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Venture capital in Utah drying up

Venture capital money to Utah businesses plunged to its lowest level in five years, mirroring a national trend of shrinking deals.

By Dave Anderton
Deseret News business writer

For the three months ended Sept. 30, three Utah companies received $4.3 million in funding, down 93 percent from $63 million during the same period a year ago, according to the MoneyTree Survey, which tracks venture activity and is made in partnership with PricewaterhouseCoopers, Venture Economics and the National Venture Capital Association.

"The bad news is obviously less money is being deployed nationwide," said Brad Bertoch, president and chief executive officer of the Wayne Brown Institute, a Salt Lake-based non-profit organization that helps emerging businesses raise capital.
Steven Stauffer, senior audit manager for PricewaterhouseCoopers’ Salt Lake office, said venture capitalists are more scrutinizing because of an uncertain economy.

"It’s just getting tougher and tougher for them to take a short-term position on anything because their investment is not liquid," Stauffer said.
In Utah, Attensity Corp., a Salt Lake-based company specializing in text extraction, led third-quarter deals with $3.4 million in a series A round of financing led by In-Q-Tel Inc., a private non-profit venture group funded by the U.S. Central Intelligence Agency. Echopass Corp., a Salt Lake-based company that services call centers, received $530,000. Avinti received $375,000.

Despite a slower economy, Bertoch said, venture capitalists will invest roughly $12 billion in U.S. companies this year, ranking the year the fourth- or fifth-highest in venture investments.
"What we have seen is that while venture funding appears harder to get, if you have a truly venture-quality deal you can get money, and they’re desperate to deploy it," Bertoch said. "They are hunting. They are willing to travel out of Silicon Valley now for the first time."

Quality deals, Bertoch said, are typically those characterized by large and growing markets, a sustainable competitive advantage protected by strong intellectual property, evidence of sales, and a management team with experience in the industry they are embarking upon and general knowledge and experience in venturing.

"Our mission has always been to produce quality deal flow and to search for diamonds in the rough, companies that would normally be looked over because they have some defect. We know how to polish those defects and teach the company to better understand how to raise money," Bertoch said.

Nationwide, venture investments fell to $4.48 billion in the third quarter, a 48 percent decrease from the same time a year ago and the ninth consecutive quarter in which investments fell short of the preceding quarter. The last time quarterly venture capital investments fell below $5 billion was in first quarter of 1998, when venture investments totaled $4.2 billion.
A total of 647 companies across the country received funding compared to 838 in the prior quarter.

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