Seal the deal: Utah's venture capital community still funding.

• Author: Bertoch, Brad
• Position: Special Section Financial Update

The venture capital situation in Utah is a mixed bag. The good news is that since 2000, venture capital under management in Utah has increased 17-fold, from $200 million to almost $3.5 billion. But "dry powder" (investable funds) has diminished. State-sponsored R&D has increased dramatically with programs like USTAR and the Centers of Excellence (COE), University-based entrepreneurship programs have exploded, angel groups abound and a cadre of truly great service providers exists.

All that is true, but the economy has taken its toll. The Utah Fund of Funds' executive director has left, and the remaining $200 million in contingent tax credits remains unsubscribed. Furthermore, COE is probably not going to fund any companies this year. 2009 was an awful (in every sense of the word) year to raise money for a venture fund--the worst in recent memory. On the upside, 2010 is looking markedly better. Last year I stated, "Overnight, homegrown high-tech economic development has gone from an economic cult to the No. 1 mainstream economic religion. In fact, in 2005 Utah was third in per capita venture capital investment, and 2010 is looking pretty good. Don't be fooled, it took 35 years of hard work by some great people to make it happen. Bless them."

I went on to say, "Local stalwarts who have done the heavy lifting in financing the Utah tech community--UV Partners, Epic Ventures, vSpring, Canopy Group and EsNet--successfully raised new money just before the 2008 collapse. At the close of 2007, Sorenson Partners raised a new fund in 30 days. Rumor had it Peterson Partners raised its last fund in 30 minutes. Then there's Huntsman Gay, $1.2 billion first close--it still takes my breath away. What about Zions Bank, deploying millions in venture debt in two and a half years--that's commitment! Even Silicon Valley Bank had opened a loan production office in Utah." I hold by what I said, but 2010 will have its challenges.

Two years ago, I forecast a rosy 2008 for Utah entrepreneurs. I was close. At least Wayne Brown Institute (WBI) had a record year. In 2008, WBI Utah alumni companies had $1.3 billion in sales, employed 6,200 workers, generated more than $49 million in state taxes and raised more than $170 million in capital. And 2009 isn't as grim as you might think, according to the recent MWCN Deal Flow Report: venture investment was on par or a little ahead of 2008. While WBI alumni companies were down in capital raised, exits exceeded $2 billion. It...