February 15, 2006

  

A Publication of the Economic Development Corporation of Utah


 PRESIDENT'S MESSAGE

 Fund of Funds Ready to Go



In addition to supporting several ED-specific initiatives being presented during this legislative session, GOED recently launched the Fund of Funds initiative, an effort to raise $100 million in venture capital for Utah-based companies. Originally approved by the legislature in 2003, it is finally ready to go. Today's feature article discusses this important initiative and how the Fund of Funds will benefit the state for many years to come.

Today's Economic Review also includes links to many of the ED-related news stories from the past week. As always, if you have comments, suggestions or topics you'd like to see in the Economic Review, please contact us by clicking the "Comments" button on the bottom of this page.

Enjoy!

Jeff Edwards
Jeff Edwards
President and CEO

FEATURE STORY

Fund of Funds Will Help Increase Flow of Venture Capital Investment

Perhaps Salt Lake City's designation by Fast Company last November as one of the country's "truly fast cities" is a harbinger of accelerated innovation in Utah, as the ground swell of support for the USTAR initiative translates into more high-tech spin-offs from our research universities. But taking innovation to market requires capital, and the anticipated acceleration will only enhance a most pressing issue: availability of early-stage venture capital in the state. Will the investment money be there when it is needed?

Utah's Venture Manager Jeremy Neilson says Utah's Fund of Funds is an important venue to increase the flow of VC money into Utah. The Fund of Funds, which celebrated its launch in January, is a state-sponsored private equity initiative tailored after funds in other states like Oklahoma and New Mexico, which have since seen an explosion of VC investment growth without cost to taxpayers. Judging by the attendance at the kick-off event January 26, Utah's Fund of Funds is attracting a lot of attention-more than 30 venture capital firms from Utah, California, Oregon, New Mexico and other areas participated in the event.

Neilson says the Fund of Funds should be very good for the state. Its goal is to attract early-stage venture capital investment to Utah companies. While the Fund of Funds cannot directly invest in startup companies-whether they be in Utah or not-venture capitalists that tap into Fund of Funds monies must agree to establish a presence in Utah, which is good for local entrepreneurs. It is true that participating venture capital funds are not required to invest in Utah companies; however, Neilson said investment money flowing into Utah should expand because of the increased working presence of VC firms in the state. Local entrepreneurs will have the opportunity to build relationships with VC firms and thus attract investment capital.

It is expected that by the second quarter of this year the Fund of Funds will have gathered $100 million in investments from large-scale institutional investors. To encourage institutional investment in the Fund, Neilson says the state will provide an incentive in the form of contingent tax credits. However, the tax credits only go into effect if the investors do not receive the agreed-upon minimum return on their investment into the Fund. Neilson says the goal is to repay investors from the Fund's long-term performance rather than from the contingent tax credits.

Two boards will govern various aspects of the Fund of Funds. Neilson says the Utah Capital Investment Corporation (UCIC) is a non-profit board charged with oversight of the fund manager. The UCIC receives and invests funds according to criteria set by the Utah Capital Investment Board (UCIB). On the other hand, the UCIB is a governmental board that establishes investment products, policies and procedures related to the contingent tax credits, and provides oversight to the Utah Capital Investment Corporation.

Cincinnati-based Fort Washington Capital Advisors, Inc., will manage Utah's Fund of Funds, and is expected to open an office in Salt Lake City. Neilson says Fort Washington has extensive experience in private equity investments and has been managing state-sponsored programs like Utah's Fund of Funds for the past five years.

As a side note, in 2005 venture capitalists invested $21.7 billion nationally according to the MoneyTree survey. The life-sciences sector, which includes the biotechnology and medical-devices industries, accounted for $6 billion of that total and made up 28 percent of all venture capital investments in 2005. These numbers bode well for future Utah start-ups, given the state's strong posture in the biotechnology and medical-device industries.

Highlights from Commerce CRG's Latest 'Utah Economy' Report


The Utah Economy report produced for Commerce CRG by the U of U Bureau of Economic and Business Research reveals that during 2005, Utah had the highest level of net in-migration since World War II, with 41,700 new residents.  Also, the end of 2005 saw a surge in new jobs, mostly due to growth in the construction and business service sectors. November jobs created: 41,200; December jobs created: 44,000.


CALENDAR

Feb. 24:  GOED Tech Breakfast (Click here to register)

March 8-9:  Business and Technology Expo, Orem

March 23:  EDCUTAH's Quarterly Investor Update

April 6-7:  Utah League of Cities and Towns Spring Convention, St. George

April 9-12:  BIO 2006 Annual Conference, Chicago

April 19-20: Rural Business Conference, Vernal (Click here for more information)

April 23-26:  CoreNet Global Summit Spring Convention. Philadelphia

May 3-4:  SL Chamber Business-to-Business Expo

May 21-24:  ICSC Spring Convention, Las Vegas
 


USTAR UPDATE

St. George Area Chamber Endorses USTAR


It's not just Wasatch Front leaders who support the Utah Science, Technology and Research economic development initiative. Political, education and business leaders all over the state are stepping up to support USTAR and encourage full legislative funding.

The latest support comes from the St. George Area Chamber, which recently passed a resolution that reads, in part:

"THEREFORE, BE IT RESOLVED: the St. George Area Chamber of Commerce encourages the State of Utah to proceed with expediency to bring USTAR to fruition; and

BE IT FURTHER RESOLVED: that the St. George Area Chamber of Commerce is prepared to assist in the actualization of the USTAR initiative, be it in cooperation on the State level or local level.

With USTAR, Ideas Go from Lab to Market - No Bull


Having grown up on a farm, Conly Hansen remembers how families struggled to make a living, and he wanted to find a way to make their lives better. As a biological and mechanical engineering researcher at Utah State University, he found the answer caked on the bottom of farmers' boots - cow manure... (SL Tribune)
 


IN THE NEWS

Economic Development Headlines

Utah's Unemployment Rate Sinks Lower; Squeezes Small Businesses

- The Zions Bank Small Business Index for Utah continued to slide last month, dropping to 106.6 in January from 108.2 in December, and a high of 114.6 in May of 2005. January's index, which measures business conditions from the point of view of a small business, reflects declining unemployment rates and higher interest rates. (Utah Business Magazine) (Morning News)

SBA Budget Provides Record Capital for Small Businesses

- The U.S. Small Business Administration has announced a fiscal year 2007 budget request of $624 million that provides a record $28 billion in loan and venture capital authority for the agency's flagship small business financing programs. (Utah Business Magazine)

Cities Tapped to Aid Business Incubator

- Backers of the new Davis Entrepreneurial Center taking shape in Kaysville feel they have, or will have, sufficient funds to build it. But operating it once it's done may be a different story. (Davis County Clipper)

48-Acre Holladay Village Plan Would Cater to Local Businesses

- The Holladay Village Center redevelopment project received a green light Tuesday - an approval Mayor Dennis Webb called "one of the most single important votes in the city." (Morning News)

EnergySolutions to Buy Duratek

- The EnergySolutions (formerly Envirocare) empire grew Tuesday as it purchased another company for more than a third of a billion dollars, underlining its emergence as a top business in the nuclear services industry. (Morning News) (SL Tribune)

Duratek's Largest Shareholder Opposes Takeover

- Duratek Inc.'s largest shareholder, Jeffrey Gendell, said he will ''strenuously oppose'' the company's plans to accept a $345 million takeover offer from Salt Lake City-based EnergySolutions. (SL Tribune)

Redevelopment Agencies: Bill Creates 3 Categories with Their Own Uses, Rules

- It has been a year in the making, but Sen. Curt Bramble's plan for how Utah cities create - and re-create - themselves is moving forward. The Provo Republican saw his SB196 - Revisions to Redevelopment Agency (RDA) Provisions - unanimously approved by the Senate Revenue and Taxation Committee on Friday. It now goes to the full Senate. (SL Tribune) (Daily Herald)

Kennecott Utah Copper Earned $311M in 2005 as Prices Soared

- Copper is glittering like gold on the world's metal markets, and for Kennecott Utah Copper, the rising demand and record high prices for the metal are putting a new shine on its bottom line. (SL Tribune)

Looking for a Pretty, Great Tag Line

- State tourism brand: It should describe Utah's "emotional core." It will emote "Utah." It should summarize, symbolize and synergize the entire state, highlighting Utah's attributes to outsiders far and wide. (Morning News)

Midvale Firm Predicts a 'Healthy' 2006

- The Dow will hit 12,000. Corporate earnings will see 10 percent growth. And the U.S. economy in 2006 will post "healthy, somewhat predictable, reliable growth," a Midvale-based investment advisory firm predicted Friday. (Morning News)

Plan to Slash Tax Rate Debuts in Legislature

- The introduction Friday of the centerpiece of a proposed state tax reform, a "flatter" 4.9 percent individual income tax, marked the Legislature's halfway point. (SL Tribune) (Morning News)

Evans & Sutherland to Sell Division

- Citing post-9/11 market changes, Evans & Sutherland Computer Corp. said Wednesday it has agreed to sell its flagship computer simulation business to Iowa-based Rockwell Collins Inc. in a deal worth $71.5 million. (Morning News) (SL Tribune)

University of Phoenix to Open St. George Learning Center

- The University of Phoenix will open its first St. George learning center this spring in the 700 South Building (965 East 700 South). For the past two years, the university has been holding classes in a number of interim meeting rooms. (Utah Business Magazine)

Local Experts Are Bullish About Utah Tourism

- The outlook for travel and tourism in Utah in 2006 is bright. Healthy mountain snowfall, the solid growth of tourism on the national level and Utah's strong economy have contributed to a feeling of optimism. (Utah Business Magazine)

IAUS Inks $150M Deal for New Breakthrough Solar Technology

- International Automated Systems Inc., based in Salem, Utah, has signed a $150 million purchase and installation contract to install a turnkey 100-megawatt power plant for Solar Renewable Energy-1 LLC of Nevada. (Utah Business Magazine)

Canon U.S.A. Acquires Salt Lake City-Based Uinta Business Systems

- Expanding its direct presence in the Western United States, Canon U.S.A., Inc. has acquired Salt Lake City-based Uinta Business Systems, Inc., and its subsidiaries. (Utah Business Magazine)

LMI Aerospace Acquires Technical Change Associates

- St. Louis-based LMI Aerospace, Inc. has acquired Ogden-based Technical Change Associates, Inc., a provider of lean manufacturing, facility layout and business planning consulting services. (Utah Business Magazine)



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