Oct 28, 2003

Utah venture capital on the upswing

By Lesley Mitchell
The Salt Lake Tribune 
   
Venture capital investment in Utah companies in the first nine months of the year reached $99 million, surpassing the amount raised statewide in all of 2002. 
   
The rise in venture capital investment in Utah, outlined in PricewaterhouseCoopers' MoneyTree Survey released Monday, follows two years of declines caused by the high-tech implosion and the general economic slowdown. 
   
"I would think the fourth quarter should be very strong and that we should end up well over $100 million for the year," said Todd Stevens, managing director of Wasatch Venture Fund, an early-stage venture capital investor in technology companies in the West. "It's not a lot compared to the amount invested in 1999 and 2000, but it's going in the right direction." 
   
In the third quarter alone, Utah companies received about $40 million, up from $4 million in the same three months last year, according to the survey. 
   
Nationally, venture capital investment in the third quarter totaled $4.2 billion, down slightly from $4.4 billion in the same quarter in 2002. Investment in the first nine months totaled $12.9 billion, which means for the year, investment may fall short of the $21.3 billion invested nationally last year. 
   
So far this year, Utah's share of U.S. venture capital funding was 0.77 percent, up from 0.46 percent last year, said Steven Stauffer of PricewaterhouseCoopers. The average deal size in Utah in the first nine months was $5.5 million, up from $3.6 million last year. 
   
"We're seeing many positive signs," Stauffer said. 
   
Despite the increased activity in Utah, venture capital investment in the state remains only a fraction of the amount invested in 2000, when Utah companies received $708 million. In 2001, after the high-tech industry began to falter, investment in Utah companies dropped to $198 million, falling farther in 2002 to $97 million. 
   
Companies that received money in the third quarter include Forum Systems, a Sandy-based Internet security company that serves government agencies, financial institutions and Internet-based enterprises. It received the largest investment in the third quarter of nearly $17.5 million. 
   
Investors included GMG Partners, CMS Companies and Navigator Fund. The company said it is using the money for research and development and marketing. 
   
Companies such as Forum, which has raised $20.5 million since May 2001, say getting venture capital money continues to take more time and effort than it did two or three years ago. 
   
"Venture capitalists are more skeptical now and they should be," said Wes Swenson, Forum chief executive. 
   
Attensity Corp., a provider of data analysis software with dual headquarters in Salt Lake City and Mountain View, Calif., received $12 million in funding led by Palomar Ventures, with additional investors In-Q-Tel, Jefferson Partners, The Entrepreneurs' Fund, Highway 12 Ventures, Triangle Venture Capital Group and Village Ventures. 
   
Attensity also will use the money for product development and marketing. 
   
Cerberian, a Draper-based Internet content filtering solutions company, raised nearly $3.35 million in the last quarter. 
   
Investors included vSpring Capital, East Gate Capital and Aspen Grove Ventures. The company said it will use the money to increase sales and fund marketing efforts. 
   
Other Utah companies receiving money include Fatpipe Networks ($3 million), GeoLux Communications ($1.35 million), DriveSafety ($1.04 million) and Metro Waste ($1 million). 
   
lesley@sltrib.com