When Hunter Manz had the idea for a novel system to improve the efficiency of water desalination, he expected investors to line up around the block to help him build a company to deploy his idea.

A Las Vegas native and former Utah Tech University student, Manz knew firsthand how important water is in the West, and believed his innovation would help communities turn seawater or underground brackish reservoirs into clean, usable water.

But instead of being the belle of the venture capital ball, Manz initially struggled to sell investors on his company.

“What is always a surprise to hear is that the development of the technology was the easy part,” Manz, CEO of Eden Technologies, said during a press conference at the Capitol on Monday. “I thought once the technology was even remotely proven out that a myriad of high-quality investors would come pouring in. I was mistaken. Most venture capitalists are not interested in backing a hardware company, a company making physical tangible goods.”

“They want software,” he added, which is “safe and easy to scale.”

Venture capital's reticence to fund technologies like Manz’ which don't meet their criteria for short-term returns is why Utah Rep. Jeff Stenquist, R-Draper, and Sen. Ann Millner, R-Ogden, passed a bill earlier this year to create a state-backed fund to help promising businesses get off the ground.

Hunter Manz, Eden Technologies, center, talks to attendees after an announcement of a newly formed state-backed venture capital firm, Utah Innovation Fund, at the Utah Capitol in Salt Lake City on Monday, Dec. 11, 2023. | Megan Nielsen, Deseret News

HB42 established the Utah Innovation Fund and provided $15 million to get started, which came from returns on the now-defunct state Fund of Funds, not taxpayer dollars.

Manz' Eden Technologies was the first business to receive an investment from the Innovation Fund, and Manz spoke at a press conference Monday alongside Gov. Spencer Cox and other state leaders.

“Fifteen years ago, Utah was not on the map when it came to the tech world,” Cox said. “With the support of the state — and more importantly, the entrepreneurs in our state — we're now the nation's fastest-growing startup and entrepreneurial economy. ... Now we're looking at what Utah can be the leader in next, to discover cutting-edge solutions to some of the world's biggest problems.”

The fund “fills the gap” in investing, he said.

Rep. Jefferson Moss, R-Saratoga Springs, who also serves on the board of directors of the Utah Innovation Fund, said the fund is “willing to take a little bit more risk” than most investors, but he hopes its success will signal to venture capitalists that there is money to be made in longer-term investments.

Although the types of businesses invested in will take time to fully mature, Innovation Fund managing director Gabi Tellez said the “patient capital” approach will help budding entrepreneurs show proof of concept, setting them up for later-stage funding from traditional investors.

“Ultimately, what we'd love to see is a very robust, deep tech venture capital ecosystem and that the fund ... becomes much less needed because the market is solving it itself,” Moss said. “At the end of the day, if there was a market solution to this, we wouldn't be doing it. We only fill this gap ... that's really the goal, that they can go out now and raise more money to be able to support their own company.”

The fund will work closely with state and private universities in the state to identify research that may have commercial applications and step in at an early stage to help get ideas off the ground.

The Innovation Fund partners with 18 higher education institutions and has several industry partners, including 3M Health Care and Intermountain Health.

To date, it has invested $700,000 in three companies: Eden Technologies, and biotechnology companies 3Helix and Inherent Biosciences.

Rep. Jefferson Moss, left, House majority leader, shakes hands with Mark Paul, executive director for the Center for Medical Innovation at University of Utah Health, after an announcement of a newly formed state-backed venture capital firm, Utah Innovation Fund, at the Utah Capitol in Salt Lake City on Monday, Dec. 11, 2023. | Megan Nielsen, Deseret News