The Governor's Office of Economic Development is backing a bill in the Utah Legislature that would enhance the Utah Fund of Funds — a program boosting access to capital for Utah entrepreneurs.
The GOED board on Friday adopted a resolution endorsing SB11, which would increase the amount of contingent tax credits that back the fund to $300 million, compared with the current $100 million level.
The fund is designed to provide access to alternative or nontraditional capital to Utah entrepreneurs. The program does not invest money into any company or individual. Instead, the program invests in venture-capital and private equity funds that commit to establishing a working relationship with the Utah Fund of Funds and Utah's startup and business community, and commit to making investments in qualifying companies.
Deutsche Bank invested the first $100 million, and so far, 96 percent of the capital has been awarded to 19 funds, including seven Utah funds, according to the Fund of Funds' managing director, Jeremy Neilson.
Twenty-five Utah companies have received $365 million in investments, including $127 million from Fund of Funds portfolio companies. Those Utah companies have created 1,006 jobs paying an average salary of more than $60,000, and they are expected to produce Utah tax revenue of $150 million over 10 years, he said.
"They are investing in Utah, and Utah is getting the benefits of the program," he said.
Since the Fund of Funds launched in January 2006, 170 funds have applied to participate. During that time, the number of Utah-headquartered venture-capital firms has doubled to six.
Program stats show that more than 290 days have been spent in Utah by portfolio out-of-state funds, and more than 360 Utah companies have been reviewed by those funds.
"The impressive thing to me is how many funds have been through and talked with Utah high-growth entrepreneurs and their ventures," said Richard Nelson, a GOED board member and president and chief executive officer of the Utah Technology Council. The UTC has made the Fund of Funds bill its top legislative priority.
Neilson said Utah's program is doing "quite well" compared with other states with similar funds. And he reiterated that because of several factors, the risk of actually using the contingent tax credits is "very low."
Jerry Oldroyd, another GOED board member, said an unanticipated benefit is the networking occurring between companies needing funding and the portfolio of funds in the program.
"Making those connections may be the very best thing about the fund," Oldroyd said. "None of that was really anticipated back then. It has been a success story, no question about it."
Nelson said he expects SB11 to pass through the Legislature because of the program's success, even though the program is still very young. "We won't know for years how it's gone, but we think it's putting the (necessary) things in place," Nelson said.
SB11 would exempt the Utah Capital Investment Corp., a nonprofit quasi-government entity involved in the Fund of Funds process, from Utah's Government Records Access and Management Act and open-meetings requirements. The bill also will clarify the Utah Capital Investment Board's ability to obtain financing.
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