About the Tech Index
The SARTA Technology Index™ (aka Sacramento Tech TRAQ™) is an innovative tool that measures the health of the regional technology economy by tracking metrics of the leading 50 high tech and life science companies driving its growth. Just as the S&P 500 acts as a bellwether for corporate America, the SARTA Technology Index™ is a barometer of how technology companies in the nine county greater Sacramento region are performing.
While there is a varied assortment of national and international technology indices in the world today, to our knowledge, this is the first regional tech index ever to be developed. The SARTA Tech Index™ includes both public and private technology companies headquartered in the greater Sacramento Region.
The numerical value of the SARTA Technology Index™ is based on a proprietary formula developed by SARTA and compiled with the assistance of Ernst & Young LLP, to track and measure movement in the financial metrics of revenue, employees and equity capital raised.
The Index was originally set to a base of 100.00 at its initiation in October of 2003, and is updated on a quarterly basis.
To qualify for consideration to become an Index company, high tech and life science firms headquartered within the counties of Butte, El Dorado, Nevada, Placer, Sacramento, Solano, Sutter, Yolo or Yuba can apply once per quarter during open enrollment. If you have any questions, send us an email.
Background
Index (defined by Merriam-Webster's Dictionary of Law): a ratio or other number derived from a series of observations and used as an indicator or measure (as of a condition, property, or phenomenon)
Not a day goes by without us hearing, seeing or reading a news story that mentions some type of index. From indices tracking job data and demographics to industrial growth or overall economic health, we are barraged by numbers and statistics that ask us to believe their figures as infallible and unbiased.
In the universe of company and industry indices, most focus on publicly available numbers obtained from publicly held companies. At least one innovative index, however, has broadened our thinking and our ability to measure regional economic health by tracking both public and private firms: the SARTA Technology Index.
The Sacramento Area Regional Technology Alliance is the economic-development-focused venture capital and technology hub driving regional high-tech growth by supporting entrepreneurs and attracting investment capital into our cities' early-stage technology firms.
The SARTA index was developed and launched in the second quarter of 2003 to serve as the barometer for and guide to the health of our region's nine-county technology and life science economy. It has since been consistently used by regional press, the state and national publications as a credible tool to track the growth sector of the Sacramento-area tech industry's economic health.
How It Works
The Sacramento Business Journal published an article quoting a Dow Jones executive agreeing that all of the indices he knows of are comprised of public companies. On the other hand, the SARTA index consists of the public and private high-tech companies based in our nine-county region.
Q&A
Q: Why has this been so challenging for anyone to do in the past?
A: For a regional index mixing public and private companies to succeed, its creators must address two crucial questions:
Q: How do we develop a formula for consistently and fairly valuing private companies?
A: The algorithm that is currently used took a great deal of time to develop, and at the request of The Sacramento Bee was tested for consistency and viability by an economist from the University of California Davis.
Q: How do we gain private company trust, and convince these firms to divulge confidential information?
A: Thanks to the help of lawyers at both Pillsbury Winthrop and Weintraub Genshlea Chediak Sproul, the SARTA Tech Index includes comprehensive statements of non-disclosure and additional policies protecting confidential information as well as intellectual property.
Collecting Data
Like many public indices, metrics for calculating the SARTA index are known, objective and straightforward. Two weeks after the end of the prior quarter, current index firms update their financial data and new companies apply to be considered for index listing. For public companies based in the region, we use their market capitalization as of the end of the last quarter.
Private companies submit the previous-quarter results for number of employees, any private equity raised, and their fiscal year-end revenue. Since year-end revenue numbers tend to be audited more frequently (than quarterly numbers), this reduces the margin of error.
This confidential data is crunched through the index's algorithm, which creates a market cap in order to compare apples to apples (public to private companies). Ernst & Young then randomly spot-checks company results.
Creating the Index
Then companies with the largest 50 market caps in any single quarter are formally entered as the SARTA Tech Index. To protect the confidentiality of the private companies, individual information is never made public, and only aggregate results are published.
We are the first in the nation to create such an index and successfully operate it for over eight quarters. It has continued to gain national credibility, with the Greater Dallas Chamber of Commerce buying a license to use it in their region, and other cities across the nation soon to follow.
The index remains a valuable instrument to measure the health and status of our region's technology and life science economy. It's an important tool, and will be used by media, government agencies, business leaders in and out of the region and other business development organizations to better understand the region's tech industry's economic health.