A recent article on Beehive Startups discussed the venture capital scene in Utah as one of their writers attended the Utah Technology Through Time Conference. The conference was held in Salt Lake City as one of the main focal points of discussion was Utah’s startup environment.
One of the first topics discussed was the venture capital support for Utah’s booming tech startup industry. The conference brought together notable venture capitalists whose presence has been felt in Utah. The panel consisted of Ralph Yarro, founder of Think Atomic; Chris Cooper, partner at Pelion Venture Partners; Dr. Dinesh Patel, founder of Signal Peak Ventures; and Sid Green, founder of TerraTek and former Entrepreneur of the Year for the state of Utah.
The panel discussed Utah’s new investment high and posed the question, “how crucial is Venture Capital to Utah’s budding startup scene?” Recently the private research software company, Qualtrics, had a series B investment round of $150 million. The Provo-based company’s record-breaking investment round brought Utah’s overall investment to a record high. The panel went on to discuss the importance of funding needed to keep up with the innovation taking place in Utah.
Ralph Yarro pointed out Ray Noorda, along with a couple other investors who acted as “sugar daddies” and paved the way for Utah’s startup scene and attracted more venture capitalists. Also, state funded injections to the tech startup scene, such as the Small Business Innovation Research and Utah’s Technology Finance Corporation, made Utah a more attractive place for venture capitalists. These injections along with Utah’s high-profile investors brought Utah from the fringe of IT into a more central role that developed throughout the years.
Two more interesting observations were said about Utah’s developing startup scene. One of Utah’s biggest tech disadvantages was their lack of C-Level executives. It was difficult to convince big business heads to come to Salt Lake City and live in Utah. This is not the case anymore as Salt Lake City is becoming more attractive and bringing in more C-Level executives. Another aspect that was brought up by Dinesh Patel was that many entrepreneurs in Utah are content with quitting after selling a company for $5 to $10 million, whereas in Silicon Valley, entrepreneurs will sell their company and move on to their next venture.
The Importance of Venture Capital in Utah
Binary Capital out to Revamp the Venture Capital Industry
A recent article in the New York Times talks about a new venture capital firm that is focusing less on metrics and more on a company’s mission. Born in Singapore, Jonathan Teo graduated from Stanford University with a master’s degree in electrical engineering. He worked his way up at Google to become an engineer manager at the young age of 27. He was part of the Benchmark Capital team and had an integral part in their investments in Twitter and Instagram.
Now at the age of 34, Jonathan teamed up with his friend Justin Caldbeck to form Binary Capital. On the 17th of July, Binary Capital raised $125 million dollars in hard capital in just three months. While most venture capital firms look at a companies metrics and scale the companies future financial relevance, Binary Capital’s goal is to invest in 15 to 20 early stage startup tech companies that have the potential for global impact.
Binary Capital also plans on giving a portion of their earnings to charitable organizations that are chosen by their entrepreneurs. They eventually want to use the technology that they invest in to team up with global nonprofits in the developing world. The entrepreneurs that Binary Capital plans on partnering with not only have a vision of commercial success, but they are also focused on improving the lives of less fortunate people.
Jonathan and Justin will be taking a different approach to most venture capital firms. They want to find the elusive entrepreneurs out there that are not already in play. Entrepreneurs that venture capital firms have to pitch to are some of the best deals made because they truly have a vision for their company.
Justin Caldbeck and Jonathan Teo are known for their gritty, smart, hardworking efforts. Binary Capital is a venture capital firm to watch out for as they try and revamp the venture capital industry.
You can read more about Binary Capital in their very own New York Times article here.
Venture Capital in the United States Accelerating Businesses
A recent article on Investor Place talks about how venture capital revolutionized business in the United States. The article goes on to discuss the history of venture capital. The beginnings of the practice are said to have started back in the 1970s where tech gurus like Tom Perkins and Don Valentine saw major advantages to providing capital for startup companies.
Before venture capital, angel investing was the method in where startups acquired capital. Angel investing differs in venture capital in that angel investing is where rich investors would pay from $50,000 to $100,000 per deal. Venture capital is the collaboration to raise millions of dollars from institutional investors, or limited partners, and then loan that money to startups.
The rich entrepreneurs engaging in angle investing were weary of this practice at first, so firms like Kleiner and Sequoia had to find out a way to get these entrepreneurs on board. These firms decided to create companies themselves to show entrepreneurs the advantage of engaging in venture capital. Kleiner started a company called Genentech, which ended up exploding due to venture capital.
Venture capital was then seen as an easier way to scale companies. General partners at venture capital firms would earn 2% of the assets under management of any company that they were able to gain investments for. There was also a salary bonus of 20% of the profits as incentive.
Since venture capitalists have such a stake in the company that they invest in, they typically involve themselves in that company’s business development. This is another attractive quality to venture capital. The partners investing in the company will often have entrepreneurial experience; so helping a startup through various phases of business development is beneficial for everyone involved. Venture capitalists are also generally well connected which is essential in developing a business. With this being said, venture capital firms almost act as a startup factory. They not only throw money at the company, but they are engaged in the building process of the business.
No wonder the United States has had such success in the emerging startup industry. They have not only had the money behind each company that investors decided had potential, but they have also been guided through each phase of the business development process by experienced entrepreneurs. The teachers teach the students, the students learn, and eventually the student becomes the teacher. This is the model behind venture capital.
This article is based off of this article from investor place.
