Venture funding dips for Utah companies

Venture capital funding of Utah companies fell in this year's third quarter, mirroring a national decline in total investments.

According to the MoneyTree Survey released Monday, nine Utah companies captured $46 million in the three months ended Sept. 30, compared to 10 companies receiving $57 million during the same quarter a year ago.

Zars Inc., a developer of transdermal drug patches and creams, led Utah deals in the quarter with $22 million.

Lead investor Draper Fisher Jurvetson of Menlo Park, Calif., invested $7 million in the Salt Lake-based company. Other investors included ePlanet Ventures, CDIB Ventures, vSpring Capital, Wasatch Venture Fund and Stanford University Fund.

Larry Rigby, president and chief executive of Zars, said the money will be used to finish clinical trials of two new pain treatment products, add personnel and develop a small manufacturing facility.

The company is Rigby's fourth start-up. Zars initially was funded by Rigby and three other co-founders. In addition, financing was obtained by private angel investors.

"This is the first big institutional round," Rigby said. "It's very hard to get venture money. We feel very fortunate."

Other companies funded in the quarter included Star Bridge Systems at $7 million and IMCentric Inc. at $5.7 million.

Even with the third quarter's drop in funding, Utah venture investments to date are at $121 million, already surpassing the $118 million raised in all of 2003.

"If you look at it, we've had two stellar quarters in a row," said Steven Stauffer, senior audit manager of PricewaterhouseCoopers in Salt Lake City. "You could almost say that the market is stabilizing, and it is healthy, and there seems to be a trend toward capital efficiency, where companies are using their money wisely."

Nationally, $4.3 billion was raised by 601 U.S. companies in the third quarter, compared to $4.4 billion raised by 706 companies in the same period last year.

"We are in a more euphoric stage than 18 months ago," Promod Haque, managing general partner with Norwest Venture Partners, told The Associated Press. "There needs to be a lot of discipline exercised by venture capitalists. We don't want to end up like we were in 2000 when just about every idea would get funded."

In a separate survey also released Monday by the Salt Lake-based MountainWest Venture Group, it found 12 Utah venture deals with a total value of $88.6 million were funded in the third quarter.

The MoneyTree Survey is produced by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association. The survey captures only equity investments and excludes deals that involve debt, bridge loans, recapitalizations, roll ups, initial public offerings or "angel" investments.

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Contributing: The Associated Press; E-mail: danderton@desnews.com