Venture capital on pace for record year

By Brice Wallace 

A venture capital group recently put a spotlight on Utah’s VC ecosystem, but that ecosystem already was shining on its own.

Statistics discussed during a National Venture Capital Association webinar indicate that, like the nation as a whole, Utah’s VC realm is on a path to top recent records for the number of deals and the amount invested.

In 2020, Utah saw a record $1.77 billion invested across 150 deals, putting it 14th among states in deal activity. While the number of deals was higher in 2019, the amount of investment that year was nearly $1.6 billion. In contrast, as recently as 2011, the state had only $371 million invested in 91 deals.

“We’ve seen a lot of growth in recent years, and based upon the data we’ve seen so far … things will look even better in the future,” said Michael Chow, the association’s research director.

The Salt Lake City area dominated the VC scene, with about $1 billion in investments in 2020. The Provo-Orem area contributed about $617 million, while some activity also was seen in Ogden-Clearfield and St. George. Forty-one percent of investments were in information technology and 27 percent in healthcare.

Nationally, the U.S. saw a record $164 billion invested in about 12,500 deals. In the first half of 2021, VC investment already had reached $152 billion in about 7,000 deals.

Last year was “phenomenal” and “really a testament to the robustness and adaptability of the industry that it was able to thrive in conditions unknown in this country,” Chow said. “At this [2021] pace, we can anticipate that even after a record year last year … we are on track to about double the record amount of investment seen last year.”

Several panelists on the webinar said Utah has become attractive for entrepreneurs looking to grow their innovative companies.

“When I first started practicing law, there was a little bit of a vibe that you needed to go to Silicon Valley to build a software company because you couldn’t find the talent and other resources you needed in Utah,” said Chris Shoff, a partner at law firm Latham & Watkins. “My sense is that’s definitely changed.”

John Mayfield, founder and general partner at Lehi-based Album VC, agreed.

“It used to be ‘Why are you not in the Bay Area?’ Now, it’s ‘Why are you in the Bay Area?’ And it’s a better place to build here a lot of times. … I think it has flipped exactly just in my short time being here.”

Mayfield said the cost of talent in Utah is rising from what once was “our little secret advantage.” But Utah has great talent and a heavy flow of tech-interested graduates “unleashed on the market every year” from its universities, he said.

Carine Clark, general partner at Salt Lake City-based Pelion Venture Partners, said many companies want to move their headquarters to Utah because their leaders love the state’s work ethic, workforce and quality of life

Aumni Inc., a Cottonwoods Heights-based company focused on automated investment analytics for the private capital markets, moved to Utah about two years ago. Kelsey Chase, a co-founder and president, said that at that time, starting a company in the Bay Area and Silicon Valley was “sort of the default lockstep motion that most companies look to.” But Aumni’s co-founders, with young families, were lured by Utah’s quality of life.

“You really can’t compete with the cost of living, quality of life and talent base and just the lifestyle that’s available to you in Utah,” Chase said. “It’s, I think, really a well-kept secret as to just how good it is. You really have to be here to understand it.”

Utah has seen much of the company’s employee increase because “we haven’t hit inhibitors to growth,” he said.

“It has, I think, all of the pieces of the recipe that make for just a fantastic ecosystem,” Chase said of Utah. Those pieces include established firms and “exemplar success companies.”

“It has all the foundational elements to really succeed. … The energy here rivals what I knew and experienced on the West Coast, and it is very exciting and very attractive, I think, for entrepreneurs and talent and folks looking to play in Utah.”

Among the elements discussed by panelists was something unique in Utah: a collaborative spirit in the VC ecosystem.

“People ask me that all the time,” Clark said. “They’re like, ‘Why is it that you guys get along so well,’ because it’s a very competitive market while there’s a lot of deals and you guys are funding these companies, but you guys actually like each other.

“I think we all understand that in order for this to work, we need Utah to do well, we need these companies to do well, and we often work together to syndicate deals so that we’re all working to build these bigger pies. … We’re fine to compete but we also need each other to do well.”

Mayfield said the networks in Utah are “fairly tight.”

“I think there’s sort of a built-in incentive to work collaboratively with people.” Historically, it has been a really small ecosystem in terms of capital deployed “and also just a necessity to work together and to raise companies together from the early stages,” he said.

Chase said his company found in Utah an ecosystem of operators, angel investors and professional investors that was “very welcoming to entrepreneurship and wanting to see good companies succeed.”