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High-tech firms get a call to increase public policy input
Armed with recently passed legislation as an example, Gov. Mike Leavitt Thursday urged the state’s high-tech community to get more involved in government efforts to improve the state.
By Brice Wallace
Deseret News business writer
Leavitt, speaking at the annual member meeting of the Utah Information Technology Association, said he will organize a political action committee that he hopes the tech industry will become "deeply involved in, to begin to drive and orchestrate additional participation at an even more fundamental level."
The PAC could help people understand the connection between a high standard of education and the state’s economy, he said.
Leavitt recalled how captains of industry often met to discuss issues.
"Captains of industry don’t gather the same way as they used to," he said. "The new industries aren’t as engaged in public policy as the old industries used to be. . . . I intend to call upon all of you to become involved, not on a partisan basis, but on the basis of driving the important priority of educating people and making Utah a capital for high-tech investment, employment and entrepreneurship."
Such a grassroots effort’s effectiveness was demonstrated by HB240, the Venture Capital Enhancement Act, passed by the Legislature this year after starting as an industry initiative. Leavitt conducted a ceremonial signing of the bill Thursday.
Representatives of the high-tech sector "educated, cajoled, convinced, persuaded" people that the bill was a good one, Leavitt said.
The act creates a $100 million "fund of funds" to attract additional capital for early stage Utah tech companies. The money will come from private sources, but the state will protect investors from a loss by issuing contingent tax credits that would be issued if investors do not receive a 5 percent to 6 percent return on their investment in Utah companies.
Several speakers Thursday agreed that industry prompted the legislation and was a key ingredient in its passage.
"You’re the reason that this passed," Richard Nelson, president and chief executive officer of UITA, told the audience.
"I think it’s important to recognize that this bill started not with a group of paid lobbyists, not with a group of paid attorneys. It started as an industry initiative," said bill supporter Jerry Oldroyd.
"Instead of going to the Legislature and whining about a problem with the state of the economic structure in the state of Utah, UITA came in with a concrete proposal supported by sound data, supported by experience and also with great testimony by industry itself."
Oldroyd said he thought the bill would take two or three years to get through the Legislature, but that was quickened by industry reps’ willingness to address issues and legislators’ questions. "You had exeuctive officers that had suffered through these issues, suffered through the lack of capital and had first-hand testimony to the problem," Oldroyd said. "That’s what made this bill attractive to the Legislature."
Todd Stevens, managing director of the Wasatch Venture Fund and UITA’s capital chairman, agreed.
"It’s nice to hear from venture capitalists who are assigned here, from attorneys, but having the IT industry represented, having CEOs testify to the legislators that capital is in scarce quantity, we can’t get it, it’s choking our companies and we’re losing jobs — that’s what resonated with the Legislature," Stevens said.
Supporters had said the state needs more early-stage capital because Utah has lost many such companies and their employees to other states where venture capital was more abundant. The number of venture capital deals in Utah has dropped from 64 in 2000 to 26 last year.
Leavitt noted that only four or five early-stage VC companies are in Utah, but he expects the bill to improve that figure. "I believe this will result in another eight or 10 funds locating here — or more — and will create a momentum that will be of value and importance," he said.
Nelson described HB240 as the most important economic development legislation of the decade.
"I used to say ‘of the 2003 session,’ " he said, "but if you think about it, what other legislation have we had in the last decade that can have this kind of impact, taking $100 million in enhancement funds and attract several hundred million dollars in growth-stage capital as well as high-tech, high-paying jobs?"
Stevens said the legislation will work. "I think from the venture capital’s perspective, this bill will be very helpful in bringing additional venture capital resources. . . . With this ‘fund of funds’ legislation, I’m very optimistic we’ll see additional funding mechanisms, additional funds for early-state technology companies. . . . We think that it will be a terrific boon for the state."
Will West, CEO and president of STSN Inc., concurred. "In my mind, HB240 is just the beginning. There are all sorts of things we could be doing here in the state to build our economy and make it better," he said.
"This (act) makes such an enormous difference. . . . What you’re doing here — this seed money idea — is really enormous."
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