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FEATURE

Utah Fund of Funds Report Card

When the Utah Fund of Funds (FoF) initiative was established, its proponents envisioned a catalyst that would support existing venture capital funds, help new funds get started in the state, and maximize the diversity and quality of venture capital available to Utah's entrepreneurs and growth companies.

It's been 18 months since the launch of the FoF and Jeremy Neilson, managing director, says results to date are “off the charts.” Indeed, the FoF has become a major economic development engine in its own right:

• Over 160 venture capital groups have sought funding
• 300 Utah companies have been evaluated by venture capital groups
• 22 Utah companies have received $49 million in venture capital investments
• Those 22 companies have gone on to raise a total of $293 million in venture capital investment
• 974 jobs have been created among the 22 companies
• Average annual salary: $62,000
• The jobs are expected to contribute $75 million in tax revenue to the state over the next decade
• Among the results is a commitment by non-Utah funds to spend more than 900 days with local entrepreneurs. Participating funds include six Utah funds (including three new ones), plus six from California, two from the New York/Boston area and one from Idaho.

The FoF was created by the Utah Legislature to maximize the amount, quality and diversity of capital funding available to early-stage and growth-stage companies in the state. The fund used tax credits as collateral for a $100 million loan from Deutsche Bank. Rather than investing directly in specific companies, the FoF is structured to incentivize high-quality, professional venture capital firms and encourage them to focus some of their investment efforts on Utah entrepreneurial ventures. The FoF invests in carefully chosen venture firms, which then commit to establish a working presence in Utah. The venture capital companies expect to recover their investments, plus a profit, when the start-ups they invest in go public or are purchased by other companies. When that happens, the venture capital company pays back the Fund and shares any profit. The investment, plus interest, is repaid to Deutsche Bank, so it doesn't cost the state of Utah anything, Neilson says.

To date, the FoF has made commitments to 15 different venture capital funds, and Neilson expects the FoF will invest in five more by year-end, spending all of the $100 million. What's extraordinary: “Of the 100 million in our coffers, we've already seen $49 million come back to Utah,” he says. The Utah FoF has been so wildly successful; Neilson is hoping the legislature will provide tax credits for another $200 million during its 2008 legislative session. Deutsche Bank AG affiliate, DBAH Capital LLC, which put up the entire $100 million allocation for the initial FoF, is ready to repeat, according to Neilson. Utah State Senator Scott Jenkins, R-Plain City, plans to introduce a bill in the 2008 legislative session in January that would create $200 million more in tax credits, which would be used as collateral for the $200 million loan from Deutsche Bank. The FoF expansion has wide support among public and private economic development officials, according to Neilson.

Jeff Edwards, president and CEO of EDCUtah, says he'll ask the EDCUtah board to support legislative measures to increase the FoF by another $200 million. “We're going to support Jeremy's efforts. The Utah Fund of Funds has created remarkable exposure for the state with the investment community. The venture firms that have come here have far exceeded our expectations, and the demand for this kind of money is solid,” he says.

The creation and performance of the Utah FoF has propelled Utah's reputation to new heights within the venture capital community. “This is the best of both worlds for us,” Edwards says. “It has changed the image of the state and brought venture capital firms to the state that wouldn't have come here otherwise.” Indeed, Utah's venture capital landscape is changing and some VC firms now see Utah as the No. 1 tech growth area in the country, thanks largely to the Utah FoF.
 

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CALENDAR

Sept. 27: What's Going Down Up North (USU Innovation Campus - Calibration Auditorium, Logan). For more information contact: Monica Nielson (435) 797-9610 or email: whatsgoingdownupnorth.usu.edu

Oct. 6-10: Industrial Asset Management Council (St. Louis)

Oct. 18: PTAC Symposium (Sandy, Southtowne Expo Center)
Cost: $50.00/person for the first person and $35.00/ additional registration from the same company. Fee includes a continental breakfast, lunch, and all the training sessions, exhibits and materials. Time: 7:45 a.m. to 4 p.m. Event Coordinator: Myrna Hill
Phone: 801-388-775. E-mail: ptac@utah.gov

Oct. 28-31: CoreNet (Atlanta)

Nov. 7: EDCUtah Quartely Update

Dec. 19: EDCUtah Holiday Open House

IN THE NEWS

Economic Development Headlines from the Past Week

Major new transit oriented project to get under way in W. Jordan

- JStation, a new transit oriented development, is about to get under way in West Jordan that will involve an extensive renovation and expansion of an existing 20-acre, 275,000 square foot shopping center. (SL Enterprise)

Mark Miller investing $20 million in new SLC Toyota dealership

- Auto dealer Mark Miller is investing more than $20 million in a new Toyota dealership to be located on property in Salt Lake City formerly occupied by Larry Miller Ford Downtown. (SL Enterprise)

Salt Lake DNA-related testing laboratory to expand

- Sorenson Genomics to embark on a multi-million dollar expansion and upgrade of its Salt Lake City facility, due to increased demand for DNA-related testing services, both pubic and private. (SL Enterprise)

Digital video surveillance franchise eyes Utah

-  EYESthere, a Texas-based provider of turnkey, customized digital video and software security solutions, plans to open two franchised locations in the greater Salt Lake City area by 2010.
(SL Enterprise)

Outdoor Manufacturers Thank Ogden

- As we wrap up an amazing summer of adventure in beautiful Ogden, we, members of the outdoor industry, would like to thank the people of Ogden for climbing, backpacking, trail running, water-skiing, boating, biking, camping and fishing with us. (Standard Examiner)

U. setting tech world on fire

- The Salt Lake City area could see a boost in high-paying jobs in the coming months with the development of 17 new companies based on technology created at the University of Utah. (SL Tribune)

Legislators seeking diplomacy training

- Several members of the Legislature's Utah International Trade Commission on Tuesday recalled awkward moments — from handling toasts to meeting complete strangers — during international diplomatic or trade events, and the commission's co-chairmen suggested that training, information databases and coordination with certain organizations could alleviate those troubles.
(Morning News) (SL Tribune)

Valley groups receive tourism grants

- Four Cache Valley organizations have received matching grants from the Utah Office of Tourism to be used for out-of-state marketing efforts that will hopefully lure more tourists to the region. (Herald Journal)

Millions of dollars headed to Utah

- Millions of dollars are just a few minor details and the John Hancock of George W. Bush away from coming to Utah County. Sen. Bob Bennett, R-Utah, announced Wednesday that the U.S. Senate had passed funding for such Utah transportation projects as air traffic surveillance for the Provo Airport and bus rapid transit for the Provo/Orem area.
(Daily Herald)

Utah has 4 of top 100 fastest-growing counties in nation

- According to the latest census data, the Beehive State has four of the top 100 fastest-growing counties in the United States. Tops for growth in Utah is Utah's Dixie, where communities like St. George have helped Washington County grow a whopping 44 percent from April 2000 to July 2006 — ranking 16th nationwide over that period. (Morning News)

Utah beats nation in hiring rate

- Employers along the Wasatch Front plan to increase hiring in the next three months at a rate almost double the U.S. average, according to a national survey of 14,000 companies that will be released today. (SL Tribune)

Half of N. Utah Employers Plan to Hire

- Half of all Ogden-area employers plan to hire for new positions in the last three months of the year, a new survey found, but whether they will be able to find enough people in a market experiencing full employment remains to be seen. (Standard Examiner)

Utah employers optimistic

- Utah employers may be having trouble finding workers because of the state's low unemployment rate, but that's not swaying their intention to hire. Fifty-two percent of companies surveyed by employment services company Manpower Inc. indicate they will be adding staff during the fourth quarter, while only 3 percent expect to shrink staffing levels during that period. (Morning News)

Zions Bank Wins National Award for Business Banking

- Zions First National Bank, the top provider of U.S. Small Business Administration loans in Utah and Idaho, has won a national award for excellence in serving small businesses, national consulting firm Greenwich Associates announced this week. (Utah Business Magazine)

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The EDCUTAH Economic Review is a weekly publication of the Economic Development Corporation of Utah. It is distributed to EDCUTAH partners and selected other government and civic organizations interested in Utah's economic development. If you prefer not to receive this newsletter, please use the link below. Subscribe or Unsubscribe Your comments and suggestions regarding this newsletter are always welcome. Click here: Comments