The Picayune Rancheria of the Chukchansi Indian tribe has begun buying businesses and investing in companies, creating a much-needed source of capital in the central San Joaquin Valley.

The people who manage the tribe's fund, Mighty Oak Capital, vow to keep many of its investments local -- and they may have to if they want to access special advantages like tax exemptions that are tied to its Coarsegold reservation.

The tribe is using 15% of its profits -- amounting to millions of dollars -- from Chukchansi Gold Resort-Casino to invest in local businesses. Mighty Oak was founded last summer, but made its first local investment last month when it bought an Oakhurst lumber company. It also has invested in apartment complexes across the nation, and it is about to finalize a deal to buy a Clovis commercial construction company.

Most venture capital and private equity investors are concentrated in major cities, including San Francisco and Los Angeles, said Tim Stearns, director of the Lyles Center for Innovation and Entrepreneurship at California State University, Fresno.

There are a few large, organized investors here, including Fresno-based Bulldog Capital Partners, but many companies must attract investors from outside the area.

And when they do, they're often pulled away to be closer to their investors. That's what happened with Plastic Jungle, a Web-based company founded in Clovis that lets customers buy, sell and trade gift cards. It moved its headquarters to Mountain View after receiving a $4.8 million investment from Silicon Valley venture capital firms.

Mighty Oak has an incentive to invest in local businesses: Companies owned by the fund will use the legal benefits associated with the tribe's sovereign immunity, including tax and regulation exemptions and the ability to jump to the head of the line for some federal contracting work set aside for minority-owned businesses.

"Indian tribes are not going to pick up and move elsewhere if they become successful," Stearns said. "They have a lot of vested interest in the Valley."

Sovereignty

The advantages are tied to the tribe's status as a sovereign nation. The lumber company, for example, won't have to pay income or corporate taxes. That means it can cut prices, said Mighty Oak chief executive Case Lawrence.

Oakhurst's Yosemite Lumber Co., which Mighty Oak bought last month, will move its headquarters to the reservation. Yosemite Lumber will provide raw materials to Clovis-based Brelle West Construction, which Mighty Oak also is buying. The commercial construction company will change its name to Mighty Builders and also move its headquarters to the reservation.

Kevin Fanning, who started the company in 1987, will remain president.

Mighty Oak has construction contracts already lined up, including deals to build a chain drugstore in Ceres and a gas station on the reservation where customers won't pay taxes on gasoline.

Fanning jumped at the chance to make a deal with Mighty Oak, noting the slowdown in the economy has shrunk his payroll from 20 to two.

"We're going to have the ability to grow with their backing more than I would have been able to do myself," Fanning said.

American Indian tribes investing in business isn't a new concept.

The Lower Brule Sioux tribe of South Dakota bought Wall Street investment firm Westrock last September.

Ho-Chunk Inc., a company formed by Lance Morgan of the Winnebago tribe in Nebraska, has 18 subsidiaries ranging from a construction company to an advertising agency.