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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?
So we really need to work on figuring out seed capital. We have a lot of great entrepreneurs in this state, we have a lot of good things going, but we need fuel right at that earlier stage so that we can get the big exits later on. Everybody is still moving upstream and nobody wants to write those early-stage, higher risk checks. That’s going to be a critical ingredient for success in the future.
JOHNSON: The VCs here in Utah are very willing to participate in a deal, but not as willing to lead in a deal. Maybe that boils down to technology vision, technology experience—the confidence that you can pick a winner and make a difference in its success. That’s really what’s needed to be able to lead a deal.
We have had a lot of experience with local companies where they told us no forever until somebody else wanted in, and then they wanted in too. By then you just don’t want to continue forward that way.
Another challenge we have is anybody who wants to be a serious technology executive has an issue with Utah. That’s something we’re starting to fix, but it’s really tough to recruit experienced tech executives to Utah because of the stereotypes. This is a fantastic place to do business. We have a great pool of rank and file here that is great at getting stuff done. But when you want to find somebody who’s built a large organization and knows how to run that straight path between A to Z to a public company, it’s slim pickings here in Utah.
As we get the critical mass and we see the Fusion-ios, the ProPays, and eBay and Twitter, and we get a good conglomeration of tech companies here, we’ll be able to attract tech executives who realize that if you come to Utah and something goes awry, there is still a lot of opportunity to have a career in technology here.
Bhaskar, you’ve served on the governor’s economic development board. What are you hearing? Are we continually playing catch-up?
BHASKAR: The need for seed capital was short even in 2002. That’s when we started the concept of the Fund of Funds to help seed capital. The Fund of Funds evolved into funding higher-level companies rather than seed capital. So the very purpose of Fund of Funds was emasculated in the process of becoming acceptable to the government for it to give tax credits and tax guarantees.
Things that are needed in this state are more uniform incentivizing for job creation so that when you create a job, you won’t have to fill out a big set of long forms or need to hire lobbyists, consultants to get tax incentives from the state. We need something where if you create jobs, you should be able to send in a simple form, and maybe the first year get incentives to create jobs, because the more jobs we create, the better the economy.
We have seen a slow down funds, beyond startup seed funding. When you want to put in a $10 million, $20 million or even $100 million factory, there is little money in this state. Most of the banks are very small and can only do $1 or $2 million deals. You have Zions on the higher end. All Wells Fargo decisions are made in San Francisco.
What we now have are more entrepreneurs and a little bit of increase in money, but the problem is the same. There is a gap between need and availability. We really need more of our currently successful entrepreneurs to create more venture funds—because they understand business, they know how to invest in business, and they know how to help management. The more millionaires we create, obviously, the more venture funds we will create.
Currently, it’s taking more of the form of angel investing rather than organized VC groups because it’s hard to get very strong personalities to form a VC group. Overall, VCs have grown quite a bit. The biggest venture fund was $5 million in the state. So we have come a long way. But even when we needed money, we got some money from Utah, but most of our money came from the East or West Coast. So nothing has changed during the last 10 years. It’s just more entrepreneurs clamoring for more money.
WIDLANSKY: I hate to say it’s cultural, because that’s a loaded concept in Utah, but it is. A lot of folks here look for that early exit. There’s a lot of risk aversion here. When I joined my current company, one of the first things I told the management team is my philosophy is that a home run is way better than two doubles. And that’s how we are going to run this company.
That’s a mind-set. It’s partly because I spent 10 years in Silicon Valley and Los Angeles during the hayday, when we took Citysearch public and a lot of people went and bought new cars. But that mind-set that it is possible to swing for the fences and occasionally knock one over the fence is still somewhat foreign here.