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 �Ա�����group 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.

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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.

, a Utah-based software company focused on building tools for offline business, has raised . Most of it came in two rounds, a massive in May of 2017, and a from this June.

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Coverage of startups focuses too much on their fundraising. That’s in part because startups mostly will not share numbers, apart from their recent round size. Most startups that raise money won’t even share their valuation, so getting revenue notes out of them is difficult.

Podium, however, is willing to share. Collating notes from a dinner last night, here’s how Podium has grown during its life: Podium was around the $12 million annual recurring revenue (ARR) mark when it raised its Series A. That’s pretty high for an A, which explains it managed to raise so much during the theoretically early-stage investment. By the end of 2017, the startup was doing around $30 million ARR.

Continuing, Podium is past the $50 million ARR mark today and expects to reach $60 million by the end of the year. Next year it wants to get to $100 million.

That strikes me as pretty quick, though I don’t know how it closely stacks up to or other companies that are sometimes touted as the fastest growing SaaS shops of all time. All the same, Podium has burned in the neighborhood of $16 million during its life (I double-checked that one with its president), which means it’s floating a huge pile of cash.

And that indicates we won’t see an IPO soon, I wouldn’t think. Why bother when things are going so quickly?

Final thought: Podium’s revenue growth implies that at least some companies that are raising in an outsized fashion aren’t totally bonkers. Though I wonder how many other Series B level companies that have similar levels of capital raised are as large. And that not every Utah-based company burns cash like .

Top Image Credit: .

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 growing is 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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And if venture dollars raised per capita in the state is any indication, it’s well on its way. With approximately $353 in reported venture funding per person per year between 2016 and 161 days into 2018, Utah is ranked 6th in the nation in per-capita venture dollar volume, according to Crunchbase News research.

Some argue that Utah is becoming a more viable headquarters alternative to the Bay Area due to its relatively affordable real estate, tax climate, educated population, and a culture that—hence its earning the nickname the Beehive State.

Utah also boasts of : , an edtech startup that successfully in May; online market research platform ; cloud startup , which also recently filed to go public via a rather disappointing SEC filing (see more below); and , which has developed a sales acceleration platform.

Along the same lines, in July 2017, Forbes’ writer wrote about how the state had become “.” In 2016, CNBC named Utah as.

But when we look at funding figures,the state’s startup scene has more bumps in its road than you might expect. Total deployed venture capital in Utah in 2017 ($856.72 million over 86 deals) was up compared to 2016’s result, but lower than the tallies put up by 2014 and 2015. And deal volume in 2017 was the lowest in over five years. Of course, given that capital raised rose last year, we can presume that bigger deals were getting done.

Utah does not appear to be bucking the trend in the first half of 2018. Despite a few large deals having been announced since January—including the recent $60 million Series B investment in —Utah startups have so far raised just $251.9 million across 25 reported deals, according to Crunchbase research.

Among the state’s largest recent deals includes $60 million raise led by with participation from , , (formerly Google Ventures), and .

Lehi, Utah-based , which offers a cloud-based practice management platform for tax and accounting professionals, announced an extension to a previously announced funding round led by , bringing the total raised this year to $42 million.

, a business intelligence software startup, raised a $16 million Series B that closed in February. The round was led by , and other backers included Salt Lake City-based and . And brought in $24 million in a Series B round from investors such as and (again) .

But not all headlines about Utah companies have been positive as of late. On June 5, our editor Alex Wilhelm wrote about how Domo’s was met with a that when the filing was made public last week. Essentially, the hyped company revealed that despite raising more than $700 million and its in 2015, it really doesn’t have too much to show for it beyond a lot of debt, dwindling cash and a high cash burn rate.

Yet investors are bullish on the area and its future.

Going Big While Staying Small

Sequoia Partner believes that Utah is just now scratching the surface of all its potential. He pointed out that for a relatively small state (with a of just more than 3.1 million), Utah is home to a lot of startups.

“Despite the fact entire population of Utah is smaller than that of the Bay Area, it [the state] has some of the most promising startups that have launched in the country,” he told Crunchbase News. “In particular, the town of Provo has 150,000 people and boasts two unicorns and a number of promising companies. On a per capita basis, this is the most entrepreneurial state in the country.”

Sequoia in recent years has invested in two Utah-based startups. It led Provo-based Qualtrics’ in 2012 and participated in the company’s subsequent funding rounds. It also invested in South Jordan, Utah-based digital recruiting platform ’s Series D and E rounds in 2013 and 2015, respectively.

Schreier believes his Menlo Park-based firm is not done investing in the region.

“Utah has a long tradition of entrepreneurship but only recently have we seen the high volume of technology startup creation,” he said.”Plus, the startup environment is stronger than ever, which is evident by the number of IPOs and S-1 filings over the last few months. I think that successful companies like Qualtrics will motivate more people in Utah to start companies. ”

Insight Venture Partners also has a number of Utah-based startups in its portfolio, including Qualtrics, Pluralsight, data product startup (which was announced in ), and , a Provo-based provider of .

, managing director of , believes Salt Lake City is uniquely positioned as a hotbed for innovative ideas and companies.

“The universities are churning out computer science talent. Anyone who goes on mission is well-trained in sales. You mix sales execution and good technology, and you have growing software companies,” he wrote via email. “You also have the benefit of nearly unlimited real estate as the silicon slopes corridor widens and expands. Lots of growing software companies means you can recruit anyone you want into senior positions. All of this self-reinforces the virtuous cycle of Salt Lake City tech innovation.”

General Partner agreed the Utah startup scene is continuing to grow rapidly. NEA previously invested in cloud computing startup , which went public and was eventually acquired by S.

“Utah is a great place for technology talent and we’ve seen it continue to develop quickly,” he wrote via email.

Founders also have quite a bit of faith in the mountain-laden state.

, CEO and founder of, is naturally bullish on his company’s home state. He told Crunchbase News that Utah offers “a high-value business climate” that tech companies have taken notice of. For example, , , , among others have a presence in the state.

“The natural advantages of the state are not only business driven, but also lifestyle driven,”  he added. “Tech workers accustomed to one hour-plus commutes, high rents, and out-of-reach home prices come to Utah where mountain biking, hiking, and world-class skiing are all within a few minutes drive — and housing prices are a fraction of the Bay Area, with more space.”

Avarell founded Canopy in 2014 after having worked as a tax attorney on Wall Street, where he occasionally took on pro bono cases that gave him insight into the inefficiencies of tax resolution and accounting software. He launched Canopy to offer accountants a practice management and tax resolution software designed to make their work more efficient by cutting down on “busywork.”

Its funding this year brings its total brought in since inception to $72 million. The startup is using its latest financing to focus on product R&D and hire sales staff. Canopy currently has more than 250 employees, more than triple the number of workers it had at the beginning of 2017, according to Avarell. Its sales have grown 200 percent year over year since 2014.

Utah’s road to increase its profile as a tech hub is not without hiccups (i.e. Domo’s S-1 filing), but if the state continues on its overall current path, it’s likely that we’ll be writing about more success stories emerging from the region.