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Economic River Rafting
Natural History Museum of Utah
Rising Up the Ranks
Step by Step
Utah Ranks No. 1 Again
Why Aren’t Banks Lending?
Utah remains an active hub for business creation, but entrepreneurs report that it is still difficult, if not impossible, to secure local funding. While out-of-staters snap up the good deals, and the Utah Fund of Funds struggles to define itself, entrepreneurs continue the monumental effort of building successful companies in a down economy.
Participants: Marc Porter, Holland & Hart; Adam Slovik, Double Eagle Ventures; Robb Kunz, KnowlegeBlue; William Borghetti, Sendside Networks; Andy Raguskus, Otokinetics, Inc.; Hunter Jackson, Navigen; Mike Alder, BYU; Brad Bertoch, Wayne Brown Institute; Luke Sorenson, Sorenson Capital Lance Black, Eli Kirk; Scott Johnson, AtTask; Gary Goodrich, ProPay, Inc.; Brock Blake, Lendio; Kent Thomas, Advanced CFO Solutions; JD Gardner, ZenPrint; Michelle McCullough, Startup Princess; Tamee Roberts, Utah Fund of Funds; Matt Wells, Holland & Hart; Mark Newman, HireVue Ragula Bhaskar, FatPipe Networks; Dave McNally, Domain Surgical, Inc.; Hal Widlansky, Radiate Media; Dan Young, PC Laptops
What are the things that have affected entrepreneurship in Utah? What is going well, and what is going not so well?
WIDLANSKY: I’m a transplant to Utah—I’m eight years into my five-year plan to be in Utah. A lot has happened in the last eight years. When I came to Utah in 2003 to run a medical technology company, there was relatively little venture capital infrastructure. There were basically three firms, and they all knew each other. You didn’t have the variety of introductions you could get in Silicon Valley, where folks focused on a specific area and you could narrow cast your message to a particular set of investors.
If you contrast that with today, you have a broader set of investors here in Utah, but you also have a ton of money coming into Utah from other places. The funds that we raised at my current company, the majority of venture funds came from the East Coast. We have participation with a local lead investor, but the vast majority of the funds came from outside the state.
We’ll be announcing later this week we closed a round of financing in record time, under eight weeks, and grew our company from 50 people to 240. We led that out of the East Coast. Eight years ago it was very difficult to get an East Coast venture fund to pay attention to a Utah company. The exits that we have seen, both IPOs and acquisitions, in the last five or six years have really shown the rest of the venture market how mature this community is in terms of growing startup companies. That’s a pretty dramatic change.
RAGUSKUS: Raising money for Sonic Innovations 13 or 14 years ago was easy. There were a lot of Utah private investors who got the seed round started, and then we brought in West Coast and East Coast big-name venture firms, and then Goldman Sachs took us public and it was a great big success.
Based on that success, I went back to those same people from a new company and nobody was interested in investing in a startup. So I am not sure that the word venture still applies to the term venture capital. Everybody wants to be a late-stage investor, when most of the risk is gone. The big change I’ve seen is the risk-averse nature of investors, whether they be the individual angels or professional VC funds.
What does an entrepreneur do? You look at the environment and try to find a path to win as opposed to whining about all the problems. So we found some angels on the East Coast who gave us $7 million to get started, and now we’re going to skip all the VC stuff in the middle that we went through last time and go directly to a strategic requirer.
Do you think it’s because of the nature of the medical device industry?
RAGUSKUS: Yes. Traditionally, the Food and Drug Administration has given its highest level of approval, called the PMA, to about 100 to 120 companies a year. Last year it was 12 companies, this year it’s three. So the FDA is just shutting off innovation for whatever reason, bureaucracy or saving money, inattention. I don’t know. When the FDA will not approve products, companies don’t get funded. VC money has pretty much dried up for medical devices.
SLOVIK: The good part and the bad part about doing work in Utah is it’s still a relatively small community. The good part is that I can get a meeting with practically anyone. Everyone here is one or two introductions away.
That’s also bad in that everyone knows you, so it’s easy for someone who doesn’t like you to kill a deal. If someone had a bad experience with you, they’re like, “That person is terrible.” Next thing you know, everyone knows about it. So you don’t have that anonymity, and you don’t have the kind of resources of having a large ecosystem.