The Utah tech market is interesting. After appearing to explode into relevance out of nowhere in the last two years, Utah-based tech companies are entering their third generation.

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As we work to better understand what’s going on in the private markets, our goal at , Utah could constitute a model of sorts for how aspiring tech hubs outside Silicon Valley can grow a set of tech companies. And then another. And then reinvest money from early success back into their own ecosystem.

Let’s talk about what’s going on in Utah.

Utah

Utah is on my mind today because I went to a VC-startup dinner last night (breaking my general rule against doing so) with , the makers of Lucidchart, and two of its investors, and . Lucid is based in Utah, and I spent the evening sitting next to the company’s current COO and President.

(One of Lucidchart’s cofounders, , was also on hand. The company noted before the dinner that it crossed the $50 million ARR mark in 2018, the same year it )

Naturally, we riffed on tech writ large and the Utah scene in particular. I’ve covered companies from the state like , , , , and others. And News has written about Utah more generally a few times in the last two years. So I felt pretty prepared for the nosh.

But what stood out to me after talking to Grow for a few hours wasn’t that there are companies in Utah doing well, everyone knows that. Instead, it was interesting to learn that the companies we’ve gotten to know from the region are being closely followed by yet another group of startups. Things seem hot over on the Silicon Slopes, what Utah-located folks like to call their own tech center.

My impression now is that the -era of Utah (the first generation) was succeeded by the companies that we best know from the regions (the second generation). Cohort number two has made its mark by almost going public, posting quick revenue growth, raising lots of money, and the like.

But it’s the ²Ô±ð³æ³ÙÌýgroup of companies that is most exciting. Grow cited a few firms from the state that have his eye, naming (not a very young company, it turns out), (the tax-related startup, ), and (

This sort of generational notion, that companies of one generation invest and boost the next, is how ecosystems become mature. It’s how local venture firms crop up. It’s how Silicon Valley grew into what it is today. It’s a pattern you can see as well in Seattle to some degree, along with Chicago and other areas.

Indeed, the Utah startup scene has become sufficiently well-known (firms based elsewhere use the state as a hub for sales teams), and that it’s becoming very competitive. As SaaS guru and venture investor wrote last month:

And that’s a good thing for the workers in the state who are powering a tech scene I don’t think too many people saw coming.

Illustration: .

This week announced its first fund, a $110 million vehicle aimed at “early-stage enterprise software and security investments,” according to a release.

Another day, another fund, so why do we care about this one? One reason, really, and it’s not that Sorenson Capital put together the fund (the Capital part of the larger Sorenson org has $1 billion under management, according to itself). Instead, it’s that Sorenson’s newly-capitalized venture arm has offices in both Silicon Valley and Utah.

Utah, of course, is a tech scene that has seen its prominence rise in recent quarters with large exits (think the multi-billion dollar Qualtrics sale to SAP), and a number of big rounds (our coverage of Podium is useful here, I think), making the partial home of this new fund all the more interesting.

The fund did note in an email to Crunchbase News this morning that while it has a local presence in Utah, it will invest “in companies all over the country.” Still, having a new fund on the ground in Utah, especially one aimed at earlier-stage startups is notable.

According to , just three early-stage venture rounds have been recorded in Utah thus far in 2019. That feels light (though, of course, the start of any calendar year can be slow from a venture perspective as deals take time to compile and venture typically slows during the holiday months), frankly, given the late-stage activity the state put up in 2018.

For the curious, Utah’s 2019 early-stage deals as of this morning are the $9 million Series A,  $8.3 million Series A, and $12 million venture round. Sorenson Ventures claims eight extant investments and intends to raise that figure to fifteen to twenty with its new money.

In other fund news, we took a look at the new Scalework’s capital vehicle earlier this week. While it’s in-vogue to raise billion-dollar funds, not every fund needs to be outsized.

Of course, the new Sorenson fund was oversubscribed. Sorenson Ventures had targeted a $100 million fund in 2019.

When first filed to go public, we were impressed by its financials. To see a subscription software company generate as much cash and profit as Qualtrics while growingÌý¾±²õ rare. It stood out.

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Qualtrics is a SaaS company based in Provo, Utah, that uses survey tools to poll markets and employees. The firm across three rounds ($, , and ), from , , and during its life as a private company.

The firm previously detailed its third-quarter results in a filing, so let’s quickly summarize those results and then figure out what its new, price range tell us.

Q3

In the third quarter, Qualtrics grew from its revenue from $97.1 million in the preceding quarter, to $105.4 million. That’s a gain of around 8.5 percent in a quarter, at Qualtric’s scale. But what was even more impressive for Qualtrics is that the company managed to post a profit greater than its sequentially-preceding quarter and its year-ago quarter at the same time.

In the third quarter of this year, Qualtrics wrung out $4.9 million in net income (measured using GAAP), up from $975,000 in the second quarter of 2018, or the $4.7 million it recorded in its year-ago Q3. It does seem, reading the company’s filing, that the third quarter is its most profitable, admittedly. But to see profit grow up in the same quarter that the firm added just over $7 million in new subscription revenue is good.

On the less-than-great side of things, Qualtrics has generated less net cash increases this year than in the same period of 2017. But, the firm has grown its operating cash flow from $36.1 million in the first nine months of 2017, to $52.5 million in the first three quarters of 2018.

Got all that? Let’s talk price.

Price, Valuation

So, what is that worth? According to Qualtrics, it intends to sell shares for as much as $21 (and as little as $18). Qualtrics is selling 20.5 million shares, and its underwriters can buy up to another 3.1 million, given the firm a possible haul of about 23.6 million shares.

At its maximum, listed price that would generate around $495 million in gross receipts for the firm. Its net would be less of course, but the figure tells us that the firm is looking to raise a lot of money. (Qualtrics currently has $137.7 million in cash and equivalents on-hand).

Now, Qualtrics will have just about 216 million (215.952 million, more precisely) shares outstanding after its offering, although I am not entirely clear if that figure includes the underwriter’s option. Regardless, at its range from $18 to $21 per share, Qualtrics would be worth around $3.9 billion to $4.5 billion.

Now at over $100 million in revenue per quarter, you can quickly gist out where the firm’s revenue multiple hovers.

This will be a fun one to watch.

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Good news, that is, if you are an investor, employee, or founder at , the latest unicorn looking to go public in 2018. When Qualtrics first filed just a bit ago, we were generally impressed with its performance. The firm had slim GAAP (a fancy acronym that means “while counting all costs”) losses and solid revenue growth that was mostly built with subscription dollars.

And then the company (how to read it) that caught our eye. What did the new document contain? Why, third quarter results! So, here’s the quick hit on what is new from Qualtrics-land:

• Q3 revenue: $105.4 million (up from $97.1 million in Q2’18, up from $75.6 million in the year-ago quarter);
• Q3 gross profit: $78.1 million (up from $72.0 million in Q2’18, up from $54.9 million in the year-ago quarter);
• Q3 operating income: $5.6 million (up from $2.5 million in Q2’18, up from $4.7 million in the year-ago quarter);
• Q3 net income: $4.9 million (up from $975,000 in Q2’18, up from $4.7 million in the year-ago quarter).

Summing, Qualtrics grew while extending profitability over the sequentially preceding quarter (Q2’2018), and its year-ago quarter (Q3’2017). Very good!

In effect, Qualtrics added just over $8 million in revenue during the quarter while more than quintupling its second-quarter profit. As we , it’s a pretty darn good mix.

Oh, and Qualtrics has now generated $36.1 million in free cash flow during 2018 through the end of Q3. And Ìý¾±²õ under its IPO price. Ouch.