
City staff oversight and
administration $17,000 – $35,000
Assumes 120–240 hours annually(~0.06–
0.12 FTE), at a blended fully burdened labor
rate of senior staff. Reflects periodic
oversight and reporting review, not day-today operations.
Estimated Annual Total
(excluding losses) $79,500 - $162,500 Will be variable, based on fund size. Current assumptions are based on $2.5 million.
Cost Disclaimer:
The cost estimates presented are planning-level, order-of-magnitude assumptions based on the current understanding of program scope, governance structure, and partnermanaged implementation. Actual costs may be lower or higher depending on final fund structure, partner selection, procurement requirements, legal and compliance needs, and reporting expectations. The estimates assume normal operating conditions and do not include extraordinary legal matters, litigation, enforcement actions, or significant changes in regulatory requirements.
4. Quantitative Feasibility Analysis (“The Math”)
At lower capital levels, the fund is likely to face concentration risk. In a venture portfolio, you need enough to statistically ensure you hit 10% of companies that provide future returns to be stable.
For purposes of stress-testing downside risk, the quantitative modeling below applies a 70% underperformance/failure assumption at the upper end of the assumed range, and a $200,000 average investment size.
Table 4 - Statistical Probability of Portfolio Underperformance (No Survivors) Fund Size
Number of
Investments
(N)
Expected
“Failures”
(70%) (p)
Expected
"Survivors"
(30%)
Probability of No
Survivors (All
Investments
Underperform)
P(Total Loss) = p^N
$500,000 2 1.4 0.6 49% (0.7^2)
$1,000,000 5 3.5 1.5 16.8% (0.7^5)
$2,000,000 10 7.0 3.0 2.8% (0.7^10)
$2,500,000 12 8.4 3.6 1.3% (0.7^12)
$5,000,000 25 17.5 7.5 <0.01% (0.7^25)
Analysis: At $500,000, the Fund has a nearly 50% chance that all investments underperform, leaving no capital-preserving outcomes to sustain the fund, simply because the "sample size" is too small to capture a winner. At $2.5M, the math shifts; you statistically expect ~4 “survivors” or “capital-preserving outcomes”, which provides the "Evergreen" recycling capability needed to keep the fund alive.
Investment funds have high fixed compliance costs. If the fund is too small, the administrative costs “cannibalize” the investment principal before the startups have time to mature.
In fund management, administrative costs are typically structured using a Base + Variable model. While certain costs, such as legal audits, statutory reporting, and basic oversight, remain relatively fixed regardless of the amount of capital, the Management Fee (the cost to actively vet and manage the investments), is almost always a percentage of total fund size. The table below uses a base fixed cost of $80,000 plus a 2% variable management fee. These assumptions reflect the midpoint of the estimated cost ranges and are used for illustrative purposes only. This analysis demonstrates how annual operating costs disproportionately impact smaller funds.
Table 5 - Scaled Operating Efficiency and Principal Erosion C = (B/A) x
100 D = B x 5 E = A - D
Fund Size
(A)
Fixed
Cost
(B1)
Var. Mgmt
Fee (2%)
(B2)
Total Annual
Cost
(B)
Annual
"Fee
Drag" (%)
(C)
5-Year
Cumulative
Drag
(D)
Remaining
Investable
Capital
(E)
$500,000 $80,000 $10,000 $90,000 18.00% $450,000
$50,000
(Severely
Depleted)
$1,000,000 $80,000 $20,000 $100,000 10.00% $500,000 $500,000 $2,000,000 $80,000 $40,000 $120,000 6.00% $600,000 $1,400,000 $2,500,000 $80,000 $50,000 $130,000 5.20% $650,000 $1,850,000 $5,000,000 $85,000* $100,000 $185,000 3.70% $925,000 $4,075,000 *Fixed costs increased slightly to account for the additional complexity of a larger portfolio (e.g., more comprehensive audits and reporting requirements)
Analysis:
At the $500,000 level, the fund effectively ceases to be an investment vehicle.
After 5 years of mandatory compliance and management, only $50,000 remains. By moving from $1M to $5M, the annual "Fee Drag" (C) drops from 10% to 3.7%.
This brings the fund much closer to the industry-standard 2.0% benchmark, ensuring that the vast majority of the capital is deployed into the community rather than being consumed by the structure itself.
In the $5M scenario, the fund retains over 80% of its principal for investment, compared to only 50% at the $1M level.
Because most administrative and compliance costs are fixed or semi-fixed, smaller funds experience disproportionate erosion of investable capital over time.
As capitalization increases, the annual cost burden declines materially, improving operating efficiency and long-term sustainability.
5. Funding Level Analysis and Viability Assessment
This section synthesizes the quantitative modeling, cost analysis, and risk assumptions presented in prior sections and translates them into practical policy implications for each funding level. The tables below summarize how portfolio size, diversification, and administrative cost structure affect the City’s ability to operate a publicly backed equity or quasi-equity investment initiative in a fiscally responsible manner.
Table 6 – Funding Level and Viability Assessment Summary Fund Size Summary Analysis Conclusion
$500,000 Supports only 2–4 investments, resulting in
extreme concentration risk. A single failed
investment can impair 25–50% of total capital.
Fixed administrative and compliance costs
consume a disproportionate share of funds, leaving
little ability to absorb losses or recycle capital.
At this scale, a publicly backed
equity or quasi-equity model is not
viable. Outcomes would be driven
largely by chance rather than
portfolio construction, and the
platform would be unable to
withstand normal investment
volatility.
$1,000,000 Allows 4–8 investments, modestly improving
diversification but still highly exposed to expected
failure rates. Fixed costs remain large relative to
capital, and early losses would be highly visible and
difficult to absorb.
This funding level remains
insufficient for a standalone equity
or quasi-equity platform. At most, it
could support a constrained pilot
or passive sidecar participation,
but not a durable, self-supporting
investment model.
$2,000,000 Supports 8–12 investments, improving
diversification and reducing immediate
destabilization from single failures. However,
outcomes remain sensitive to early losses and
require disciplined sizing, pacing, and strong
external management.
This funding level is conditionally
feasible but operates with a limited
margin for error and elevated risk
relative to best practice.
$2,500,000 Enables 10–20 investments, providing meaningful diversification and sufficient loss-absorption
capacity. Fixed administrative costs become
manageable, and the platform can support
governance, reporting, and oversight over a multiyear horizon.
This represents the minimum
funding level at which a publicly
backed, partner-managed equity
or quasi-equity investment model
can reasonably function with
acceptable fiscal and reputational
risk.
$5,000,000 Supports 20–40 investments, achieving high
diversification and strong loss-absorption capacity.
Administrative efficiency improves materially, and
the platform gains resilience, flexibility, and partner leverage.
A $5.0 million funding level
represents best practice for a
stable, resilient publicly backed
investment platform. Based on
portfolio diversification, fixed
compliance costs, and publicsector risk tolerance, staff’s analysis indicates that
approximately $2.5 million is the
minimum viable program size.
Below that level, concentration risk
and administrative cost overwhelm
potential public benefit.
While Table 6 summarizes the overall feasibility and policy implications associated with each funding level, Table 7 presents the underlying portfolio characteristics that inform those conclusions. Specifically, it illustrates how capitalization affects portfolio breadth, concentration risk, and the fund’s capacity to absorb expected investment losses under normal early-stage conditions. Together, these metrics explain why scale is a primary determinant of fiscal and reputational risk.
Table 7 – Capital Scale and Portfolio Characteristics
Capital Size Typical Investments Concentration Risk Ability to Absorb Losses $500,000 2–4 Very high Very limited
$1,000,000 4–8 High Limited
$2,000,000 8-12 Elevated Limited/Moderate
$2,500,000 10–20 Moderate Moderate
$5,000,000 20–40 Lower High
Based on mathematical probability of impairment and assumed annual costs, $2.5 million represents the minimum viable capitalization threshold, or in other words, the “floor”.
Capitalization below this level increases, rather than reduces, fiscal and reputational risk due to concentration effects and fixed administrative costs.
Private Market Benchmark Context (Venture and Growth Equity) Publicly backed equity and quasi-equity funds operate within the same underlying market dynamics as private venture and growth equity funds. The private market experience is relevant for two reasons:
1. Outcome distributions are highly skewed, meaning a small number of investments tend to drive any positive performance.
2. A meaningful share of investments fail or underperform, which makes diversification and time horizon critical.
The primary takeaway is that fund viability depends on achieving enough portfolio breadth to avoid “single-deal” risk and to withstand multiple losses without undermining the program.
Typical Fund Lifecycle and Time Horizon
A venture-style fund generally operates across a long time horizon:
Years 1–3: Capital deployment (initial investments and follow-on reserves) Years 4–8: Portfolio support and monitoring (governance, reporting, restructures) Years 7–12: Exits or repayment events (acquisitions, secondary sales, or revenue participation)
This lifecycle reinforces that equity and quasi-equity capital is not an appropriate tool for near-term budget needs and should be evaluated as long-duration, higher-risk capital.
Operating Model and Cost Drivers (High-Level)
Unlike grants, loans, or guarantees, equity and quasi-equity approaches require ongoing investment operations that mirror private investment practice:
Deal sourcing and screening
Due diligence (financial, legal, market)
Investment documentation and closing
Ongoing governance, reporting, and portfolio management Periodic valuation or impairment assessments
Exit or repayment planning
These functions require specialized expertise and reinforce the importance of independent fund management and clear oversight parameters.
6. Other Risk and Fiscal Considerations (Not a Complete List) Loss Tolerance and Time Horizon
Equity and quasi-equity investments involve a material risk of partial or total capital loss and long investment horizons. Any publicly backed investment initiative must explicitly acknowledge and define acceptable loss tolerance and should not be evaluated using short-term performance metrics.
Liquidity Constrains
Capital deployed through equity or quasi-equity instruments is inherently illiquid and may not be recoverable for extended periods. These funds are therefore inappropriate for near-term operational needs or liquidity management.
Political and Reputational Risk
Investment losses, even when anticipated, may generate public scrutiny. Smaller funds amplify reputational risk due to higher concentration and visibility of individual outcomes.
Clear governance, transparency, and communication are essential risk-mitigation tools.
7. Alternative Economic Development Tools Analysis
Cities have access to a range of economic development financing tools, each with different risk profiles, administrative requirements, and suitability depending on policy objectives and scale. The table below provides a high-level comparison of commonly used tools to contextualize equity and quasi-equity approaches relative to more traditional economic development mechanisms. The comparison is intended to inform tool selection, not to recommend any single approach in isolation.
Table 8 - Comparison of Economic Development Financing Tools Tool Fiscal Risk Capital Recovery Administrative
Complexity Appropriate Scale
Grants High None Low Small
Loans Moderate High (if performing) Moderate Small to Medium Guarantees Moderate Conditional Moderate Medium
Equity / QuasiEquity High Uncertain High Medium to Large Why Equity or Quasi-Equity Tools (and Why Not)
Equity and quasi-equity tools are most appropriate where traditional lending is unavailable due to limited collateral, early-stage operating history, or growth uncertainty.
In these situations, equity-based approaches can help address capital gaps that conventional debt instruments cannot.
However, equity and quasi-equity tools also introduce higher volatility, long-duration illiquidity, and elevated reputational risk compared to loans or guarantees. As a result, these tools are generally appropriate only at sufficient scale and when implemented through independent governance structures that separate public policy objectives from investment decision-making.
Accordingly, equity-based approaches should be evaluated alongside, rather than instead of, lower-risk tools such as revolving loan funds, credit enhancements, or milestone-based grant programs.
Alignment with the Fund Models Outlined by Sunstone
The fund models outlined by Sunstone Cities, LLC, including evergreen-style funds and sidecar co-investment structures, are consistent with this analysis’s emphasis on appropriate capitalization, independent governance, and realistic expectations regarding financial outcomes. These models reflect best practices observed in other publicly backed investment initiatives and align with the feasibility thresholds identified in this memorandum.
Alternatives Beyond Sunstone’s Fund Models
Consistent with best practices, any future implementation effort should also evaluate non-equity and hybrid alternatives, including:
Loan-first innovation or revolving loan fund programs Credit enhancement or guarantee programs
Milestone-based grants with performance and clawback provisions Participation in existing regional investment vehicles Non-investment strategies such as business support, incubation partnerships, procurement opportunities, and regulatory modernization These alternatives are not evaluated quantitatively in this memorandum, but are identified to ensure that future policy decisions consider the full economic development finance toolkit.
8. Conclusion
Alignment with Sunstone Recommendations and Peer Practices The findings of this analysis are consistent with the strategic guidance provided by Sunstone Cities, LLC, which emphasizes the importance of appropriate capitalization, independent governance, and realistic expectations regarding investment outcomes.
Sunstone’s recommended fund models, including evergreen-style funds and sidecar coinvestment structures, align with the feasibility thresholds and risk considerations identified in this memorandum.
Peer city evaluations and publicly backed investment programs reviewed during this analysis reflect similar conclusions regarding minimum viable fund size, separation of governance and investment decision-making, and the need to distinguish economic development objectives from financial return expectations.
The Economic Development Strategic Plan calls for partner-driven capital formation, not a City-operated venture fund. Consistent with this direction, the Plan also supports a publicly backed, self-supporting innovation financing platform that leverages City participation to catalyze private and institutional capital rather than replace it.
Summary of Key Findings
A publicly backed investment fund is only fiscally defensible at sufficient scale and with independent governance.
Capital levels below approximately $2.0 million present elevated fiscal and reputational risk.
Direct City-led investment structures are impractical under current statutory and operational constraints.
Equity and quasi-equity tools should be evaluated as part of a broader economic development finance toolkit, rather than as a standalone solution.
Limitations and Boundary Statement
This memorandum is intended solely to inform policy discussions. It does not authorize fund creation, commit City resources, or imply an expectation of financial returns.
This preliminary analysis does not address:
Funding strategy, including City capital contribution amount, funding mix, or identification of capital partners
Exit strategies or wind-down procedures should the program underperform Performance metrics and success criteria, such as job creation, companies retained in the city, private capital leverage ratio, or portfolio internal rate of return (IRR).
Appendix A – Interpreting Capital Scenario Classifications How to Read the High-Level Capital Scenarios Table
The table summarizes how different funding levels perform across three related but distinct dimensions: financial viability, risk profile, and overall assessment. Financial Viability describes whether the investment platform can reasonably operate as designed, given expected investment losses, portfolio size, and fixed administrative costs.
Risk Profile reflects the City’s exposure to financial loss, reputational impact, and administrative strain, assuming normal early-stage investment outcomes. Overall Assessment represents a policy judgment that combines viability and risk to indicate whether and how the City could proceed at each funding level.
The following terms are used consistently throughout the table:
Not viable: The platform cannot function as intended; normal losses or fixed costs would overwhelm the fund.
Marginal: The platform may operate only in a very limited or pilot capacity and is unlikely to be sustainable.
Borderline: The platform could operate under constrained conditions but with limited margin for error.
Viable: The platform can function as intended with appropriate safeguards and oversight.
Strong: The platform is well-capitalized, resilient, and capable of operating effectively over the long term.
Very high / High / Elevated / Moderate / Lower relative risk: These terms describe relative risk levels across funding scenarios, with risk decreasing as fund size increases. “Lower relative risk” does not imply low or no risk, but reflects reduced exposure compared to smaller funding levels.
Appendix B - Sources Reviewed
This analysis was informed by the following sources:
Legal Framework
California Government Code §§53600-53609 (Local Agency Investment Law) Venture Capital Performance Data
Ghosh, Shikhar (Harvard Business School, 2012) - Venture-backed startup failure rates
PitchBook-NVCA Venture Monitor (Q3 2024) - Seed-stage deal metrics Early-Stage Investment Benchmarks
Angel Capital Association Angel Funders Reports (2023-2024) National Venture Capital Association industry data
Municipal Finance Guidance
Government Finance Officers Association best practices Sunstone Cities, LLC
City and Other Government Agency Public-Private Programs and Private Venture Capital
Municipal Programs
Long Beach Accelerator & Launch Beach ($25M target, public-private partnership)
Washington, DC Venture Capital Program ($52M total, launched 2024-2025) Portland Seed Fund (originally city-backed, now independent) State-Level Programs:
California SSBCI Venture Capital Program ($1.181B state allocation) New York State Ventures ($184M deployed since 2015)
Massachusetts Growth Capital Corporation (evergreen fund model) Maryland Venture Fund (state as LP, launched 2014)
Regional/County Programs:
Los Angeles Regional Small Business Development Fund
Miami-Dade County Minority Business Enterprise Fund
San Diego Innovation Fund (county-managed)
Private Venture Capital
Kansas City Rise Fund (sidecar co-investment model, privately funded regional Venture Capital)
Municipal Community Development Finance Programs (Not complete list) Detroit Strategic Neighborhood Fund ($115M, CDFI loan/grant program, not equity)
ATTACHMENT 3
2025 TechTopia Marketing and Branding Campaign Report
Cox Communcations
Period PSA's Run Value
Oct-Nov 2025 980 $49,000
Chamber Email
Period Newsletter Sends Opens Open
Rate
Clicks Click Rate
Sept-Dec 2025 Weekly Business Connection 9,619 4,260 58% 290 37% Website Landing Page
Period Website Views Sessions Clicks
July-Dec 2025 TechTopia 330 240 994
YouTube Videos
Period Website Views Click Rate
Sept-Dec 2025 YouTube 174 4%
Social Media
Period Channel Views Reach
Sept-Dec 2025 Instagram 1413 493
Sept-Dec 2025 Facebook 411
Sept-Dec 2025 LinkedIn 986 654
PR & Media
Period Outlet
August 28, 2025 Noozhawk
August 28, 2025 Independent
August 28, 2025 Blue Laser Fusion
August 29, 2025 Independent
Community Partnerships
Santa Barbara
Airport
SBA shares the video when
meeting with airlines.
Business
Participants
Video files were shared with all
participating businesses (7) for
their individual use and sharing.
Chamber
Meetings
Video has been shared with the
community at Chamber Board
meetings, Committee meetings,
and several major Chamber
events - including the State of
the County and the upcoming
TechTopia event
City of Santa
Barbara
Santa Barbara Councilmember
Oscar Gutierrez shared the
TechTopia video with several
businesses on an economic
development trip to Asia.
ATTACHMENT 4
City of Goleta Business Guide
Business Guide Step-by-Step
1. Prepare and Plan
Research your market and write a
detailed business plan.
2. Choose Business Structure
and Name
Select which legal structure (sole
proprietorship, partnership, LLC,
etc.) is best for your business.
Guidance is available online at the
California Secretary of State’s
“Starting a Business Checklist.”
3. Register with the Secretary of
State
Register your business and pay
fees with the Secretary of State.
www.bizfileonline.sos.ca.gov
4. Register a “dba” or Fictitious
Business Name
If your business name is anything
other than your own last name,
you will need to file and publish
your fictitious business name
through the County ClerkRecorder.
www.countyofsb.org/237/ClerkRecorder
5. Prepare for Local, State, and
Federal Tax Obligations
If necessary, register for a Tax
Identification Number (TIN) with
the IRS, and an Employee
Identification Number (EIN) with
the Franchise Tax Board. This is
not necessary if you are a sole
proprietorship.
6. Open a Bank Account
Please note, the documents
required to open an account may
vary by institution.
7. Find a Potential Location
Use the property locator tool on
our website to find a potential
location. Before you sign a lease,
contact the Planning Department at
(805) 961-7543 or
[email protected]
to ask about any zoning limitations
or permits needed.
8. Apply for Licenses/Permits
Visit the City’s website to apply for
a business license and any building
permits for your business, and use
our links to find out how to apply
for any other specialty permits. For
questions on your business
license, contact (805) 562-5503 or
[email protected].
9. Get Insurance Coverage
Open Your Doors!
Thank you for being part of what
makes Goleta a great place to live,
work, and play!
For questions, contact Shannon
Kirn at (805) 562-5512 or
[email protected] or Blake
Markum at (805) 961-7512 or
[email protected]
Online Business Guide:
www.cityofgoleta.org/work/city-ofgoleta-business-guide www.cityofgoleta.gov
Step-by-Step Toolkit
for Starting a
Business in the
City of Goleta
City of Goleta
Business
Guide
City of Goleta Economic
Development Program
City of Goleta Business Guide
Thinking of starting a business in the City of Goleta? Use this guide to help make your vision a reality! Choose Business
Structure & Name
Register a
Fictitious Business
Name (or “dba”) if
necessary
01 02 03 04 05
Prepare and Plan
Prepare for Tax
Obligations
Register with the
Secretary of State
Open a Bank
Account Open Your Doors!
Find a Potential
Location
Apply for Licenses
and Permits
Get Insured
06 07 08 09
Guía de Negocios Paso a Paso
1. Prepara y Planifica
Investiga tu mercado y elabora un plan
de negocios detallado.
2. Elige la Estructura y Nombre de tu
Negocio
Elige la estructura legal (empresa
individual, sociedad colectiva, sociedad
de responsabilidad limitada, etc.) que
mejor se adapte a tu negocio.
Encontrará información útil en la lista
de verificación para iniciar un negocio
que ofrece la Secretaría de Estado de
California en su sitio web.
3. Regístrate ante la Secretaría del
Estado
Registra tu negocio y pague las tarifas
correspondientes con la Secretaría de
Estado.
www.bizfileonline.sos.ca.gov
4. Registre un nombre comercial
ficticio o “dba” si es necesario
Si el nombre de tu negocio es diferente
a tu apellido, deberás registrar y
publicar tu nombre comercial ficticio a
través de la oficina del secretario del
condado.
www.countyofsb.org/237/Clerk-Recorder
5. Prepárate para tus obligaciones
fiscales
Si es necesario, regístrate para obtener
un Número de Identificación Fiscal
(TIN) ante el Servicio de Impuestos
Internos (IRS) y un Número de
Identificación de Empleador (EIN) ante
la Junta de Impuestos de Franquicias.
Esto no es necesario si tu negocio es
un propietario único.
6. Abre una Cuenta Bancaria
Tenga en cuenta que los documentos
necesarios para abrir una cuenta pueden
variar según la institución.
7. Encuentra una Posible Ubicación
Utiliza la herramienta de búsqueda de
propiedades en nuestro sitio web para
encontrar una ubicación adecuada. Antes
de firmar un contrato de arrendamiento,
comuníquese con el Departamento de
Planificación al (805) 961-7543 o a
[email protected] para
consultar sobre cualquier restricción de
zonificación o permisos necesarios.
8. Solicita Licencias y Permisos
Visita el sitio web de la ciudad para solicitar
una licencia comercial y los permisos de
construcción necesarios para su negocio, y
utiliza nuestros enlaces para obtener
información sobre cómo solicitar otros
permisos especializados. Si tienes
preguntas sobre su licencia comercial,
comunícate al (805) 562-5503 o escribe a
[email protected].
9. Obtén cobertura de seguro
¡Abre tus puertas!
¡Gracias por formar parte de lo que hace
de Goleta un lugar estupendo para vivir,
trabajar y jugar!
Para cualquier consulta, comunícate con
Blake Markum a (805) 961-7512 o
[email protected]
Guía de negocios:
www.cityofgoleta.org/work/city-of-goletabusiness-guide www.cityofgoleta.gov Guía paso a paso
para iniciar un
negocio en la ciudad
de Goleta
Guía de Negocios
para la Ciudad de
Goleta
Programa de Desarrollo Económico
de la Ciudad de Goleta
Guía de Negocios para la Ciudad de Goleta
¿Estás pensando en abrir un negocio en la ciudad de Goleta? ¡Utiliza esta guía para hacer realidad tu visión! Elige la Estructura y
Nombre de tu
Negocio
Registra un
Nombre Comercial
Ficticio (o “DBA”)
si es necesario
01 02 03 04 05
Prepárate y
Planifica
Prepárate para tus
obligaciones
fiscales
Regístrate ante la
Secretaría del
Estado
Abre una Cuenta
Bancaria
¡Abre tus puertas!
Encuentra una
Posible Ubicación
Solicita Licencias y
Permisos
Obtén
Cobertura de
Seguro
06 07 08 09