Steve Grizzell is a 20-year veteran in entrepreneurship, finance, innovation and economic development. His experience began in the mid-1980s when he consulted for the World Bank and U.S. Agency for International Development. To date, Steve has been directly responsible for more than 200 transactions, the majority involving technology-based companies. He maintains regular communication with some of the more significant companies in which he has invested, which provides a wealth of experience on matters such as fund raising, board formation and personnel recruitment.

Silicon Slopes: Tell us about InnoVentures Capital Partners.

Steve Grizzell: InnoVentures Capital provides a type of investment capital that is positioned between traditional venture capital equity and commercial bank debt.  We funds entrepreneurs with businesses that are in their early stages of revenue growth.  We offer $100,000 to $500,000 infusions of capital in the form of venture debt, a unique instrument that we have developed over the course of more than a decade.  This type of capital causes less dilution to the founders and outside investors and is more flexible than commercial debt.  With it we have funded over 700 companies since the mid-80s.

Silicon Slopes: Can you tell us about the history of the firm? How did it all get started?

Steve Grizzell: Our predecessor entity was the Utah Technology Finance Corporation which was founded by the state of Utah in the mid-1980’s to provide venture capital to Utah businesses at a time when there was very little venture capital in this state.  In 2001 we separated from the state and launched a new $9.6 million fund that was funded exclusively by the private sector with investors from banking and industrial loan corporations.  The 2001 fund invested over $17 million dollars in 53 early stage businesses by reinvesting the initial capital. 

Then in 2007 we raised $13.7 million in our second fund and anticipate providing over $20 million dollars in funding using a similar model of reinvestment of the original capital.  We have invested in 19 companies since the inception of Fund II and believe that we will fund substantially more during the upcoming years.

Silicon Slopes: What have been the greatest accomplishments of the firm?

Steve Grizzell: One of our most significant accomplishments is that we have developed a unique financial instrument that we have labeled as venture debt.

Another significant contribution is entrepreneurial development.  Only a few Utah entrepreneurs are ready for traditional venture capital and they can gain experience with growing their first or second company with our fund and subsequently pursue traditional source of equity.  As an example, we have probably funded more of the university business plan competition winners than any fund in the state.  Property Solutions in Provo was a business plan competition that we loaned almost $1 million in capital and is doing very well today.  We believe that by funding some of the novice entrepreneurs that we have helped develop the venture/entrepreneurial ecosystem in Utah.  The longer term impact is that some of the active angel investors today are entrepreneurs that we funded years ago.

Silicon Slopes: What are the top 3 things you would like companies or entrepreneurs to know before going after funding?

Steve Grizzell: Your first priority is sales.  Until you have revenues from customers the business is just a concept.  People tend to try and delay selling their product or service until it is “just right”.  I believe it is better to begin selling something as early as you can so that you can understand your customers’ real needs and what they will pay for your solution.

The second priority is managing your cash.  If you run out of cash it doesn’t matter what you have accomplished you will likely lose it all. I frequently hear entrepreneurs say that if they cut back their expenses any further that the company won’t have any value or be viable.  I don’t believe that has ever turned out to be true and you must always have a back-up bootstrapping plan.

Third, avoid raising money as long as possible.  Fund raising is very challenging and the longer you put it off the better you are.  The value of your company will improve with time if you know what you are doing and you will have a better sense of how to use outside money to increase the profitability of your business.

Silicon Slopes: During this economic downturn, you’ve been able to remain successful. Why is that?

Steve Grizzell: Our success is partially a function of good solid deal flow and partially the significant investment experience of our team.  We listen to lots of people who are trying to raise money and so the volume of opportunities that we screen is large.  This allows us to pick the types of entrepreneurs and companies that we believe that we can support because we understand their business model. Our team has almost a decade of experience together and this is a real asset when investment decisions get tougher.

Silicon Slopes: You were recently recognized as one of the leading Utah company investors for 2008 at the MountainWest Capital Network’s Deal Flow event. What kinds of companies do you look to invest in, and why do you think Utah is a great place to find them?

Steve Grizzell: We look for companies that can use an infusion of debt to grow their sales.  This can be many types of businesses although we concentrate on information technology and service businesses. 

Utah is a vibrant small market and this allows us to use our network to identify the best entrepreneurs and to find additional talent to enhance the management team once we have funded them.

Silicon Slopes: What is your business approach and how does it set you apart from others?

Steve Grizzell: Personally, I really try to understand the personality and character of the entrepreneurs who are asking for money. Unless I can get comfortable with the person I cannot get comfortable with the business plan.   As a firm our approach expands beyond the people and it is to understand the likely future cash flows of the business model and to use venture debt judiciously to help entrepreneurs grow their company’s sales.  By focusing on future cash flows and not historical cash flows and available collateral, we can fund a much wider range of businesses than other sources of debt.