Was the downturn good for Utah tech companies? Optimism grows as investment capital flows in the beehive state.

• Author: Thomson, Kimball
• Position: Business Trends

THE MOOD at a recent Utah Business roundtable discussion with leaders from the state's information technology industry stood in stark contrast to the almost funereal atmosphere of similar gatherings during the past several years of economic carnage. The CEOs and venture capitalists at this event exuded a palpable excitement and a heady sense of confidence in the future of their own companies and of the larger Utah IT industry.

More Capital

Why this sudden "morning in Utah" optimism in the countenances of these executives and investors?

For some at the table, much of the reason was highly tangible--their companies had recently closed or were about to close sizable funding rounds. For Control4 CEO Will West, the ink had barely dried on the paper from a Series B round of nearly $15 million. Wes Swenson of Forum Systems, Bob Carter of First Choice Solutions and John Knab of Phonex Broadband shared similar stories. Meanwhile, Kent Gilson of Starbridge Systems politely opted out of the discussion in order to finalize a $7 million round.

An Unanticipated Boon?

Counterintuitively, some key players believe the downturn of the last several years has ultimately benefited the state's technology companies, as they shored-up their business models and management teams in anticipation of a tech sector turnaround.

"After three brutal years, Utah has 2,600 surviving IT companies," says Richard Nelson, CEO of the Utah Information Technology Association (UITA). "As the market recovers, these survivors are in a greater position than ever to drive Utah's economy forward and add to the 40,000 high-paying, high-tech jobs they already provide."

According to Wayne Brown Institute CEO Brad Bertoch, "The bottom falling out of the market was one of the best things that could have happened for Utah companies. This has allowed them to really outshine the rest of the country."

Undeniably, Utah is enjoying the fruits of a general improvement in the nation's economic conditions. "The economic engine is running strong now on the state level and on the national level for the tech sector, with initial public offerings and mergers & acquisition activity surging," says Blake Modersitzki, a partner with the Salt Lake-based fund UV Partners.

Growing Investment Options

But Utah's tech sector is actually benefiting disproportionately from the economic revival, according to Bertoch, spurred by improved deal flow opportunities and state programs such as the recent Fund of Funds...