“Slow and Steady”: Utah’s Silicon Slopes a Home for Startups and Unicorns Alike

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This is the second in a series of special features on some of the US’ unsung startup hubs. Our first examined Oklahoma City’s ‘Silicon Prairie’. The second focused on North Carolina. Stay up-to-date here and on the Red Herring Twitter feed for more stories.

Utah’s tech chops were first won, you could argue, in 1927: that was the year that Beaver local Philo Farnsworth developed the all-electric television.

45 years later Nolan Bushnell founded Atari Inc. Its pioneering games platforms were the earliest tech Thor Roundy can remember. Back then he was a kid living in Logan, near Utah’s northern border with Idaho.

Today Roundy, a legal expert and owner of Advanced Title, Access Salt Lake and 212 Development, is one of the leading scions in Salt Lake City’s–and Utah’s–emergence as one of the US’ most exciting and diverse tech hubs.

Led by a coterie of corporate giants, including Adobe, Qualtrics, Vivint and Ancestry, Utah’s ‘Silicon Slopes’ have become home to a growing number of startup founders and entrepreneurs, lured by low living costs, a thriving ecosystem and access to capital.

Utah’s investment-per-deal average is higher than those of Silicon Valley, Los Angeles or New York. It is also home to four unicorns: Pluralsight, Qualtrics, Domo and Insidesales. It appears that, more and more, when it comes to growing a Utahn tech business, the sky’s the limit.

Even back in 2001 Utah’s governor, Michael O. Leavitt, told the New York Times: “It has become clear to me that Silicon Valley has a challenge. They have reached natural boundaries geographically. Traffic has become a huge problem. Those have become significant inhibitors…We have workers, we have space, we have proximity.”

Today it has all of those things in abundance. In 2015 the Brookings Institute released a report of a hundred American cities with the most jobs in advanced industries. Salt Lake City, Ogden and Provo were, surprisingly to many, among them. Utah was recently ranked the best US state in which to do business by CNBC.

Forbes has placed Utah number one on its own business table for six of the last seven years. Salt Lake City leads the country, alongside Austin, in terms of job creation among metro areas. Tech talisman Google Fiber is present–and will stay–in the region.

Venture capital, often tough to find in smaller tech states, is not lacking: In 2015 venture spending in Utah was $719.5m, placing it 11th nationally. The figure was slightly down on 2014. But that had been a more-than 150% increase on 2013. There is plenty to shout about.

But funding, argue many, is far from democratic enough. Utah’s VC network is too much who-you-know and not what-you-know, argues Roundy: “It isn’t like Silicon Valley, where people will fund any stupid idea, just because you used to work at Facebook. You need to have a solid business team, and someone on that team needs to have enough experience to keep you on track for success.

“I think there are more solid ideas present here in Salt Lake City, other than just money hungry initiatives,” he adds. “So there is a big opportunity for investors. But investors need to be careful about how they invest, because not every entrepreneur is part of a team that can execute on his/her ideas.”

In an industry enthralled by the frenetic chest-puffing of Silicon Valley, some have criticized Utah for having not sold itself as much as other parts of the country. Roundy disagrees. “The world generally knows that Utah is here and that it produces strong tech,” he says. “I think it is a problem of critical mass. 

“An area has to reach a tipping point before you will see a spike in activity around something like the tech sector,” adds Roundy. “Utah is doing several things well. It leads the nation by some specific metrics like dollars per capital raise. But for Utah to reach the tipping point that will bring a massive influx of attention: people, jobs, money and commerce, there are some specific things that need to improve.”

Jeff Lyman, chief marketing officer of Vivint Smart Homes, says that perceptions about Utah as a feeder state have shifted in recent years. “The perception used to be that to you had to leave Utah to work because there weren’t opportunities to reach the pinnacle of your career in tech and business in Utah,” That has shifted in the past 10-15 years with a thriving tech environment.”

A proliferation of local companies that have grown organically before seeking funding (Vivint’s founder Todd Pedersen only accepted outside investment in 2006–seven years after founding it), has showed Utah’s tech talent they can grow viable companies instate, and go big.

The biggest infrastructural drawback today, says Roundy, is the lack of a vibrant downtown environment like San Francisco, Seattle, Boston or Portland. Until that is remedied, he adds, Salt Lake City and its surroundings will continue to lose talent to young professionals seeking wild nights alongside their careers.

“Utah-based companies are widely distributed across the state: we see them from Orem to Provo and many places in between,” says Jeff Hudson, CEO of security firm Venafi. “This wide distribution makes it more challenging to create the dynamic, vibrant urban environment that will attract younger tech workers.”

That’s not to say Utah is lacking in white-knuckle adventure–especially for those preferring their adrenaline fixes from nature rather than the city. The 2002 Winter Olympics were held thirty minutes from Salt Lake City, and mountaineering, biking, river rafting and other extreme sports are well within reach. Park City, which hosted athletes that year, is also home to the prestigious Sundance Film Festival.

Salt Lake City, too–surrounded by the Wasatch Mountains, the Great Salt Lake and home to iconic landmarks like Salt Lake Temple and City-County Building–is an attractive place to live in, and visit.

Building a dynamic downtown, however, might come slowly to Utah’s capital: not least because of its population, two-thirds of whom are Mormons–members of the Church of Jesus Christ of Latter-day Saints–and among the nation’s least enthusiastic drinkers. Beers above 4% ABV are not permitted in local bars, and brands like Pabst have been forced to sell low-alcohol versions of their brews in the state.

Mormonism, it appears, plays a role in almost every aspect of Utahn life. The religion’s pioneers, who first arrived in 1847, are said to have bestowed a go-getting and entrepreneurial spirit on their descendants. Lonnie Mayne, a Mormon and president of customer experience management firm Inmoment, agrees.

“There’s a particular ethic that the Mormon culture has infused into the larger culture; a kind of “pioneering spirit” that inspires an interesting combination of work ethic, commitment to education, entrepreneurism and preparedness that has combined to create a unique environment,” says Mayne.

“We don’t mind taking calculated risks, we’re future-oriented and we expect to have to put in the work to realize our goals,” he adds.

Others are less eager to attribute the state’s success to its most popular religion. “The more you do business within (Salt Lake City), the less Mormonism has a role in day to day life,” Mark Morris, co-owner of coworking space Work Hive SLC, says.

In fact, he adds, there have been cases where tech workers have arrived in Utah, only to leave soon thereafter due to feeling like an outsider. “It’s definitely a problem,” he says. Other interviewees told Red Herring Utah would be better served by an image that doesn’t depend upon being Mormon. “Mormons are pretty much the same kinds of people as anyone else who grows up with strong values,” says Roundy. “You can find people like that in many communities.

“(Utah’s) shouldn’t be a purely Mormon image, if it is going to be authentic and reflect the people who are here,” he adds.

Elsewhere the connection between religion and tech is clearer: at Church & State, for example, a former Central Christian Church-cum-startup incubator in the heart of the capital. It is one of a raft of coworking spaces that have popped up to accommodate the state’s younger generation, keen to get a foot on the tech ladder, including Impact Hub, DeskHub and Work Hive.

They are helping keep down the cost of starting a business in Salt Lake City compared to Silicon Valley, or major west coast cities. “While there may not be the same capital to go around, the costs for labor, housing, expansion is much lower,” says Morris.

“We see a lot of businesses coming through Work Hive from California and other places that are attracted by lower costs as they grow. I’d say that’s SLC’s competitive advantage. We’re still close to the Bay Area, but have much lower expenses for startups and businesses as they grow.”

City Hall has generally been accommodating to its growing tech industry. Utah weathered the global financial crisis pretty well, thanks to a fiscal conservatism and local government’s predisposition against overregulation of the private sector. While other states floundered, Utah diversified the economy and provided strong support to local companies. That has helped it retain its status as a place where startups can go big.

But, says Roundy, political infighting has stymied progress in recent years. “If you follow the news, there is always something brewing between the mayor and one or more members of the city council,” he says. “It is tough to get difficult things accomplished when you have to spend so much energy in conflict.”

“Our city leaders are incredibly passionate, and I deeply admire the role they play in the larger economy and culture of our state,” says Mayne. “As a progressive enclave in the midst of a much larger and more conservative state, sometimes city leaders get too attached to their own ideas. While I admire their commitment, it’s so important to always keep the larger picture in mind.

“Collaboration is not failure. And we are all getting better at it. In fact, the technology sector is a great example where our government leaders have been incredibly supportive and progressive.”

Two years ago the associate dean of Utah Business School produced a written recommendation to Salt Lake City on how to become a ‘Great American City’. It involved combining divisions of City Hall frequently at odds. Last year, when she took office, current mayor Jackie Biskupski, implemented it. Biskupski’s ability to pull together warring factions of her own administration are key for Salt Lake City’s emergence as a true startup hub.

The need is great. Populations are swelling and there are many concerns that Utah isn’t ready for the influx. Nowhere is this felt more than in Provo, whose citizenry is set to double in the next two decades.

Never mind that Salt Lake City is ranked as America’s sixth most affordable city by Money Crashers: if the housing market suffers, people will leave. “The city is in a growing crisis around housing, and the city isn’t building new housing fast enough,” says Morris.

That will only exacerbate as Utah builds on its impressive academic reputation–particularly at Brigham Young University, which is the seventh most likely college to turn out unicorn companies worldwide.

Utah Valley University, Utah State University and the University of Utah–whose Lassonde Entrepreneur Institute in an ultramodern mix of academic and business study–have produced impressive graduates in ever-increasing numbers.

“In 2001, the state legislature launched the Engineering and Computer Technology Initiative to increase the number of students graduating from engineering, computer science and related technology programs,” says Lyman. “The number of engineering degrees awarded across the state has increased 80% since 2000, and the number of computer science degrees awarded has increased 130%.”

“Whether people grew up in Utah, or moved here because they like the mountains, entrepreneurs are just people who have great ideas who are at the stage in their life where they want to take a chance,” says Roundy. 

“They believe they can do something that no one else has done,” he adds. “And if they have saved up some money, or they have found someone with some capital and experience to help them succeed, good ideas can succeed in Utah.

He is being proved right by a collective of fresh-minded and entrepreneurial Utahns that have completely transformed their state’s economy. Should its politics be ironed out, and infrastructure added to entice a younger, more dynamic crowd, who knows what fortunes await the Beehive State. Judging on its progress since Farnsworth’s breakthrough 90 years ago, the ides are good.