/ Why Utah is the next Silicon Valley

When we talk about what makes a company economically competitive, we tend to stray into conversations about which industries are most innovative.

While that’s a critical piece of the discussion, Mark Muro at the Brookings Institute believes that it’s just as important to understand what the most innovative industries have in common so that we can learn how to replicate their successes.

Consequently, Muro and his colleagues set out on a project to identify a few simple characteristics that are associated with innovation and come up with what they describe as a “super-sector” of innovative companies that might yield some valuable lessons for other companies.

This past February, Brookings published its groundbreaking research in an 88-page report. Muro and his colleagues examined their super-sector of innovative companies and discovered something curious: Three of the 15 metropolitan areas with the highest concentration of employees in the super-sector were located in Utah.

“We don’t pay attention to Utah much, and Utah clearly sticks to its own affairs,” Muro said. “There’s a sense that they’re not like some metros, selling themselves externally, and yet, they do seem to be executing.”

While Muro and his colleagues were shocked by the findings, Utah companies shouldn’t be too surprised. After all, Utah was ranked number one in dollar-per-deal averages in 2014, beating out Silicon Valley and New York, according to Inc.

Interestingly, most of the employment in Utah’s super-sector came from unicorn startups – like Domo and Qualtrics – as well as established companies that had opened offices in the state. Utah’s number of unicorns, startups worth $1 billion or more, reached five this last year. That’s a lot considering Forbes reported only 80 unicorns existing so far in 2015.

In 2014, Utah companies raised almost $1 billion, the most in the state’s history. This year, companies are on pace to exceed that number, having raised over $500 million. While neighboring Colorado and Arizona are often regarded as startup hubs, Utah surpassed them both last year, according to CB Insights.

The large per-deal sums that Utah is seeing, happen in part because by the time companies receive them they already have revenue, proven products and a large employee base.

For example, Qualtrics had $48 million in revenue and 300 employees before it took any money. Pluralsight had $16 million in revenue in 2012 before it took its first round of financing in 2013. Most recently, Domo recently raised the largest single round in Utah history in a $200 million Series D.

A brief history of Utah tech

As one writer observed, much as Intel and other semiconductor manufacturers helped create Silicon Valley, the software company Novell, founded in Provo in the 1970s, paved the way for other technology companies in Utah.

The Wasatch region of Utah, which includes the metropolitan areas of Provo, Salt Lake City, and Ogden, is home to eighty percent of Utah’s population. Companies like eBay, EMC, and Edwards Lifesciences were lured to the state by cheap real estate and an educated workforce, employing hundreds of people in the region.

More recently, venture capitalists have infused a large amount of money in Utah companies. Omniture set the stage in 2009 when the web analytics company sold to Adobe for $1.8 billion. Home-automation giant Vivint was bought out by Blackstone for $2 billion in 2012, the largest exit in Utah history.

The state was the sixth most popular destination for venture-capital funding in the first half of 2014. That was the year Qualtrics and Pluralsight both reached the $1 billion mark.  InsideSales and Domo both joined the billion-dollar club in 2015.

So how are they doing it? Outsiders have pointed out a few reasons Utah companies have succeeded, including a cultural proclivity for salesmanship and entrepreneurship. A recent New Yorker article identified several conditions that Utah has in common with other regions that have super-sector companies, including:

1. Universities that graduate STEM students

With Brigham Young University, the University of Utah, and Utah Valley University all producing graduates in the STEM field, local companies have a strong talent pool from which they can hire. These universities have also produced a large number of startups and entrepreneurs.

One key way in which Utah has replicated Silicon Valley’s success is by creating a pipeline of STEM employees through good universities and corporate training programs.

2. Policies and infrastructure that attract businesses

Utah offers generous tax breaks to corporations, which has lured companies like eBay to the state. In addition, Utah’s government has a light-rail system that connects the state’s big cities to one another. Several years ago Utah decided to extend its rail system further south to accommodate the influx of businesses and residents.

3. Tight-knit relationships between local companies

Many of Utah’s businesses are home-grown and the state’s population is small and densely populated so the businesses get to know each other well. Collaboration between these tech companies has created a local ecosystem that has encouraged innovation and growth in the region. In addition, Utah’s local and state governments have worked to facilitate strong relationships between local companies.

There are a lot of reasons Domo is proud to call the Beehive State home. The work-life balance, for instance, is unparalleled in the state. Utah companies have the full attention of Silicon Valley – and are positioning themselves for continued success in the future.

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