We gathered this group of life science and tech executives to discuss two primary issues: the struggle to find qualified talent and the trend toward acquisitions of companies in Utah. Both of these topics are covered in related features in this issue of Digital iQ, and our panelist brought additional unique perspectives to the table. They also discussed the growth of the life science sector and the plan for it to become an increasingly potent sector in the technology industry. 

Our panel included: Kent Millington, Access Data; Jeremy Neilson, Fund of Funds; Dave Cutler, Novell; Richard Hanks, Mindshare; Pat Nola, Sorenson Communications; Jack Sunderlage, ContentWatch; Jeff Alexander, Alexander Print Advantage; Michael Paul, LineaGen; Eric Olafson, Tomax; William Moeller, American Biotech Labs and Pratap Khanwilkar, WorldHeart.

       A special thank you to Kirton & McConkie for hosting and sponsoring the event, and Richard Nelson for assisting as a facilitator.

Let’s start by talking about a few of things that we are particularly excited about in the technology and life sciences industries. What comes to mind with each of your companies?

NELSON: One of the least known but largest things we have accomplished is raising the rigor in high school requirements. On over 550,000 kids in schools we have raised the rigor to four years of English, three years of science, and three years of math. The State Board of Education thought that the low expectations for a six-year period were acceptable. We, as an industry, didn’t. We were the only organization that decided to take that position, which has pulled us into other opportunities to voice our concern about producing knowledge workers for the future.

NEILSON: We have had a great year of deal flow in venture capital funds wanting to participate and look at deals in the state. Some funds have pushed other people out and let us in simply because they want to have access to the Utah deal flow. We have been able to get into some top 10 venture funds in the country because the deal flow is so good in Utah.

CUTLER: Our biggest achievement this year was staying flat organically without acquiring companies. The past several years we have been able to stay around $1 billion a year, but we have had to buy companies and revenue streams in order to do that.

HANKS: We just completed 57 consecutive months of increasing revenues, without any accounting tricks. No asterisks. We are going to try to get to a hundred.

NOLA: I am proud that in the past six years we haven’t turned over any of our V.P.s, which is amazing for two reasons: One is if you have the opportunity that we have had with the growth and the kind of awards that we have received, a lot of times you get people leaving your company. I’m pretty happy that the staff has decided to stick with us. The second thing is a lot of times outside investors will put pressure to start changing your staffing, and I think we have been able to show them that we can scale and we have the maturity and the processes in place to be able to do that.

PAUL: I think our greatest accomplishment this year was closing what was perhaps the largest series A round for a life science-based company in Utah – about $6 million. As you know, it’s a little bit of death by a thousand cuts. But I’m going to work to not be encumbered by product revenues for the foreseeable future. Life science is a capital intensive business.

What are some of the challenges that you are seeing?

NELSON: Quality workforce and shortages are clearly our number one issue. It’s not just in the technology industry. It’s across the board.

CUTLER: Our biggest challenge this year is retention of key employees. We just went through off-shoring a couple hundred jobs from Provo to India, so most of the engineers think that the writing is on the wall that all jobs will go there eventually, which is not true. We have to manage that expectation and try and keep them around.

PAUL: It’s going to take many years to grow the strength of Utah’s life sciences industry. I think our greatest challenge is actually a challenge that affects all of us: First, health care, and second, understanding the genetic basis of disease. The challenge going forward is to really identify those unique things about each one of us that will lead to better ways to diagnose and treat horrible diseases.

OLAFSON: The workforce is also a challenge for us. We are in the market today for about 10 or 12 employees. We have more than our share of experience in what it’s like to hire in this market, and we share everyone’s concern about what we can do. However, I’m happy to be based in Utah and in this industry.

What kind of pain do you have in hiring qualified employees? If you can, try to quantify the number of openings you currently have and the kind of recent employees you’ve added.

SUNDERLAGE: Networking through the Utah Technology Council has been a benefit for us. We recently expressed a need for a vice president of engineering and Novell suggested three candidates within their ranks who were about to become available. We just made the offer Friday, and the individual accepted Monday. He’s a 19-year veteran. We are just delighted. So, number one, I’m grateful that Novell is grooming and developing that sort of talent; and secondly that we have those opportunities to be able to interact.

            It absolutely is a problem finding good people. Yet I think as we go about the networking here in the community, there’s good opportunity. It wasn’t too many years ago when we were all concerned about the out-migration in the state and not having enough jobs here in Utah for the talented people coming out of the colleges and universities. And here we are today with great growth. So the big task is to continue to develop those folks.

NELSON: There have been three surveys on Utah’s shortage of engineers. We are still tracking well over a thousand openings for engineers in the state. We haven’t backed off from that.

PAUL: I think we have some unique challenges that differentiate us from our technology counterparts, namely that our market is very global. We have to look at where we recruit from and where we lose people. Really, one thing we struggle with is less the attraction of qualified people, but really the sustainability of getting them here, paying them a market competitive wage, and then providing them with some type of development plan not just for their careers but for their families – how they can sustain themselves here in Utah should their one opportunity not pan out.

Are we making progress in that?

PAUL: I think the trick is getting national capital here that understands the relevancy of market wages. The more capital we have, the more companies we’ll have, and that will help sustainability.

NOLA: So your key talent has to come from out of state, then, for the science roles?

PAUL: For the discovery role primarily, similar to the University of Utah. Most of the Ph.Ds in the engineering and science side are coming from major institutions.

OLAFSON: Potentially internationally.

Isn’t there an integral relationship between capital and talent? If you have capital, doesn’t that cause us to attract talent, and vice versa?

NEILSON: I think they are linked, but not all capital is equal. When you bring in a firm like Frasier Health Care that’s been around for 15 years, talent follows. One of the benefits of the Utah Fund of Funds is that these top firms are really interested in Utah, and they are interested in taking Utah Fund of Funds money and looking at deals. So getting the right type of capital and the right professionals and the right talent behind the capital helps build the job force, as well.

KHANWILKAR: On the life science side, we are building up an ecosystem, which means there needs to be a number of companies at every stage of evolution. To attract people, workers need to know that if my company fails, that they have some other place to go. Knowing what else is out there as a safety net is important.

CUTLER: With high tech, I think we have that ecosystem in Utah. When we had our recent layoffs, I had three calls from other companies saying, “Can you give us a list? We will hire them all.”

MILLINGTON: I think that’s one of the reasons we had success this summer. We raised $18 million, which meant we could get going. We were already at 75 employees and we have added 50 employees since June, probably 30 or 35 of them in software development. Every time we had a job opening, we had a whole list of applications. It was just amazing, because I had been hearing all this time about the difficulty in finding these people. When we raised the money, we scratched our heads and said, “This is going to be tough to really find the people now that we have the money.”

KHANWILKAR: Did you find them locally?

MILLINGTON: Yes. There’s only one of that whole group that wasn’t, and that was because he had a specific experience that we needed in e-discovery. Everybody else was here local, and I really think that it’s because of the background in software development that’s been around here for 20 to 25 years.

SUNDERLAGE: The vision of USTAR was that if we were to create the right infrastructure in the state, we could attract some top level researchers who would build teams. Ultimately it wasn’t about just interest in research, it was about commercializing that research into products and, ultimately, companies. I think we are on a good track, and it’s nice to see that as being one of the important components that is going to allow us to succeed in life sciences and all technology.

Pat, it sounds like you are not just trying to attract available talent, but you are actually trying to create an entire workforce. What are you finding is working both in terms of indigenous growth and growth from outside?

NOLA: I think there probably is a critical mass of computer-oriented people in Utah. It started with Evans and Sutherland. A lot of that legacy is still rippling through Utah.

            If you are looking at sheer capacity, we add 10 to 150 interpreters a month. These are people making $40 an hour because they have high skills for it. If I could have hired them all in Utah, from a business and a cost perspective, it would have been better. But we have had to go outside and get funding from state organizations like Utah, which has been very accommodating.

            We are working with Salt Lake Community College on a fast track program where they find people who are already interpreters but they have gone off to another field and we are pulling them back in. We are creating an institute and hiring trainers and educators from different organizations because the educational institutions are moving a little too slow for our hiring needs. It’s a multi-year effort. But it’s something we have to do because we are facing a critical shortage.

PAUL: I think the life sciences are the younger sibling of the IT community, and we need to learn from the older sibling’s problems and challenges. I see life sciences growing to acquisitions. We need to really keep our eye on how the IT sibling has evolved through this organic growth and how we need to incorporate some of that learning as life science grows up.

            As you move through the phases of a company’s development in biotech, you go from discovery and research to product development. That’s where we are going to need a lot of skilled workers on the engineering side on product development. As Jeremy said, you get the right capital and the right talent. It’s a little bit like the chicken and egg; which comes first? You need the talent to recruit the capital, and the capital recruits the talent. But then how do you find the qualified workforce to really put the product development plan on the right track for the company?

OLAFSON: I’m thinking from a slightly different perspective, a bit of a pull-back. Jack offered that it wasn’t too many years ago we were dealing with net out-migration. We have gone from being comparatively under the radar to being fairly centrally located and fairly conspicuous. We are now paying a great deal more money for the people we are hiring. That’s just an absolute fact.

PAUL: Eric makes a good point. We are talking about talent now. We are not talking about capital. It seems we are very comfortable with the level of capital, which traditionally has been the problem. Now we have to deal with how to put it to work.

SUNDERLAGE: It’s safe to say that we are dealing with supply and demand, and that’s going to drive the salaries and wages of those people who are a scarce commodity today.

HANKS: One of the benefits of being in Utah is the attractive place we have here. On top of that there is now capital in place. But I don’t see companies spending enough effort on keeping who they have got. Truly hanging on to the customers you’ve got is far more cost-effective than trying to bring a new one in. We have never lost an engineer. We did four software releases in the last 14 months. So, having them working all night long, we have had to be creative to make sure they like working for us. Frankly, we are a small company, but if I think about the amount of money we would have to spend to try to steal your guys, I couldn’t do it.

What are the core things that you are doing?

HANKS: I think we have nine engineers now; my partner takes them paint balling. It’s silly, but if that’s what they like, fine. For Christmas, we had Costco open early, and we gave our employees $500 to buy whatever they wanted. They were able to wander around Costco with nobody else in there. We buy sections in theaters. We have Jazz tickets. It was proven long ago that it costs seven to 10 times more to get a new customer than to hang on to one. The same goes for employees. So I can go pay a head hunter $50,000 to find me the right guy, or I can buy some more paint balls.

MILLINGTON: That’s something that we have done, too. Every employee that comes on gets stock options. We make it very clear what our goal is, and so we provide that kind of incentive.

ALEXANDER: The state is spending way too much, in my opinion, to go outside and bring companies in when we all need those employees here. I think we could do more as a group to try and promote with the legislature and get the governor to understand more about how we can continue to build business from the inside out rather than trying to bring it from outside into Utah.

What role can education play, both higher education and K-12, in building a qualified workforce? What kind of request would you have of higher educators and the legislature in terms of the focus?

SUNDERLAGE: I think just developing that K-16 mentality and getting kids on a track fairly early in their academic careers is important. One of the good things we have done in the state is create the new high tech high schools. There was some good vision there about putting some of these kids into high rigor math, engineering and science. And in the case of those early college high schools, those kids are coming out of the schools with 60 hours of college credits and pursuing careers in science and technology. So I think there’s a nice opportunity there to complement traditional education.

NELSON: If we want to change the pipeline to be able to fuel our employees, we need to champion teachers. We need to make teaching a respectable profession again. A handful of economies in our country really understand what STEM (Science, Technology, Engineering and Math) workforce is. That ought to be an acronym every one of us knows. It is about increasing the level of science, technology, engineering, and math we are teaching. Education is a very compelling need that we have, and our legislators are very responsive when we can articulate that. It all comes back to creating the hottest economy in the country.

KHANWILKAR:  It is important to introduce rigor. The short-term challenge I faced before was attracting good mid-level management talent to the state. They have kids and they want to put them in public school. They are used to public school in Michigan or New York, and they have skepticism about education system in Utah.

NELSON: I have been asked to chair the Quality Workforce Task Group on the Governor’s Board of Economic Development. I hope in coming months that we can turn our very effective marketing machine, the Economic Development Corporation of Utah, into a machine that is targeted to only seven clusters, the Governor’s strategy, and development with health care benefits, and add some of these high need areas such as management talent and engineering.

            You are seeing that already with GOED’s outreach effort. The original Home for the Holidays campaign has now evolved into an outreach very specifically targeted to one need. It ought to be broadened even further. Hearing your needs and your pain and telling your story to the Governor, his cabinet and legislators helps move the needle. When we can align significant resources in this state, some really spectacular results occur.

A few companies in Utah have recently been sold to out-of-state firms. What can we do to keep those companies in Utah? Or is that something we should be worried about?

HANKS: I think it would be great if the state started building companies instead of flipping companies. I’m amazed at the amount of people who say, “When is your IPO? When are you going to sell?” My partner and I say, “No. We are building a company here.”

NEILSON: I think it’s an ecosystem, and I think in any locale you are going to have a few stalwarts. I would not blame any young person that builds a company, because it is exhausting and if you get offered $100 million, it’s difficult to turn that down. But it does build entrepreneurs and CEOs, and you are going to have a few stalwarts. You need a Josh James, and you need a Bill Gates who are just a little bit crazy. They just want a huge company. But the ecosystem needs to be built.

            When you take venture capital money, it’s always going to be a push. If you want to build a capital-rich place like Silicon Valley or Boston, you are going to have a lot of liquidities and exits. That’s just the way the world runs.

SUNDERLAGE: I thought the defining moment for the Fund of Funds was when the governor was questioning whether this was an appropriate role for state government to play, and you brought about five of the CEOs and execs in with the chief of staff to deliver the message that absolutely, if we are talking about needed incentives in the state, this is one we need to be competitive.

Is it easier to scale a company in Utah now than it was five or 10 years ago?

NOLA: I have been here for 15 years, and I think the dot-com bust, actually helped the market in a way because it reset expectations for investment.

            The biotech or the life sciences need to go through something different. But on the technology side, it was mature enough that people were buying into wild dreams. I think, post dot-com, a lot of investors lost money. They realized that at the end of the day you have to sit around the table and make good decisions, not just make decisions. The management level people who went through that dot-com bust and survived it learned a lot of lessons from it.

NELSON: In 2003, to have 2,000 surviving companies was really astonishing for the state because we lost hundreds of companies during that prior three-year period. We didn’t talk about it. We didn’t keep track of the statistics.

            Fast forward that to the present and we now have over 4,300 IT and life science companies in the state. To have net new growth of companies, we grew at over 10 percent. You have those young companies that are starting to grow into some of these larger success stories now. We clearly have made a lot of progress in developing management talent.

NOLA: I see that coming in the life science area. Even though I’m not related to the industry, I have two boys that would love to go into the life sciences. We need to pick three or four key areas where we are going to meld in government. If it’s a few areas in life sciences that have tremendous opportunities, I think that’s a good thing for the state. I’m not for just looking to trying to push the computer science thing; to make Utah stronger, you have to have multiple technology bases.

NELSON: That’s where you see the Governor’s strategic focus on seven clusters, including our real strengths in life science. Thus USTAR really matters and is a long term investment for the state.

We have a lot of acorns. Is the prognosis good for these turning into mighty oaks? And what do we need to do for that to happen?

SUNDERLAGE: As it relates to the investment community, if you look at the early stage – the angel groups – it was kind of a random act of investing in the past. I think we have five organized angel groups throughout the state right now.

KHANWILKAR: I think there are now nine.

SUNDERLAGE: Then we have early stage VCs. We have the mid stage. And I think we are about to see another venture capital fund in excess of a billion dollars come on line in the state. If you take a look at the broad spectrum of investment opportunities to support the companies that are the acorns today that want to become the oaks, that’s going to be a big factor.

PAUL: We have to leverage the IT strengths with life science strengths. We have this core incredible ecosystem of IT companies. All of that technology can find a home in the fastest growing segment of the GEP, which is health care. There’s a convergence of IT in addition to the genetics, in that IT needs to drive personalized medicine. If we can figure out a way to really leverage the existing ecosystem in IT with the emerging system of life sciences and USTAR, I think we are in a great position globally to compete.

SUNDERLAGE: That was the basis for Rich taking the leadership role in getting UTC going, because we had UITA and we had the Utah Life Sciences Association, and it was all about the convergence that we were seeing within the industry. Now is the time to integrate those two and watch life sciences grow in the process of that.

HANKS: I really believe in the concept of growing into might oaks. It is in the boring everyday. It’s not the sexy “let’s flip the company.” I think we define our company as relationships, augmented by technology. It’s a company where the relationship comes before the technology. And I believe that’s missing a little bit still in this state.

 It takes relationships augmented by technology to make this work. It’s the operators that make things win. It’s not the flash and burn anymore. It used to be. It was a fun two years. If you knew it was going to happen, we could all be rich. Since then, it’s basically running good companies, making good decisions, and trying to build businesses. If I had a way to change mindsets in Utah it would be that: Building businesses rather than the quick flip companies.

OLAFSON: I think you need both. Look at the Website for Utah Fund of Funds: investor expectations, right off the Website, say you have to have an expectation of giving up a majority of your company and selling out within thee years. That is sort of built into the system and it’s built into the mechanics of how people operate in that system. That’s not to say a certain number of other acorns aren’t preoccupied with that process. In our own company, we are not particularly angling for an outcome every day of the week. We are just building our business.

            Just one perspective that I would offer on balance. Utah has its problems even in hiring people and having them stay. It is a much a better place to build a business than it was five years ago. With all the problems we have, I think there’s been so many things that have happened that have established the brand and the quality of life here in the state that it is hard to have a negative view.