Utah Technology Finance Corp. officials are using the strategy of spreading their seed capital resources among more companies in a conservative investment approach, resulting in fewer business failures than the national average for organizations providing seed capital.
This word comes from Robert N. Brewer, program director for UTFC, whose figures have been used in the 1991 National Census of Public and Private Seed Capital Funds prepared by Emory Business School, Atlanta, Ga.Brewer said the average seed capital entity in the U.S. is capitalized at $2 million and has $16 million under management while UTFC was capitalized at $2 million and had $8 million under management.
The average seed capital entity in the U.S. has investments in 26 projects with its $16 million, but UTFC has 115 investments with its $8 million, an indication of its conservative investment strategy, said Brewer.
Each of the seed capital organizations responding to the survey had an average of four failures for a 15 percent rate, but only five of the 115 companies receiving money from UTFC or 4.5 percent failed. Companies aided by UTFC have resulted in 1,200 new jobs, an average of $5,000 invested for each job, compared to the average of 980 new jobs and $12,000 investment for each job for the country.
Brewer said 58 companies participated in the study and 50 percent of those responding are private and take stock as collateral for the loans while one-third take royalties. UTFC is a quasi-governmental (created by the government as an independent corporation for government purposes) institution that doesn't take stock from the lendees, but takes royalties and interest return on loans, he said.
In finding companies for seed capital loans, Brewer said he tries to find firms that know where other investments will come from. He said seed capital bridges the gap in getting prototypes into production.