Utah’s tech scene has been gaining momentum for the past five years, and before. With two high profile IPOs and a huge $8 billion acquisition in the past year, the spotlight is shining right on the Beehive State.
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In our analysis of the Utah tech ecosystem last week, it became clear that tech pioneers have brought it into a new era. But beyond proving that Utah’s low cost-of-living, balanced lifestyle culture, and supportive community can produce profitable and fast-growing companies, they brought another big advantage into the fold: venture.
Legacy tech companies in Utah may have bootstrapped themselves for the early years, but the movement by Silicon Valley investors into Silicon Slopes has changed the landscape for their successors. Many individuals who grew up in those companies and graduated to start their own are finding their way in this more capital-heavy landscape.
Beyond The Headlines
With that, we looked beyond the companies that made waves last year, namely Pluralsight, Domo, and Qualtrics, to see which startups are riding the funding wave and speak to a few founders with great expectations for Utah.
Divvy is a Lehi-based company looking to disrupt the expense and subscription system of businesses by expanding the idea of the “corporate credit card.” It’s a pretty interesting platform, which our EIC Alex Wilhelm outlined here when the company raised a $200 million Series C earlier this year. That capital infusion came just months after it picked up a $250 million debt facility. In 2018 alone, the company raised $45.5 million.
Divvy’s CEO Blake Murray told Crunchbase News that because of its product-market fit and the surge in early adoption, the company had a fundraising strategy before it raised its first institutional round. Murray said he bootstrapped the company before raising its seed round.
“If we were going to raise, it was going to be if we could skip a round of dilution,” Murray explained of his strategy. “Where a normal series A is in a dilution range that’s, say, 20 to 35 percent dilution, and you’re kind of just grateful to be invited to the dance at that point. We said, okay let’s go build a bench, and that bench just kind of built itself with inbound requests from dozens of venture capital firms.”
All in, the company has raised a known total of over $500 million including debt. While Murray said many Utah founders “love the story of the sweat equity” and the delayed road to venture financing, that’s just not the case for startups in the Silicon Slopes these days.
“Week in and week out there are so many literal investors that have boots on the ground in Utah that are constantly trying to exploit and explore this market, figure out what’s here, and get in early, that I think that’s going to be the outlier instead of the norm. Now, the norm will be venture-backed businesses.”
Andrea Ibanez, founder of seed stage SaaS company Streemly, echoed that sentiment. Prior to founding her own B2B SaaS company, Ibanez held leadership roles at Canopy and InsideSales.com, two companies that have made names for themselves in the Utah tech scene and beyond. Ibanez is one of many entrepreneurs who found their footing working for Utah’s tech incumbents and aspired to eventually start their own companies.
“We both knew we were going to start our own B2B SaaS company someday,” said Ibanez of herself and her co-founder Megan Burtenshaw. “We wanted to learn the playbook from other greats in the area that have done it. We wanted to learn as much as we could, and frankly, just do it better when it was our turn.”
That strategy included taking advantage of the resources available to them, which were not readily available to their “grandfathers”– like venture capital, for instance, Ibanez said.
“Elkington and Ryan – those guys didn’t raise a ton early on. It took them 12 or 15 years,” Ibanez said, referring to David Elkington of InsideSales and Ryan Smith of Qualtrics. “This generation of entrepreneurs has these metrics in our head like the ‘triple, triple, double, double, double,’ to get to $100 million company and be valued at over a billion dollars.”
“I think our landscape is going to be completely different,” she continued. “I think we’re going to be chasing venture a little bit–a lot more than our ‘grandfathers’ did.”
And raise they have. Take a look at some of the startups that have banked early-stage funding since the start of 2018.
Of course, this activity in Utah has also opened up channels for discourse about what should become of the community in the future.
“It’s great for the ecosystem. It’s forced the people locally in Utah to step up their game as well,” he said. “Now they know that there are other people entering to invest in Utah companies too.”
Ibanez and Murray also said interest from outside investors has been a call-to-action for local investors to hop in early, especially as home-grown companies want Utah investors to be a part of their cap tables.
Another important point to consider is diversity. As a relatively young, but growing tech community, startups in the state may have the opportunity to bake the ideals of diversity and inclusion into their vision. According to Bolivia-born Ibanez, diversity is part of the ongoing conversation.
“I think the leaders in Utah are doing a good job of talking about it. But that’s just the first step. The second step is acting on it. And that’s where I think all of us can and should do better,” she said.
While Ibanez said major metropolitan areas like San Francisco and New York are more likely to be ethnically diverse, she pointed out that inclusion was incorporated into her company’s culture and values from the beginning.
“It’s harder to find a female leadership candidate, but we’re not going to close a position until we actually have a chance to interview at least one qualified female candidate or one qualified candidate of a diverse background,” said Ibanez.
Beyond that, Divvy’s Murray said he believes another aspect of Utah’s work culture may need shifting. Namely, the level of interest that Silicon Valley investors have had in Utah startups must be matched by the willingness to sacrifice work-life balance, an ideal which is ubiquitous among startups in the Bay Area and other hubs.
“Work-life balance is a healthy and necessary discussion to have, but I think there’s an unhealthy understanding of what that means to go build a winning, profitable, and massively scalable company,” Murray said.
He thinks that there is an unrealistic expectation in Utah that a massive company can be built on the back of a mere 40-hour work week. While he believes that concept is rooted in good, honest principles that emphasize family and that there is a scale between total balance and complete sacrifice, he thinks some change needs to happen.
“For Utah to not just constantly be on the cusp of the potential that everybody sees in Utah, I think there actually needs to be a cultural shift with larger groups of people embracing that the 40 hour work week is a bit of a fallacy. For us to really emulate some of the success of some of our peer markets, we have to embrace that,” he said.
But Murray has high hopes for the future of the Utah tech scene. He believes investments by universities and leaders in the tech world alike that emphasize computer science and engineering at all educational levels will have lasting effects.
“Three, five, ten years from now, I believe that Utah won’t just be known as an awesome tech hub with strong sales and marketing… but it will actually be known for the engineering talent. For true senior principal engineers.”
It’s that investment and belief that he said will make Utah not just one of the best secondary or tertiary markets in the U.S., but one of the most sought after tech hubs nationwide.
Illustration Credit: Li Anne Dias