SALT LAKE CITY — The mythical unicorn is a creature with a large, pointed, spiraling horn projecting from its forehead with the power to render poisoned water potable and to heal sickness.
In the world of business, unicorn has an equally awe-inspiring meaning, but without the mythic overtones. It's a company, usually a startup that may not have an established performance record, with a stock market value or estimated valuation of more than $1 billion. Nationwide, there are approximately 150 companies valued at the billion-dollar level.
The Beehive State is home to at least six unicorns including Domo Technologies, InsideSales.com, Pluralsight, Qualtrics — all Utah based — as well as JET.com and Thumbtack, which are headquartered elsewhere but have businesses within the state. The Wall Street Journal and tech analytics firm CB Insights each track the number of unicorns, which can change from month to month based on estimated value or investor funding level.
“The reality is that we are doing better than any other state in America today as the No. 1 best performing economy,” Utah Gov. Gary Herbert told business leaders Friday during an economic summit. “We’re on the right road, going in the right direction.”
But are the unicorns a sign of a prosperous economic future or part of a building economic bubble with the potential to burst?
Currently, the highest valued Utah unicorn is American Fork-based software firm Domo Technologies at $2 billion. Josh James, who also co-founded the web analytics software company Omniture in 1996, founded the new company in 2010. He sold Omniture to Adobe Systems Inc. in 2009 for $1.8 billion after having taken the company public three years earlier.
Today, he is leading his second billion-dollar venture and attributed the presence of multiple unicorns in Utah to the business-friendly culture that has been cultivated over the past several years, along with the maturation of the state’s growing technology ecosystem.
“We’ll definitely see more companies get to the (unicorn) level,” he said. “Silicon Slopes is on the map in a big way.”
The San Francisco Bay Area's Silicon Valley is home to hundreds of startup and global technology companies. Silicon Slopes refers to a cluster of information technology, software development, hardware manufacturing and research firms along the Wasatch Front.
James said the state is among the top producers in the nation of new tech startups and venture capital raised. It is a trend that he said is likely to continue thanks to the number of innovative, homegrown business savvy executives that have been responsible for the rise in Utah’s technology sector.
“Silicon Slopes is a ‘unicorn in a box,’” he said. “We’ve got a great ecosystem of executives, financiers and venture capital that comes here from Silicon Valley combined with the (local) entrepreneurial spirit and experience that has been building here, and a great business environment. There is this ‘spontaneous combustion’ that takes place.”
Another unicorn executive attributed much of the state’s tech success to an environment that is well-suited to developing strong enterprises.
“There is an overall hardworking attitude in Utah,” said Brett Barlow, chief marketing officer at Pluralsight. Headquartered in Farmington, the privately held online education company provides video training courses for software developers and information technology professionals through its website.
“We’ve generated a reputation of being solid professionals that are thoughtful in the way that we go about our business,” he said.
Barlow said the growth of the state’s tech economy is only just beginning, with other potential unicorns possibly on the horizon.
“Omniture started a path for a lot of these other tech companies, and I see it getting bigger and broader,” he said. “We’re just getting started.”
Regional economic analysts have differing views on the local tech sector. One researcher noted an abundance of quality technology businesses currently in northern Utah, while another expressed serious concerns about the industry’s future.
“With high levels of education and high levels of entrepreneurship, these types of companies (are created),” said Lexi Russell, senior research analyst with the Bay Area office of commercial real estate firm CBRE. "With five colleges in northern Utah, there is a lot of talent that companies can pull from," she said.
With so many firms currently valued at or more than $1 billion across the country, whether they will all be successful in the long run is yet to be determined, she said.
“Just because you have the money, does that mean you can fulfill your business plan? Is your business plan profitable?” Russell asked. “Some of these companies are profitable, while some we may have to wait and see.”
Economically speaking, the impact of unicorns is uncertain. But the increasing presence of technology firms in Utah could be a harbinger of things to come, she said.
“Because they have a lot more tech there — because the infrastructure is good — might bring more net migration to the area,” Russell said. “That might be able to (preserve) some of the tech talent that’s been cultivated through the educational institutions and the (Silicon Slopes) corridor.”
Yet there remains some concern about the potential for a “tech bubble” like the country experienced at the beginning of the millennium. Noting that the number of unicorns has more than tripled in the past three years, Hal Snarr, assistant professor of economics at Westminster College, said this latest expansion could be trouble in the making.
“People thought the dot.com (bubble) would continue to (grow), but when you look at this through the lens of history, it’s similar to a building boom,” he said. “It’s just another bubble.”
He said the rapid growth and overvaluation of tech companies is very reminiscent of the housing bubble of the Great Recession.
“I don’t think it’s sustainable,” Snarr said.
He said the reason so many companies are valued so highly in Utah is due to the state’s business-friendly climate that includes fair litigation, low regulation, along with “fair, consistent taxation.”2 comments on this story
“Everything California is in terms of policy, Utah is like the opposite,” he said. “So we benefit from that.”
Snarr said, however, when Google was first launched years ago, the company was not valued at the billion-dollar threshold, which leads him to be skeptical of the increasing number of estimated high-value firms that are prevalent today.
“If Google was not a unicorn, and now you have all of these unicorns, I just see it as another dot.com bubble,” Snarr said.