A Utah Fund of Funds


House Bill 240, currently being considered by the Utah Legislature would set up a non-profit corporation that is authorized to raise up to $100 million dollars and then disburse that money to existing or new venture capital firms with a Utah presence. Those VCs would be encouraged through various means to invest the money in either Utah firms or firms that create Utah jobs. How do you raise the $100 million in the first place?

With contingent tax credits. The non-profit, called a fund of funds would guarantee its investors a certain rate of return (probably equal to the current money market rate). If the fund did not perform as promised over the life of the fund (usually more than 10 years), the investors could recoup their investment through tax credits. These kinds of bills have proven successful in places like Oklahoma and Arizona in creating new sources of venture money.

Industry statistics from Arizona shows that their economy receives $6.54 revenue return over a five-year period for every $1.00 of venture capital investment. In addition, for every $1 million in venture capital, 27.6 jobs are created in the state. Utah's young companies have seen available venture capital disappear, falling from a high of $330 million invested in Utah firms in the second quarter of 2000, to a low of $4 million in the third quarter of 2002

Its not just the total dollar amount available for investment in a geographic region thats important, its also the number of venture capital firms. Each firm has its own flavor or theme. For example, I've talked to VCs in the last month who say "I won't invest in services." and have lunch the next week with one who says "Services are where its at. That's all I invest in."

If you are involved in high-tech in Utah, would like a high-tech job in Utah, or simply care about it, I urge you to write to your representative and your senator1 and explain to them why Utah needs more investment in high-tech and ask them to support HB240. Make sure you tell them that you are a constituent in their district or that you own a business in their district. That carries a lot of weight. Written or faxed constiuent communication is taken as being much more important than email.

  1. The Utah Senate doesn't have an interactive map to find your district. You may have to visit your county web site (you can get to it from utah.gov) or call the Senate and ask them (801-538-1035). I could explain to you why the House has a nice map and the Senate doesn't and how they could both have really great ones for free, but I'm trying really hard not to piss anyone off this week.