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Fertile Ground

Utah is rich with resources for homegrown companies

By Di Lewis

From the time pioneers first rolled into Utah, the State has provided a welcoming place for those who have the drive to work hard and build something from scratch.

From the time pioneers first rolled into Utah, the State has provided a welcoming place for those who have the drive to work hard and build something from scratch.

Even the simple State motto — “Industry” — reflects a core value that binds many Utah residents. Hard work is hard coded into Utah’s workforce, and the State’s government is focused on making it easy for businesses to perform. Utah is home to a wealth of resources both public and private for those who would become modern-day pioneers. Along with its renowned business friendly climate, Utah offers an educated workforce, low cost of living, high quality of life and a growing investment community, all of which makes the State an attractive option for aspiring and seasoned entrepreneurs.

Hometown Heroes

Perhaps the most obvious measure of the successful environment Utah provides entrepreneurs is the growing number of deals and acquisitions of local companies taking place in the State. These deals are part of Utah’s rich and growing economy, and they are being created thanks to the innovative ideas of local business leaders.

Vivint CEO Todd Pedersen is one of Utah’s success stories. Pedersen came to Utah for school and turned his post-collegiate job into a $2.1 billion deal.

In 1992, Pedersen started his company at age 22, doing outsourced marketing and sales work for pest control companies. APX Alarm was founded in 1999 when the company began alarm hardware installation and monitoring. Pedersen’s vision for the company grew as quickly as the business did, and in 2006, APX Alarm signed a $75 million deal with Goldman Sachs, Jupiter Partners and Peterson Partners, a local private equity firm.

APX Alarm outgrew its name once it started offering home automation, energy management and solar power. In 2011, the company launched a major rebrand, taking on the name Vivint. The company has continued exponential growth, Pedersen says, and is now the second-largest home security provider in North America and is quickly moving to become second-largest in the world.

Global investment firm Blackstone paid more than $2 billion to acquire a majority interest in the company in September 2012. “We’ve got pretty grand plans on what’s next,” Pedersen says. “We’re a $2 billion startup, essentially. We’re growing rapidly.”

Because of that meteoric growth and huge success, Pedersen says he can’t see his company headquartered anywhere else. While Vivint has a presence around the globe, Utah’s hardworking, multilingual sales force is so key to Vivint’s operations that Pedersen says it’s one of the best things about the State.

“I can’t imagine another place that I would run our corporate offices out of,” he says. “I wouldn’t even consider it, to be honest.”

Amy Rees Anderson, another seasoned entrepreneur, agrees with Pedersen, saying Utah is a great place to build a business.

“You have a ton of hardworking people. There’s a unique work ethic, here in the State, of accomplishment. People want to accomplish things. They’re a lot more goal-oriented … There’s an emphasis on integrity and honesty in what you do, so I think it lends itself well to an environment where businesses can start and flourish,” says Anderson, founder and managing partner of REES Capital and former MediConnect Global CEO.

The solid foundation Anderson built for MediConnect Global paved the way for a $348.6 million acquisition by Verisk Analytics in March 2012.

“It was a really unique corporate environment at the time that allowed us to have huge success without putting out tons of capital, and that made us very profitable,” she says. “If it wasn’t for the workforce we pulled in and the quality of people working for us, we never could have done what we did.”

In addition to the State’s great workforce, Anderson says MediConnect took advantage of the public and private resources available in Utah. For example, the Economic Development Corporation of Utah helped with market research, and the Utah Department of Workforce services collaborated with MediConnect on basic testing and gathering resumes.

“We’ve had great help from people,” she says. “And when we reached out to them and needed help to grow, we were able to get the assistance that we needed.”

After MediConnect Global was acquired, Amy Rees Anderson formed REES Capital to give back to and mentor other companies.

“I decided to keep it in Utah because of the fact that there is an unbelievable idea pool that comes from Utah,” Anderson says. “I hope to see more of these Utah companies — instead of starting here and then leaving the State — to start and be able to stay here in Utah, because you do have all the right components here for a successful company to do phenomenally well.”

A Rising Tide of capital

With every new startup, the State’s business ecosystem is strengthened, says Pedersen. “There are so many companies that are up and coming, so many that have potential to be billion- or multibillion-dollar companies. And the more that happens, the more people will come.”

Those kinds of companies are also attracting the attention of tech-savvy venture capitalists from around the country, he says, which will attract more businesses and higher-level talent that in turn build the entrepreneurial community.

Utah has always been a good state for business, but it was a best-kept secret for a long time, says Brad Bertoch, president at the Wayne Brown Institute. That is changing quickly, Bertoch says, and the number of entrepreneurs and available capital has skyrocketed.

“It’s just huge,” Bertoch says, about the investment community. “It has grown exponentially. I can’t tell you how many orders of magnitude it is bigger than it used to be.”

From 2000 to the present, Bertoch says Utah has grown from a handful of venture funds with a few hundred million dollars to 15 or 16 venture funds with $3.5 billion in capital.

The Utah Fund of Funds helped raise awareness of Utah’s fertile field for innovation, Bertoch says. Even more people followed with the formation of the Utah Science Technology and Research (USTAR) initiative, which he says was an invaluable investment in human capital.

Venture capitalists across the State have also weathered the recession much better than the rest of the nation, he says. Utah offers businesses a moderate tax environment headlined by a corporate tax rate that hasn’t risen in 15 years. In addition, Utah’s prudent and fiscally responsible State government’s efforts to trim unnecessary regulation have created a stable place for companies to grow. “When you can stay predictable for the last four years of what we’ve gone through, it really shows you’re in charge and really have a commitment to what you say you’re going to do,” Bertoch says.

Frank Pignanelli, executive director of the National Association of Industrial Banks, believes Utah is a hotspot for entrepreneurs and an example of smart growth due in large part to government support.

In addition, Utah has been a long-time supporter of industrial banks, understanding that they’re safe and perform well, Pignanelli says. The State has continued to provide fertile ground for entrepreneurs because of a “government that’s a firm but fair regulator and an educated workforce,” he says.

Pignanelli says industrial banks grew from $10 billion to $250 billion in the five years leading up to 2008.

“Our entrepreneurial spirit has created and fostered financial services that are innovative, yet safe and secure,” he says. “Some [industrial banks] invest very heavily in venture capital funds for startup companies. Not only are they themselves entrepreneurs, but they are contributing to the entrepreneurial environment.”

Utah is reaping the benefits of being a good location for financial companies, he says, and is home to two-thirds of the roughly 30 active industrial banks nationwide. Locals also see rewards because banks must put about 1 percent of assets toward community-driven projects, he says.

Home Base

There are few better examples of the type of innovation and successful business development the State fosters than BLOXR.

BLOXR was able to take its safer, lightweight, lead-free radiation shield from concept to market in less than two and a half years, says Ashok Khandkar, BLOXR president and CEO. With the help of BioInnovations Gateway, a government-owned life sciences incubator, and a talented team, Khandkar says Utah was the perfect place for BLOXR.

“Utah is very small business friendly and encourages the development of new businesses and growing businesses, because the State really does want business here. They’re not just looking to attract the Adobes. They equally want small businesses to start here and stay here,” says Ginny Rowland, BLOXR vice president of marketing and education.

Khandkar says he’s been in Utah for the last 27 years and between the tight-knit venture community and business-friendly government, “it just made sense to have Utah as a base.”

If you have a good track record, he says it’s relatively seamless to raise capital because of the close venture community in Utah.

Being able to take advantage of space in the BioInnovations Gateway Business Incubator (see page 66) which is state and local Granite School District supported was also very helpful, Khandkar says. BLOXR even graduated from the Gateway early because it accelerated the company’s development.

Aside from the business help, Khandkar says the quality of life in the State is simply amazing. “You can go from work to home to the mountains all in one day and you’re still refreshed.”

And Rowland jokes, “You never have a problem with someone coming to your office. People like to come here so they can ski in the winter and go to the national parks in the summer.”

 

Resources:

Utah Department of Financial Institutions
www.dfi.utah.gov

Utah Bankers Association
www.uba.org

Utah Credit Union Association
www.utahscreditunions.org

Small Business Administration
www.sba.gov

National Association of Industrial Bankers
www.industrialbankers.org

Utah Microenterprise Loan Fund
http://umlf.com

MountainWest Capital Network
www.mwcn.org

Utah Fund of Funds
www.utahfof.com