How Tech Companies are Making a Home in Utah's Entrepreneurial Climate


Editor's Note: Cross-posted on BroadbandBreakfast.com, the site devoted to following Gigabit Networks, broadband usage and universal connectivity.

In Gigabit City Provo, Utah, a Startup Ecosystem Thrives in Good Soil and Deepening Roots

Broadband's Impact September 11th, 2015

Drew Clark, Publisher, BroadbandBreakfast.com

PROVO, Utah, September 11, 2015 – Utah is uniquely hospitable to entrepreneurship, and its deepening roots in software and search analytics have enabled it to become a significant technology hub, said Gov. Gary Herbert and a host of entrepreneurs, venture capitalists and national journalists participating in the first annual Startfest here.

The startup festival last week featured more than 200 speakers and panels, including CEOs or top executives from Domo, Qualtrics, Pluralsight, Maritz CX, MX, Oracle, Vivint and a score of VCs.

“Utah, in a lot of ways, is a stronger and vibrant community than Austin, Texas; or Boulder, Colorado; and yet they get an insane amount of press,” said Clint Betts, the founder of the publication BeehiveStartups.com, which hosted the event.

Timed to coincide with Provo’s annual “Rooftop Concert Series,” showcasing local bands, and the smartphone-focused Pocket Film Fest, the event also concluded with a Google Fiber-sponsored “hackathon” devoted to helping develop applications for Gigabit fiber connectivity.

Cheerleader-in-Chief Gov. Gary Herbert

“I see Utah rising like cream to the top,” said Herbert, governor of the 33rd largest state since 2009, and who is running for re-election in 2016. He kicked off the panel programs on Tuesday, September 1, with a speech followed by a question and answer session with Betts.

“That doesn’t mean we don’t have challenges, but we are on the right road and going in the right direction,” said Herbert.

Herbert said his job is being a cheerleader for the state: “Mainly, it is making people aware that if you invest in Utah, your chances of success are greater than elsewhere.”

As the newly sworn-in chairman of the National Governor’s Association, Herbert has the opportunity to frequently tout the state. He told of an interaction in which Rhode Island Gov. Gina Raimondo asked him, “What is it about Utah?”

But Herbert got some pushback on his boosterism from Betts, particularly regarding the controversy over Zenefits, an online benefits company. Herbert’s insurance commissioner told the San Francisco-based company in late 2014 that its free business model was illegal in Utah. After pushback from local techies, and from the governor himself, the Utah legislature passed legislation in March 2015 overturning that ruling.

Telling the Qualtrics Story

Within Utah’s technology ecosystem, there are five billion-dollar companies, based on market capitalization. Most are in software or search analytics.

They are Qualtrics, a leading online survey tool; Domo, a “big data” analytics engine; Pluralsight, an online educational platform, and InsideSales, a lead-generation tool. Vivint, a major home automation company, and which also includes wireless and solar divisions, weighs in with roughly a $2 billion market capitalization.

In an interview at the festival with TechCrunch journalist Sarah Buhr, Qualtrics CEO Ryan Smith recounted its founding story. Going to college in Los Angeles, Smith dropped out when he learned that his father had cancer with a prognosis of three month to live.

He came home to Provo, where his father was a professor of marketing at Brigham Young University, to spend time with his dad. Smith brought his technical skills to online surveys, and soon Qualtrics was born. His father, who outlived the terminal diagnosis, and his brother, a former Google executive, constitute the company’s core leadership together with Smith. 

In part because venture capital in Utah has been hard to come by recent years, Qualtrics financed itself by bootstrapping. Indeed, the company had obtained to $50 million in revenue before it received any serious funding offers.

Then, all of a sudden, everything was on the table, said Smith. The company got an offer that might have led the family to sell the company. Or it could continue on its organic growth path. Or it could take on new capital investment.

He faced the dilemma of successful entrepreneurs: “There is nothing wrong with the business, it is scaling beautifully, and yet there is a multi-billion opportunity,” said Smith. Fundamentally, he wanted to control his destiny – but without turning his back of what the company could become.

“My goal at Qualtrics is to write my own story; I don’t want others to write it for me.”

He decided to take the investment. One year ago, Qualtrics brought in $150 million in venture capital, a sum that bumped Utah last year to sixth in the nation for venture capital.

“I believe you can do this in Utah,” said Smith, referring to his intent to grow the company further and further. “There are probably five to six really big companies with founders who have the ability to write their own story. They haven’t sold out yet, and they want to do something big.”

And the upside? Everyone is still only “in the third of fourth or fifth inning,” he said.

College Friends and Fellow Entrepreneurs

Josh James is CEO of Domo and one of Utah’s most successful tech executives. He built Omniture into an analytics powerhouse and then sold it to Adobe for $1.8 billion in 2009. The division remains based in Utah, with the high-profile Adobe building overlooking the booming City of Lehi in Utah County.

James took the stage with his friend and former BYU college friend Jeff Kearl, now CEO of the lifestyle/clothing company Stance. Previously, Kearl played a key role in founding Skullcandy, the headphone and peripheral manufacturer based in Park City, Utah.

Both James and Kearl are bullish on Utah, although Stance is based in San Diego to be closer to surfing. Their wide-ranging “conversation among friends,” moderated by Greg Warnock of Mercado Ventures, touched on everything from the unique peculiarities of Utah’s business culture to Kearl’s past antics in arbitraging frequent flyer miles from Kellogg’s waffle packaging.

James, for example, addressed the need to actively court tech talent from out of state.

“We give them the red carpet treatment,” said James. “We send flowers to their spouse. We make sure to carve out at least an hour to show them real estate” – so they can see how much of home they could buy in Utah, versus Silicon Valley. “We invite the smartest engineers to spend time talking, and shield them from the ones that don’t come across that way.”

That morphed into a discussion about building a corporate culture that will be valued by all-import tech-savvy millennials. 

“Work is different today than 20-30 years ago, when we went to factories and produced things. Then on Friday it was over,” said Kearl.

‘The information age created a bunch of companies with computers and conference rooms. It has shifted the activities that happen in the day. This is a different type of work: social dynamics are much more different, and the millennials punctuate this.”

“I don’t want to call someone at 9 p.m. at home and have them not take my call,” said Kearl. “Yet if I am going to ask [24 by 7 availability], I have to create a workplace that allows employees to go to their kids’ activities, or to go out for a surf.”

“We just say, ‘life is holistic,’ so let’s work together and not break [work and home life] apart.”

Leading From the Front: Nike, Apple, Vivint

Jeff Lyman, Chief Marketing Officer of Vivint, spoke about the need for companies to “lead from the front.” Formerly with Nike, Lyman told the story of Steve Prefontaine, the legendary University of Oregon runner and who became the model and muse for Nike’s aggressive approach to business marketing.

Lyman said most distance athletes, runners and bicyclists, race in a pack. Not Prefontaine. He had the courage to break out the pack early: To dominate the race from beginning to end.

That’s what Nike began to do with marketing more than a decade ago. It stopped viewing the shoe sale as the completion of a marketing campaign. Rather, the sale was the first point of contact in the cycle of digital communication with the customer.

“Nike was reinventing itself and the relationship with the customer,” he said. “It was not marketing to you, but bringing you in and building loyalty.” That’s led to a database of 60 million “members.” Yet it’s acquired that at fraction of the cost of competitors.

Apple showed the same courage in launching the iPhone without a keyboard, in dropping the traditional clamshell design, and abandoning conventional web browsing technology. Those choices, he said, put Apple five years ahead of any other phone.

Vivint has done that for home security and automation, he said. It has reconfigured the entire value chain: product, sales cycle, installation, customer service, home automation and filed service.

For example, CEO Todd Pedersen was dissatisfied with Honeywell wall monitors. Yet, said Lyman, board members told him: “Stay back in the pack; don’t take the risk. Let’s just keep doing what everyone else is doing.”

Bucking that advice, the company has tackled each element of the value chain to become a leader in the smart home platform. The company sees 80 percent of security service subscribers signing up for smart home services (versus a 45 percent industry average), and obtains $63 in month recurring average revenue per user (versus a $39 industry average), he said.

Finding an Oracle Home in Park City

In a “fireside chat” late on Tuesday, Oracle Chief Information Officer Mark Sunday talked about his company, and why Sunday has chosen to make Utah the base for his work at the company. 

First Sunday worked for 7.5 years as the top technology officer for Tom Siebel and his database company Siebel Systems. Acquired by Oracle in 2006, Sunday has since run the technology show at Oracle, a Redwood Shores, California-based software giant with nearly $40 billion in annual revenue.

His secret for longevity at these tech giants? “You always put the company first,” said Sunday, speaking in the second person about himself, even “when it hurts you personally.”

Sunday extolled the vision and corporate leadership of Larry Ellison, whom combines the attributes of “the vision of where things are going; being willing to make the ‘bet the company’ call; and the ability to instill direction into the company culture.”

As an example of a “bet the company” move, he recounted Ellison’s decision, after only six days of review, to buy competitor Sun Microsystems when others had passed over such an opportunity. In recent years, Ellison has instilled a much stronger uniformity throughout Oracle than in its “early decentralized days.”

Sunday said there were many benefits to being located in Utah. Siebel Systems faced power shortages in California in 2001, and sought a backup facility within a day’s drive of Silicon Valley. 

Salt Lake City outclassed Las Vegas, Phoenix, Portland and Seattle. It didn’t hurt that former Utah Governor Mike Leavitt used the invitations to the 2002 Salt Lake Winter Olympics to entice Sunday to make that move.

“I live in Utah because I choose to live here,” said Sunday. “While I am not part of the dominant faith here, it has been a great experience here for family. I don’t know a single person here” for whom that hasn’t been the case, he boasted.

Living in Park City, a ski resort, has also broadened his professional horizons. “When I moved to Utah from San Francisco, I thought it would be like moving to Fiji: A great place to live, but my professional network would end.”

Instead, he said of his family’s experience, “We made connections that we never would have made had we lived in California.”

‘This is the Place’ for Tech Startups

USA Today reporter Jefferson Graham led a panel discussion on Wednesday about “Silicon Slopes: What is Driving Utah’s Tech Success?” It included the CEOs of Health Catalyst and Pluralsight, plus Betts.

“It’s hard to put your finger on what makes Utah so unique and special,” said Betts, although he and the others did highlight a dedicated workforce that prizes education and initiative, particularly in Utah County around Provo/Orem. It is home to both BYU and the large public Utah Valley University. It was also the birthplace of the once-formidable technology companies Novell and WordPerfect.

Beehive Startups hosted a major tech event in January in Salt Lake City, yet 70 percent of the attendees came from Utah County. That’s led the company to move its main event to Provo.

Even one of the early challenges formerly faced by Utah-based entrepreneurs may have proven to be a blessing, said Pluralsight CEO Aaron Skonnard. Rather than building up venture-backed companies into which revenues would eventually flow, “we took a very different approach – although common for Utah – rooted in the fact that we haven’t had much venture capital. You are forced to produce cash-flow early on.”

Still, for vibrant tech startups, it is “easy to feel trapped inside the state when everyone is flying over,” he said, particularly when “you don’t have a good PR strategy; you don’t have a wake to make noise.”

But things have definitely changed over the past two to three years, said Skonnard: “More and more investors are paying close attention to Utah and more actively. And if you fast forward 10 years, things will change even more. There will be a lot of companies, with a lot of wealth and success, and that will feed into more and more awareness in the West and in the East.”

Drew Clark is Publisher of BroadbandBreakfast.com. He tracks the development of Gigabit Networks, broadband usage, the universal service fund and wireless policy @BroadbandCensus. He is also Of Counsel with the firm of Kirton McConkie, based in Salt Lake City, Utah, which enhances clients’ ability to construct and operate high-speed broadband networks in public-private partnerships. You can find him on LinkedINGoogle+ and Twitter. The articles and posts on BroadbandBreakfast.com and affiliated social media are not legal advice or legal services, do not constitute the creation of an attorney-client privilege, and represent the views of their respective authors. Clark brings experts and practitioners together to advance the benefits provided by broadband: job creation, telemedicine, online learning, public safety, energy, transportation and eGovernment.  

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