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On April 8, Domo CEO Josh James made a big announcement: Domo had raised $200 million in a Series D round of financing led by New York-based venture capital (VC) firm BlackRock. The American Fork-based startup also boasted a $2 billion valuation. The announcement came as a surprise to many, as Domo had yet to officially launch its data visualization product into the marketplace.
While Domo’s seemingly out-of-nowhere success surprised many, its story is part of a growing trend in the Beehive State. In recent years, several Utah startups—particularly within the tech sector—have been quietly growing, disrupting their industries and landing big VC investments. Companies like Domo, Qualtrics, Pluralsight, Instructure and InsideSales.com have developed into major players within their respective industries, each securing VC investments of approximately $100 million and boasting valuations of $1 billion or more. These innovative homegrown companies and several others have caught the eyes of big-name investors.
Ryan Dent, audit partner at PwC, says VC and private equity investors no longer consider Utah a fly-over state—it is now a destination brimming with opportunity.
“We have seen significant dollars moving into the state—significant dollars from out-of-state investors and predominant players,” he says. “That’s a really good sign for the state.”
In 2014, Utah experienced 43 VC deals totaling $801 million, according to The MoneyTree Report by PwC and the National Venture Capital Association. Utah’s 2014 average deal size of $18.6 million was the second-largest in the country, surpassed only by Florida’s $19.6 million average deal size.
“We had three mega deals of $100 million or more in the third quarter of 2014—two of those deals (Qualtrics and Pluralsight both landed $135 million) were in the top 10 deals in the country,” Dent says. “Utah is putting our mark on the map with these large deals.”
Dent has seen two significant trends regarding the money flowing into the state. First, investments are going toward later-stage growth and expansion, as well as to companies with a proven technology. Second, several industries—not just tech—are attracting VC attention. “Software still rules, but there are several different industries with expansion-stage investments, like medical devices,” he says. “When one industry starts to take off, and if you have sustainable momentum in that industry, those will carry over and create a future pipeline and future investment.”
Dent says Utah is on track to see another highly successful year in 2015. During quarter one, Utah experienced 11 deals totaling $200.9 million, and quarter two is off to a great start with Domo’s $200 million funding round.
“We are seeing deals in the top rankings throughout the country,” Dent says. “Utah is right up there—we’re playing with the big boys.”
In the Fast Lane
Since its 2010 founding, Domo has been quietly growing, perfecting its comprehensive business management platform. Though its product was under wraps until this past April, the company had already reached more than 1,000 customers, boasted a customer retention rate of 150 percent and experienced 100 percent annual growth.
While Domo tried to remain under the radar (customers had to sign a nondisclosure agreement), businesses and investors from around the country knew James was building something great. Over the years, big-name investors like Benchmark Capital, Hummer Winblad, Institutional Venture Partners, GGV Capital, Bezos Expeditions and TPG invested in the American Fork-based startup.
If Josh James’ name sounds familiar, it’s because he is the entrepreneur behind the wildly successful business analytics company Omniture, which was acquired by Adobe for $1.8 billion in 2009—Utah’s largest acquisition at the time. James also initiated and led the state’s Silicon Slopes branding efforts. Today, James remains committed to seeing the state grow into a startup powerhouse—and much of that depends on venture capital.
James remembers a time when out-of-state VC firms scoffed at the idea of investing in a Utah startup. Just a decade ago, James says, Domo’s ability to attract big-name investors might not have happened.
“I’ll never forget a meeting in the early days of Omniture in Silicon Valley. I was talking with a venture capitalist named Neil Weintraut. He completely shut down the conversation and walked away from me as soon as he heard I was from Utah,” James recalls. “Now, we have top-tier VCs coming to invest in the state because they understand you don’t have to be in Silicon Valley to build a successful business.”