Silicon Valley’s Black Sheep: For Valin Corp., Growth Required Real Solutions, Not Tech Bubbles

Chances are that if you started talking shop with Joseph Nettemeyer, CEO of Valin Corp., you probably wouldn’t guess that his company is counted among Silicon Valley’s fastest growing privately held firms.

In fact, it’s a safe bet that it’s one of the few industrial process and supply companies to make the Silicon Valley annual list.

“To enjoy this growth while serving some very mature industries with a very mature product portfolio says that we’re doing something right — and what we’re doing is taking the complexity out of it and making things simple,” says Nettemeyer, while hitting upon the strategy that is credited with diversifying Valin’s offerings and doubling its size.

“My timing was about as bad as you could get,” says Nettemeyer, recalling his arrival at Valin in April 2001. In short order, Silicon Valley would be reeling from the dotcom crash — a phenomenon that Valin was unable to escape in light of 90 percent of its business being lodged in the semiconductor chip manufacturing and supply industry.

“We went from a $75 million run rate to a $25 million run rate, so it was pretty clear that the first thing I needed to do was diversify the business,” explains Nettemeyer, who only 6 months later would make the first of what to date have numbered 30 acquisitions.

Today, the semiconductor manufacturing industry accounts for only about 25 percent of the $150 million firm’s business, while its latest areas of industry specialization include petroleum refining, power generation, chemical processing, and measurement and analytical systems.

“The challenge that started emerging in the ’90s and accelerating after 2000 was that manufacturing was either consolidating or moving production offshore, so we took a look and said that rather than just supply product, going forward we should manage the process, and if a company is going to put something through a pipe — gases, fluids — we could help them to manage it,” explains Nettemeyer, who says that the new approach helped the firm to begin identifying key areas to make strategic acquisitions.

“In the first 5 years, we were more or less just putting the businesses together, but later on, we began making some more strategic acquisitions that gave us some design-and-build capability,” he adds.

One of the more fruitful acquisitions was of Systems Measurement Services of Bakersfield, California, in 2010. SMS was a developer of systems used by the oil and gas industries to separate and measure the amount of oil and gas as it comes out of a wellhead.

“They were about an $8 million business, but were undercapitalized, so we gave them the funding they needed. In 2011, they grew from $8 million to $15 million, and in 2012 they grew from $15 million to $30 million, and this year we think that they’ll do somewhere between $40 million and $45 million,” says Nettemeyer, who then lists other recent acquisitions, including an automation business acquired in 2009 and a number of services businesses acquired in 2011.

Among its roster of value-added offerings, Valin today lists personalized order management, on-site field support, comprehensive training, and applied expert engineering services.

“With these businesses, we can now do more ‘turnkey’ customer activity, and this helps us with profit margins,” Nettemeyer confides. “What you learn living in Silicon Valley is that you don’t have to build everything. We want to own the design. We want to own the intellectual property, but we don’t want to own a weld shop,” he explains.

Eleven years after Nettemeyer’s arrival, employees own 100 percent of the firm, up from 30 percent upon his arrival. Valin has 280 employee owners, and they all share in the long-term benefits of the business, says Nettemeyer.