Capital gains: the Utah fund of funds preps for a new round of investment.

• Author: Plothow, Brad
• Position: Focus

Imagine the ebbs and flows of the economic cycle are a storm system. Typically, one might connect foul weather to a sluggish economy, but the opposite is true in this analogy. The gales and torrents of a vicious cyclone represent the boom times--prosperity is raining down relentlessly, and nearly everyone is affected. In our scenario, the proverbial eye of the storm is the time when the economy breathes deep before the raindrops of economic activity start to reappear.

As the macroeconomic environment resets for a hopeful rebound, Utah's financial infrastructure is preparing for a new flurry as well. One of the state government's key tools in spurring financial health for Utah's growing businesses is the Utah Fund of Funds, a quasi-public asset backed by $300 million in legislative commitments. Established in 2003, the Fund is restructuring into a leaner operation and readying to offer a second round of capital to investors with interests in Utah companies.

"We're trying to increase the velocity of venture capital that comes into Utah on an annual basis," says Tim Bridgewater, a career finance man and former senate candidate who signed on as managing director of the Fund in 2010. "We're supporting entrepreneurs and trying to make Utah a more attractive place for investors and their capital."

After committing more than $120 million to venture capital and private equity funds in 2006, the Fund will spend the next six months making the final preparations for a new fund that will come online at year's end. In the meantime, Bridgewater and his team are zeroing in on funding partners and taking advantage of record-low interest rates to refinance the Fund's finances with partner Zions Bank.

The Fund is moving toward its capitalization phase at a strategic time. The state's central technology commercialization accelerator, the Utah Science, Technology and Research (USTAR) initiative, is reaching its commercialization stage after six years in existence, and Utah's entrepreneurs are finding the confidence to toss their ideas into the marketplace. The missing piece: capital to fund all these endeavors.

What is the Fund of Funds?

By legislative mandate, the Fund doesn't invest in companies directly. As its name implies, the Fund invests in other funds, which subsequently channel capital toward companies that show promise and, in many cases, are rooted in Utah.

The Fund received a $100 million commitment from the Utah Legislature in 2003 and another $200...