The quasi-public organization that helped launch some of the state's most successful technology companies - Cirque Corp., Megahertz, Create-A-Check - now faces its own shaky future.
The Utah Technology Finance Corp. lost $1 million in state funding Thursday. Rep. Bill Hickman, R-St. George, vows to draft legislation this summer that would force it out of business by requiring it to liquidate its $13 million in assets.Hickman, a banker, believes the state shouldn't be in the business of giving money to high-risk, under-capitalized companies. He also said information surfacing in an ongoing audit of the organization is "not a pretty sight."
The Executive Appropriations Committee agreed late Thursday that eliminating the organization's funding, which accounted for 15 percent to 20 percent of money it had to lend, was appropriate.
"They're not terminally wounded," said Sen. Steve Poul-ton, R-Holladay. "We feel they're able to continue their operations."
More than a decade ago, a different Legislature saw the nonprofit corporation as key to building the state's economy. It was created in 1983 with the mission of providing loans to innovative, small, technology-based businesses to help them get started, expand, market or develop products.
It has lent $27 million to more than 300 companies since then, filling a funding niche for start-up companies that banks and venture capitalists won't touch.
George Gerpheide, founder of Cirque Corp., said his company wouldn't exist today had it not been for Utah Technology Finance Corp.
Today Cirque, which makes the Cat line of touchpads that are an alternative to a computer mouse, employs 50 people; it has brought more than $32 million into the state's economy.
But in 1993 it was almost out of business.
"We unsuccessfully attempted to get money from banks and venture capitalists," Gerpheide said. "I really don't know where we could have turned next. UTFC made the small seed loan that allowed us to finish development of our product."
It also helped the company through its first round of private venture capital funding, he said.
"From my point of view, it's worked out to be a pretty good investment for the state of Utah," Gerpheide said.
Duane Blackley, acting executive director, said the corporation will scale back its activities and try to exist on proceeds from its revolving fund and other sources as a result of the Legislature's action.
It also receives funds from other state and federal agencies, including the Five County Association of Governments and the U.S. Department of Housing and Urban Development.
The corporation, which now has 15 full-time employees, will leave seven or eight open jobs unfilled and will cut back use of part-time interns.
Blackley said it also will reduce its loans in 1998 by $1 million.
Blackley, who has served as acting director since December, said he's already taken steps to correct some problems revealed by the audit.
"We have restructured UTFC to return to the core business of loaning, and, as we have become aware of deficiencies in the infrastructure and control systems, they have been changed and any weaknesses have been cured," he said.