December 1, 2011

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Con Wadsworth

Mark Tuffin




Utah Business Staff

December 1, 2011

On the exit side, it’s almost like a self-fulfilling dynamic, because on the one hand I’ve been a part of some deals that, at the time, I thought were selling way short. And yet looking back after two or three years, that was literately the very top price that company could have gotten. So for those founders, and even for investors, we should be straight-up grateful that there was enough motivation around that team to take the deal when they did.

Once you get a company to a certain point, you really need to have that funding continuum and the human capital of people who can take the company from a double-digit million dollar company to $50 to $100 million and build that infrastructure to become a public company.

We are starting to see that infrastructure develop in the form of Omniture, Skullcandy, Fusion-io, but they are still very few and far between. It’s almost like with every deal we do, we swing for the fences, but then realize taking a base hit or advancing the objective of the founders and being smart as the market changes is probably the more important priority

As entrepreneurs, what are your greatest challenges?

YOUNG: In 2002 up to 2006, I used to go to the Oyster Bar, and there were 100 of us with Ferrari F360s. We used to go to Vegas and rent a whole club for two days, right? That changed. A lot of people got wiped out. So there is a lot of fear. There’s still a lot of false evidence that appears real in the minds. That’s why you’re seeing a lot of companies and serial entrepreneurs exiting deals quicker because they want to throw some gold or something stable into their vault.

I don’t think a lot of CEOs have a plan. They’re reacting instead of responding now because of fear. That fear is in all our hearts, every entrepreneur I have talked to. But the beauty is that right now, when so many people are down, people are scared to put their chips on the table, but a good investment right now—we’ll look back, 10 years from now, saying, man, I should have done that. I should have bought 10 of those. That’s going to happen. I would say shed a little bit fear and take a little bit of risk here.

McCULLOUGH: I deal in a little bit of a different space because I’m dealing with a lot of small businesses, a lot of women who are branching out, and they don’t know how to find funding, but they are bootstrapping. They’re doing so successfully and growing businesses. One of the things I love about Utah is it’s easy to start and grow a business. The networking here—as was mentioned, you can get meetings with people in one or two introductions and make connections that will help grow your business.

The only problem I am seeing is we have lots and lots of little businesses that are all trying to compete for the same eye, that are all trying to stand out. Then what ends up happening is they get gimmicky instead of standing on their space of what they know and being able to promote what they are good at. They are trying to separate themselves with a gimmick instead of separating themselves with value and quality.

BROCK: There’s some exciting things happening in Utah, and some disappointing things as well. The angel community is really starting to get some momentum. Alan Hall was very influential in that several years ago, and then others have really made a huge impact on the establishment of the angel community. I like the mentor capital programs that are going on—BoomStartup, for example. There’s tons of momentum. Those really early-stage companies get those ideas off the ground. It’s exciting to see that.

The big hit on Utah historically was that we weren’t able to grow billion-dollar companies and we were selling out too early, but Altiris and Omniture have kind of led the way, and we’re starting to see the infrastructure to build some of those larger companies that can go public and make many millionaires.

The most disappointing thing for me is the VCs here in Utah. So many of them look elsewhere for deals. We have all these VCs from Silicon Valley and back East cherry picking deals that are right under the nose of our VCs here in Utah. Highway 12 Ventures, who we raised our round from, sits up in Boise and just picks off deals.

BoomStartup is a different approach both in terms of the investment vehicles that you’re dealing with, the types of companies you’re dealing with, the push to exit, etc. What are you seeing and what do you think is needed?

KUNZ: Looking back five or six years, we have done a great job in terms of building more formal angel groups. Not only building those groups, but syndication among those groups has been substantially better. As a guy that’s very focused on the early-stage companies, our seed capital is still really broken in this state. I was just in the Bay Area yesterday in a room full of 15 startup companies and 100 investors, and there was probably over $1 million dollars of checks written in that room within 45 minutes.

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