Utah's Unicorns, How "Silicon Slopes" is Gaining Momentum
It’s snowing this time of year along the Wasatch Front, a patch of connected cities spreading from Ogden to Provo, that some in Utah refer to as the “Silicon Slopes.” But this part of the Rockies isn’t just turning out large amounts of fluffy, white stuff, it also seems to be producing a strong herd of unicorns, or startups worth at least $1 billion on paper.
Four of these fabled creatures popped up along the Wasatch this last year, including Omniture founder Josh James’ business intelligence platform Domo. There’s also Pluralsight, Qualtrics andInsideSales – with several more “soonicorns” in the ready.
Utah has seen the most economic growth in the nation for the past two years, with tech leading the charge. But many of these tech startups had to show profitable growth before venture capitalists would even give them the time of day.
The Beehive Status
The community has a strong history in the tech industry – Utah is the birthplace of Omniture, WordPerfect and Landesk; Pixar co-founder Ed Catmul and Atari co-founder Nolan Bushnell both graduated from the University of Utah; several colleges and universities in the area churn out advanced engineering degrees in the hundreds every year; and Utah is fairly affordable and comes with a built-in well-educated workforce that likes to stay put – yet most of Utah’s startups launched without the ability to bring in venture funding.
There are four or five founders that are sitting on businesses that have a long runway because they were disciplined early on.
— Ryan Smith, Qualtrics
Because of this, Utah has “a culture of delayed gratification around building a business with strong fundamentals,” said Aaron Skonnard, CEO of Pluralsight, an educational technology company based in Farmington. His team went almost nine years without taking outside investment. “Most businesses in Silicon Valley wouldn’t have had the patience to do what we did.”
The lack of capital availability forced these businesses to have a greater focus on their business fundamentals on day one. “All of us had the discipline of how to run a company profitability,” said Dave Elkington, CEO of Provo-based InsideSales.com.
But at this point, the region has no trouble attracting venture capital. Sequoia convinced Qualtrics founder Ryan Smith to take $70 million in Series A funding a few years ago. It has since pulled in $220 million in venture capital and is now worth just over $1 billion.
Smith and Skonnard agree on several points, including the discipline these startups needed early to become profitable first. “There are four or five founders that are sitting on businesses that have a long runway because they were disciplined early on,” Smith said.
Live Long and IPO
But Smith also thinks these Utah tech companies are seeing success after sticking with it for a long time. “If all the [Utah] unicorns sell out then it will just continue to be what it’s been, Smith told TechCrunch. “WordPerfect could have been the game changer but they sold in 1992. What if they never sold?”
Many of the state’s nascent unicorns have been at it for well over a decade before reaching the valuations we see at present – much longer than Snapchat or Pinterest.
Data obtained by TechCrunch from the National Venture Capital Association shows that nearly $700 million was invested in the region in the first three quarters of this year.
And those venture investors who have bet on Utah tech are likely to see some significant returns. Educational technology company Instructure went public last month and Domo, Pluralsight and InsideSales.com are all getting close. It’s likely that there will be several tech IPOs coming out of Utah in 2016.
“I’ve seen incredible growth in the ecosystem in Utah,” said Josh Coates, CEO of Instructure. There are “half a dozen really exciting technology companies in Utah right now that are getting ready to access public markets.”
Smith tells us Qualtrics is also gearing up to go public in the next year or so. “The signs are all there. We’re already acting like a public company anyway,” he told TechCrunch.
And there are still more startups flying under the radar but possibly worth looking into. Entrata, a property management software solutions business, might not be as seemingly sexy as an Airbnb or Uber, but the company has a $100 million revenue run rate with zero VC backing – it’s entirely bootstrapped.
Others such as Health Catalyst, a Utah startup attempting to bring paper health records into the digital era, is getting closer to unicorn status this year with a half a billion dollar valuation at the moment. Much of the $165 million raised so far comes from a mix of Utah and outside venture capital – including from Sorenson Capital, the largest venture capital firm in the state with more than $1 billion in its coffers.
The Enterprise Deal in the Room
Much of Utah’s successes also happen to be from enterprise – an industry that has a much harder time getting attention from media and thus investors unless it turns a considerable profit or gains a high valuation.
“You don’t get the Snapchat type growth or the Amazon type growth [with enterprise]. You just don’t,” Smith said. “But once some of our investors see one company in Utah they love to jump into another.”
Venture capital firm Accel has poured $70 million into Qualtrics so far. Accel has also invested in the Utah-based flash memory company Fusion-io.
“Almost every major Silicon Valley investor has now seen what’s happening [in Utah],” added Elkington.
Because in Utah, said Skonnard, “our startup culture rewards companies that are built to last.”