2016 Sees Utah top $1B in venture capital for the first time

2016 saw Utah companies raise over $1 billion in venture capital, a huge milestone for the Beehive State.

99 Utah companies raised $1.17 billion in 2016 according to the latest Venture Monitor report, from NVCA and Pitchbook, closing out 2016 Q4.

2016 saw total VC investments nationally shrink from their peak in 2015 (with $69.1 billion invested vs. $72.3 billion in 2015) as some of the unicorn bloat shook out of the market and skittish VCs withdrew from seed stage deals and bet heavy on later stage rounds. That’s pretty good news.

The great news is that Utah bucked the national trend with a banner year in 2016. What’s behind Utah’s growth running counter to the rest of the country.

Well, Utah does a lot with a little.

In 2015, Utah firms reported $875 Million in capital under management. That’s after coming in a respectable 8th place in the country for new commitments to venture funds: $284 million for 2015.

But in terms of total capital, that puts Utah 18th in the U.S. (even D.C. is ahead of us and they aren’t even a state). If the 2% rule held true, you could pay the management fees for every single VC Firm in Utah for less than $18 million. Muy poco.

Look at the giants in VC. CA by contrast reports over $90 billion and NY and MA are each over $20 billion under management.

Historical VC raised in Utah 2010–2016

So Utah’s capital resources are puny.

In other words, despite Utah’s local venture firms growing their funds at a healthy clip—and those firms doing an awesome job at getting Utah companies off the ground with their seed and A rounds—the companies in the state still need and capture outside investment.

Modest as locally available capital is, the remarkable thing in Utah isn’t the age or maturity of its locally sourced capital. Utah’s story isn’t about a venerable history of finance (no disrespect to the firms that have operated in the state for years). No, Utah’s story is the explosiveness of its growth.

Utah now represents 1.7% of all venture raised in the U.S., Utah isn’t the heavyweight Lennox Lewis, it’s welterweight Sugar Ray Leonard punching way above its weight class and coming on with a fury.

Utah’s on a three-year tear. As anyone who attended this month’s Silicon Slopes Summit can tell you, it’s showing no signs of slowing down.

It’s interesting to note that over half of Utah’s funding falls into the growth equity category. Ironically, this is evidence of Utah companies focusing on building their businesses in a more traditional sense, focused on revenue growth rather than growth at the expense of revenue. Utah startups, even in tech, tend to be prematurely profitable, conservatively run businesses with legitimate traction measured in long-standing metrics—crazy stuff like consistent revenue growth from paying customers.

Utah ranks 8th in the nation in terms of total capital raised in 2016 (behind CA, NY, MA, TX, FL, WA and IL respectively), but is coming off a 4th place ranking in 2015 for growth equity raises at $538 million.

Utah has maintained its 3rd place ranking for per capita venture capitalsince 2014, beating out New York for the #3 spot again in 2016 with $390.45 per person in the state.

The moral of the story is that if you’re looking to leverage a disproportionately favorable startup ecosystem, which won’t require you to mortgage your firstborn to rent an apartment nor to sacrifice your health and family for phantom productivity, follow in the steps of companies like Chatbooks and wherever you started, find a way to locate your startup here.

Source: NVCA/PitchBook 2016 Q4 Venture Monitor Report


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