Utah's four SaaS unicorns come of age


Over the past decade Utah has been having its tech moment, with four $1 billion-valued companies all coming of age at about the same time, giving them a massive unicorn per capita ratio.

Now, over a breathless six-month period, three of those companies have made massive step changes, with two going public and one being acquired, at a premium, by German software giant SAP.

Not only did the founders of all of these great software-as-a-service (SaaS) companies attend the same university - the predominantly Mormon faith Brigham Young University (BYU) - but they also ski and golf together, as well as joining forces every year to put on the Silicon Slopes technology conference in Salt Lake City.

The other key figure at Silicon Slopes is executive director Clint Betts, who told Computerworld UK: "It's unique to have the top entrepreneurs in a vibrant ecosystem like Utah laser-focused on building world-class companies and helping the next generation of entrepreneurs do the same."

Mount Rushmore of Utah tech founders

The eldest of this veritable Mount Rushmore of Utah tech executives is Josh James, who sold his first company - and one of the initial Utah tech success stories - web analytics vendor Omniture to Adobe back in 2009 for $1.8 billion. He went on to create BI vendor Domo, which floated in June at a valuation of around $700 million (£528 million), well shy of its private market valuation of $2 billion (£1.5 billion).

Next is David Elkington, the philosophy major turned data nerd founder of InsideSales.com, a SaaS platform which uses machine learning to help sales teams enhance their pipeline and close more deals.

Insidesales recently hired a new COO, Chris Harrington, who held senior sales positions at Omniture and Domo, with the explicit goal of helping to steer another another Utah tech unicorn to becoming a public company.

Read next: How Insidesales stopped targeting SMBs and focused on the enterprise

Next is Aaron Skonnard, the well-dressed cofounder and CEO of online training platform Pluralsight which floated in May at an implied valuation of close to $2 billion.

Read next: Pluralsight CEO explains how its SaaS training platform can help close digital skills gap

Last up is the charismatic founder of the SaaS survey company Qualtrics, Ryan Smith, who developed the platform with his dad along with his brother from their family basement back in 2002 and recently secured a deal to halt their upcoming IPO in lieu of joining forces with the enterprise software giant SAP and its American CEO Bill McDermott.

Read next: How Qualtrics invaded the enterprise with its customer experience software platform

"There is definitely something unique about the Utah tech company experience. Ryan and I are close in age, all four of us went to BYU, and Josh, Ryan and I just did an all nighter last weekend together planning out our future strategy for Silicon Slopes," Skonnard told Computerworld UK last year.

These four founders have been known to golf (Smith is a 2 handicap golfer) and ski together, friendships that may be aided by the fact that although they are all enterprise-facing software makers, none of them have to compete directly.

As Skonnard put it: "In Utah the thing that's different is that all of these tech companies are committed to the greater good of Utah and our community there. So while we are all really competitive and fight for the best talent, we are still unified in our collective commitment to making Utah a better tech ecosystem and that is what brings us together and aligns us and that is really unique, I haven't seen that in any other place."

Betts has probably spent more time with all four of these men in one room than anyone else, and he is struck by how "they each have a deep commitment to leaving Utah better than they found it, and they each have the will and generosity to serve the next generation".

Utah as a tech hub

Known more for its beautiful mountains and national parks than its booming business culture, the benefits of Utah as a tech hub might actually be its positioning outside of the cutthroat Silicon Valley ecosystem and away from the amorous glances of venture capitalists.

"There's a rich and deep history of entrepreneurship in this state," Betts said. "Success breed success, and that history has helped get us to where we are today. It's also just a beautiful state that's business friendly, filled with people who believe in the idea that one person can change the world. It's in our cultural DNA, and entrepreneurs in this state have no problem bootstrapping or going it alone for as long as it takes to build something special."

One thing that brings these Utah companies together is that shared attitude to steady growth. None have been tempted over to Silicon Valley or its millions of dollars of venture capital money, preferring to bootstrap their businesses from offices in Provo or Salt Lake City.

Skonnard says that Utah is different to the Valley, where you are "swimming in bloodied water" and that the CEOs actually do hang out together, unlike the frenemies you see in the Valley trading barbs at each other through their quarterly investor calls.

The result is companies that tend to grow at a slower pace; forcing them into sustainable profitability before taking on funding - with the exception of Domo, which was venture backed from the start. However when they do take on funding, they really take on funding.

Domo had taken on the most funding of the four companies before floating this year, taking in $690 million (£540 million) since its initial seed round in 2010, according to Crunchbase. That being said the company still admitted in its pre-IPO SEC filing that it was running out of cash, highlighting the perils of venture backing.

Qualtrics on the other hand waited 10 years, until 2012, to take a Series A round, and went on to raise $400 million (£313 million) before being snapped up by SAP. InsideSales waited eight years to take on a Series A round, going on to raise $251 million (£196 million) to date. Then Pluralsight waited nine years to raise a Series A, taking in $193 million (£151 million) before floating earlier this year.

On the subject of fundraising, Smith told Computerworld UK last year that he never saw the point of "raising money to raise money," but that investing, especially in engineering talent, was a key driver to the company growing and competing in the future.

"If you look at the DNA of Utah companies we have all taken a while to scale," he added. "When you build something for that long and have traction you definitely think about the world differently."

As well as easy access to the mountains and outdoor activities, there is the added cost of living factor attracting tech workers to the Silicon Slopes. According to Numbeo the average cost of living in Salt Lake City is $803 (£628) a month without rent. Compare that to $1,145 (£896) in San Francisco. The average rent for a one bed apartment in those two cities is: $1,170 (£915) to $3,359 (£2,627) respectively.

Even compared to Denver, Colorado, the Utah state capital, you would need around $3,992 (£3,112) to maintain the same standard of life that you can have with $4,900 (£3,832) in Denver.

What next?

All four of these companies have grown at similar rates, and all are at varying levels of what can easily be considered resounding success, with Domo dealing with some growing pains and only Elkington's firm left to enter the public market.

The only logical next step for these companies is to drive global growth, all while continuing to support their local communities through charitable exercises like Qualtrics' 5 for the Fight initiative and Pluralsight's non-profit platform Pluralsight One. Then there is the continuing community work involved with the Silicon Slopes conference.

These cultural touches aren't just good for the soul and society though, they can also be good for business. According to CNBC: "McDermott said that one of the things that most impressed him about Smith from the beginning was his work on 5 for the Fight and his passion for the topic." McDermott lost his mother to cancer in 2010 and his wife Julie had been diagnosed with breast cancer years earlier, and he is widely accepted as the internal champion at SAP for the Qualtrics acquisition.

Copyright © 2018 IDG Communications, Inc.

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