Bills aim to help Colo. startups get out of the gate

State lawmakers this legislative session have proposed bills to give startups a venture-capital boost. For some, that raises the question of what role our cash-strapped state government should play in the private sector.

It’s a question that gets a lot of attention from the team at CSU Ventures, a group that helps commercialize technologies developed by academics at Colorado State University. Finding funding for startups represents a “key bottleneck” faced by the organization, CSU Ventures Vice President Tim Reeser said.

Reeser argues that government should participate as much as any other group. After all, governments generate revenue from successful businesses and job-creation, not to mention the benefits of new technology.

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“You look at the value of research and the impact on human life of a lot of things we’re working on: whether it’s in the life sciences space or energy space, it has a significant greater-good impact,” he said. 

Government help is especially important today as venture capital firms nationwide have halted investments or closed their doors, resulting in fewer dollars for technology startups in Colorado, Reeser said.

While software venture capital investments surged to a 10-year high recently, investments in life-sciences and clean-technology saw sharp decreases, according to a recent report from PricewaterhouseCoopers LLP.

A proposed grant program that supports so-called technology transfer offices like CSU Ventures would help. Under a bill introduced by Rep. Dave Young, D-Greeley, these tech-transfer offices could receive as much as $750,000 in state funding apiece. The measure has passed the House Economic Development and Business Committee.

Another bill known as the Colorado Entrepreneur act would establish a venture capital advisory board to review obstacles facing the state and develop methods to increase access to capital. Sponsored by Sen. Rollie Heath, D-Boulder, the bill has passed the Senate Business, Labor and Technology Committee.

Colorado startups could use assistance from both bills.

Despite their success in the technology sector, Colorado startups particularly struggle for funding because the state lacks a strong history of venture capital financing, CSU Ventures Vice President Terry Opgenorth said. Most venture capital technology and life sciences funds reside on the East and West Coasts in cities where governments have backed startup funding efforts.

“Their perception, at least, has been that there’s not as much deal flow in Colorado,” said Opgenorth, referring to venture capitalists in the San Francisco Bay area and Boston. “We don’t believe that’s true. … There is enough for them to look at.”

Responding to the lack of funding, the organization has considered seeking money from alumni and other donors in addition to maintaining the connections they have made with venture capital firms throughout the country.

Some people might worry that startups could leave Colorado after receiving state funding. But nearly 90 percent of the startups that CSU Ventures have assisted have remained within the state, Headley said.

That could change if companies cannot find Colorado financing. Venture capitalists that fund startups ultimately control their location, Reeser said.
“It’s very common for them to wake up and say, ‘We want them in our own backyard,” he said.

CSU Ventures currently operates with $5 million in annual funding from the state Office of Economic Development and International Trade, much of it devoted to startup financing. Additional funding would be well spent, considering the group already leverages other organizations such as the technology incubator Rocky Mountain Innosphere, Colorado Cleantech Industry Association and Colorado BioScience Association to carry out its mission.

“We have a lot of people we engage with on sort of an as-needed basis to help us out,” CSU Ventures President Todd Headley said.

That assistance should include a relatively small contribution from government, or us taxpayers. Successful startup firms certainly will repay us not only in tax revenue, but with technology that will improve our lives.

Steve Lynn covers Technology for the Northern Colorado Business Report. He can be contacted at slynn@ncbr.com.