Higher stakes come to Utah: the state of the state's venture capital.

• Author: Blodgett, John
• Position: Techknowledge

SURPRISINGLY, the tough economic times of recent years haven't taken a toll on Utah innovation and the firms that fund it. Venture capitalists have held steady and see an imminent upswing--a fact that has attracted two new players (one really not so new, one huge) which will serve underserved niches.

vSpring recently fully deployed its first fund, to the tune of 28 investments and $120 million. "The vSpring portfolio is kind of abnormally healthy," says Paul Ahlstrom. He credits the success to the low "infant mortality rate" of its portfolio companies.

Utah innovators are behind 19 of those 28 investments. "Think about how you spend your day," Ahlstrom suggests. "You watch television, you type on a personal word processor, you listen to digital music, you view graphics on your computer, you play video games, you send e-mail over your local area network." He says we spend more than half of our day in front of technologies with a Utah heritage.

[ILLUSTRATION OMITTED]

These innovations once were commercialized elsewhere because of a lack of venture capital here, he says, but this is no longer a problem. "There is more capital and potential to invest than there ever has been," Ahlstrom says. Dell Ventures, JP Morgan, TCV, and other major funds are beginning to invest here, he adds.

"It hasn't hurt that the economy has come back strong and rewarding in the sectors where Utah has technological strength," such as life sciences and IT, he says.

The Canopy Group, like many venture capitalists, maintains focus on its current portfolio. "We have some great exits that we are looking at in our private companies that we're excited about," says Ralph Yarro.

Looking at new opportunities, Yarro believes open source projects have altered how venture capitalists view the software sector. Such projects can potentially devalue intellectual property, he says. "There is some careful adjusting that all money needs to consider as they move into this communal property."

Yarro is "shocked and surprised" economists have yet to explore the economic sustainability and viability of this sector, knowledge he thinks would benefit venture capitalists.

Yarro says it's worthwhile to consider new markets. "The service industry around software and technology is interesting," he says, as are life sciences. "There are always plenty of ideas out there, and plenty of need for capital."

Todd Stevens of Wasatch Venture Fund sees opportunity in open source. "There are ways you can...