May 06, 2004

Venture Investments Jump

Venture investments jump

By Dave Anderton
Deseret Morning News

      It's a far cry from the money Utah businesses raised in the late 1990s, but venture capital investments in the state showed solid gains in 2003, according to a new report by the MountainWest Venture Group.

Deseret Morning News graphic

      On Thursday, the non-profit organization, which aims to foster capital development in Utah, reported 53 deals valued at $228.6 million, up 17.4 percent compared with $194.6 million in 2002.
      Scott Young, chairman of the 2003 Utah Deal Flow Committee responsible for the report, said the state's venture deals are consistent with what is happening nationally.
      "Deals were slightly down, but dollar value was up," Young said. "I do think that there is a buzz that deal flow is on the upswing and that hopefully this next year we'll see a big increase."
      Young said Salt Lake-based Wasatch Venture Fund was at the center of many of the 2003 deals, including $6.1 million to Orem-based DriveSafety Inc., a simulator and insurance services company, and $3.4 million to Draper-based Cerberian Inc., a software development company providing Internet access control.
      Todd Stevens, managing director of Wasatch Venture Fund, described 2003 as a "wait and see" period, where many entrepreneurs looked for a jump-start in the capital markets.       Stevens added that his firm saw a drop in the number of new business plans in 2003 but already had seen a marked increase in the quality and number of plans in this year's first quarter.
      Other 2003 venture deals included:

 

• $26 million to FX Energy Inc., an oil and gas company.

   

• $17.5 million to Forum Systems Inc., XML Web services security software provider.

   

• $12 million to Attensity Corp., a company specializing in text retraction technology.

   

      The SCO Group, a Lindon-based company embroiled in myriad lawsuits related to the Linux and Unix computer operating systems, raised $50 million. Yet last week BayStar Capital, SCO's investor, asked for its money back through a redemption of its 20,000 shares of convertible preferred stock.
      Apart from venture deals, there were nine public offerings in 2003, raising nearly $1.4 billion. Nearly two-thirds of that was raised by Zions Bancorp.
      The report tracked 17 transactions totaling $536 million in "other fundings," which included deals by private "angel" investors, private placements, institutional investors and government grants.
      Only 26 mergers and acquisitions with a total valuation of $664 million occurred in 2003, down from $1.3 billion in 2002.
      The sharp falloff of mergers and acquisitions could be a result of fewer large companies in Utah.
      "People are more likely to do M&A when they have a currency they feel is appropriately valued," said Tom Stockham, president and chief executive of MyFamily.com Inc., an Orem-based company that has raised $90 million in venture funds since its inception, but has not raised any funds since 2001. Last year the company's revenues totaled more than $99 million.
      Kevin Jessop, a member of MountainWest's Deal Flow Committee, said Utah is still viewed by venture firms as a good place to invest.
      "We have great innovators," Jessop said. "We have a great work force. Unfortunately, we can't seem to grow it to the next level — to have huge, strong public companies that started here and were grown in Utah."