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Utah draws B2B SaaS, and broader investments, to the Silicon Slopes

Domo, the Utah enterprise-software company, is rumored to be preparing for a public offering. And it will not be the last VC-backed tech company from the Beehive State to go IPO.

Domo, valued at $2.3 billion, is a bellwether for the venture industry near Salt Lake City, where businesses founded in the Silicon Slopes have drawn investors from coastal states, Europe and the Middle East.

In the past 12 months, Utah companies raised $577.8 million from venture investors across 50 deals, Thomson Reuters data shows. In Q1 2018, Utah companies raised $143.2 million across 15 deals, on pace with the 15 deals and $148.2 million raised in the year-earlier period.

Based in American Fork, half an hour south of the capital, Domo had the largest raise in that time period, a $105.2 million round led by BlackRock.

Recursion Pharmaceuticals, Salt Lake City, raised $60 million from Advantage Capital Partners, CRV, Data Collective, Epic Ventures, Felicis Ventures, Lux Capital Group, Menlo Ventures, Two Sigma Investments, AME Cloud Ventures and Obvious Ventures.

“The area has great fundamentals” for a tech and venture ecosystem, said Gavin Christensen, managing partner at Salt Lake City-based Kickstart Seed Fund. “Great schools, an entrepreneurial culture, kids graduating without student loans” are some of the factors contributing to the region’s role as a tech hub, he said.

“If you fail, you’re not mothballed your whole life. And there’s a lot of technical talent.”

Venture Utah Data Report
Photo of Utah map with pin courtesy of ilbusca/iStock/Getty Images.

Of the Utah deals listed, 28, or 56 percent, were with software-sector companies. Across all venture deals with U.S. based-companies in the past 12 months, 35 percent were with companies in the software sector.

But investment sectors are diversifying, according to Sid Krommenhoek, managing partner at Lehi-based Peak Ventures. Historically, venture deals were “much more homogeneous,” with many companies working in the B2B-SaaS sector, he said. “But the breadth of innovation is expanding,” he said.

Other sectors that saw venture deals in Utah in the past year include the chemicals and material industry, ecommerce, and medical therapeutics and pharmaceuticals.

Among investors, Salt Lake City venture firms unsurprisingly made the most deals with Utah-based companies. Epic Ventures invested in seven local companies in the past 12 months, followed by Pelion Venture Partners and Kickstart Seed Fund. Pelion and Kickstart each invested in five local companies during the period, according to Thomson Reuters.

Kickstart reported higher numbers, with 24 investments into Utah-based companies in the past 12 months, the firm told VCJ. And CB Insights lists the firm as Utah’s most active investor from 2012 to 2017.

Other firms from outside the state have made multiple investments in the past year. Data Collective of San Francisco and Maverick Capital of Dallas made three investments, and St. Louis-based Advantage Capital Partners invested in two.

And 65 firms, including Accel Partners, Y Combinator, Kleiner Perkins Caufield & Byers and Menlo Ventures, participated in at least one round with Utah-based companies in the past year.

“At this point, pretty much everyone” has invested in companies based in the Salt Lake City region, Christensen said. “It’s more of a list of those that haven’t versus those that have.”

The region has also drawn international attention. Christensen said that his firm has received requests from European investors to be limited partners in his fund, and that other venture firms in Salt Lake City had received investments from Mideast sovereign-wealth funds.

In addition to Domo, Farmington software developer training platform Pluralsight is also preparing to go public, and Christensen said he expected five to 10 more Utah companies to launch IPOs in the next several years.

Since the beginning of 2015, 12 venture-backed Utah-based companies have exited, Thomson Reuters data shows, taking an average of 6.9 years to exit. During that period, the nationwide average for a company to exit was 6.3 years.

The time difference could be an anomaly in the data, or it could be that entrepreneurs in the region are more self-sufficient by necessity, said Jeff Burningham, founder and managing partner at Peak Ventures.

Historically, a lack of capital in the region meant entrepreneurs had to be more cash-conscious than they might be in other regions with more venture firms and available capital.

“There’s a bootstrap mentality here,” he said.

“If you’re a polar bear in the coldest, furthest region of the Arctic, you might store up a little more fat because you don’t know when you’re going to come across your next seal,” Krommenhoek added.

Below are the largest venture deals with Utah-based companies in the past year.

Top-Utah-based-venture-deals

Gavin Christensen, managing partner at Kickstart Seed Fund. Photo courtesy of the firm.

Update: The story above was updated to include CB Insights data regarding Kickstart as the most active investor in Utah from 2012 to 2017.