Jul. 31–Venture capital investments in Utah plummeted in 2002, and a new survey suggests businesses eager to augment their bank accounts with such outside financing continue to struggle this year.

During the first six months of 2003, venture capitalists funded only nine Utah deals, worth a combined $54 million, a 30 percent decline from the $77 million and 18 deals funded during the first half of last year, according to the MoneyTree survey compiled by PricewaterhouseCoopers, Thomson Venture Economists and the National Venture Capital Association.

During the second quarter of 2003, three Utah companies — Echopass Corp., Fatpipe Networks and Northface University — received a combined $21 million in financing. During the same quarter a year earlier, 11 companies received a total of $31 million in financing.

“Venture capital funding levels in Utah pretty much track what is happening nationally,” said Steven Stauffer, senior audit manager at PriceWaterhouseCoopers in Salt Lake City. “Unfortunately here in Utah, though, one deal can make or break a quarter.”

Nationally, venture capitalists invested $8.3 billion in the first six months of 2003 compared with $12.5 billion in the same period a year ago.

Venture capitalists this year are a little more wary and a little more careful about where they put their money because of the weak economy, Stauffer said.

Fatpipe Networks noticed that wariness as it approached venture capital firms earlier this year seeking the funding it needed to continue to expand its corporate computer networking business.

“In 2000 we raised $8.1 million and it was much more difficult this year to get $3 million in funding,” said Ragula Bhaskar, Fatpipe’s chief executive officer. “There were a lot of concerns expressed by many [venture capitalists] about when they could get their investments back out of the company.”

Although venture capital funding in Utah is down in recent quarters, Brad Bertoch of the Wayne Brown Institute suggests that funding levels in reality are returning to the more normal levels witnessed prior to the 1999 and 2000 boom years.

“Utah companies always have had a hard time finding venture capital. But can really good deals find funding? Sure they can,” said Bertoch.

Bertoch noted that one aspect of the venture capital business — the number of venture capital firms operating in Utah — has improved dramatically in the recent years.

In June 2000, Utah had only two players in the venture capital business that had offices here. They were managing a total of $75 million, Bertoch said.

“Now we probably have 10 to 14 active players in the game managing an aggregate of $750 million in investments. And many of them are starting to look outside the state because they cannot find enough good deals here,” he said.

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(c) 2003, The Salt Lake Tribune. Distributed by Knight Ridder/Tribune Business News.