Raising the required capital

Denver start-up FullContact was incubated in 2011 with $1.5 million in Series A funding. Its business model proved worthy, and the cloud-based contact management service landed $7 million in Series B funding in July 2012.

“For us, raising a round lets us hire a bigger team and accelerate our plans to grow the company,´ said Kipp Chambers, marketing engineer at FullContact.

FullContact now has 18 employees and is hiring.

“We planned on doing all of this eventually through our own growth,” Chambers said. “But the infusion of funds allows us to move forward and get our products to market more quickly.”

FullContact’s experience is indicative of Colorado’s venture-capital fueled economy at large. Colorado attracted more than $3.5 billion in VC investments between Jan. 1, 2007 and Sept. 30, 2012, according to the National Venture Capital Association.

It’s not just tech companies getting the money.

Door to Door Organics, a Lafayette-based company, raised $2 million in the third quarter of 2012. The company, founded in 2005, partners with farmers to bring fresh, organic produce and natural groceries to homes, offices and co-ops in Colorado.

“Over the years, we have developed a deep relationship with our customers, and have been working toward our vision to build the best e-grocery experience on the planet,´ said Chad Arnold, CEO and president of DTDO. “Raising a round of capital helps to validate that vision and all that we have already accomplished, which motivates the whole team.”

Colorado’s Front Range cities have achieved a critical mass that attracts innovative companies and the investors who infuse them with cash.

“They really have a fantastic ecosystem,´ said Emily Mendell, vice president of communications for the NVCA. “It’s an example we often point to as a region that has successfully built a thriving start-up ecosystem.”

Companies that get VC funding can benefit the entire entrepreneurial “ecosystem.”

“The experience, intellectual talent and networks that can be established through a venture relationship can be very important,´ said Arnold. “The funding can also establish a level of business viability in the marketplace, enabling relationships with key vendors and customers that weren’t previously possible.”

Boulder, with a population of about 100,000, ranked 16th nationally in 2011-2012 for VC investment, while Denver, with a population of about 620,000, ranked 20th, according to the NVCA.

“Boulder has the highest concentration of startups on a business basis, and it’s probably the highest percentage in the world,´ said Brad Feld, managing director of the Foundry Group, a Boulder-based VC firm. “It’s open, collaborative, forward-looking, and innovative – it’s very exciting. Collaboration wins.”

Boulder’s entrepreneurial environment was not created by chance.

“We’ve developed a framework for how this has worked that we call the ‘Boulder Thesis,’´ said Feld.

What does that thesis hold?

For starters, “the startup community must be led by entrepreneurs,´ said Feld. “They (also) must take a long-term view toward building the startup community; they must be inclusive of anyone who wants to get involved and they have to have activities and events that engage the entire entrepreneurial stack.”

“Innovation is essential in any society long-term, as a country and a society,” Feld continued. “Humans fundamentally like to create things, and if you can create that vibrancy, you create a place where people want to be.”

Boulder, as everyone knows, consistently attracts innovators.

“I’ve always believed that venture capital goes to where there’s a lot of innovation, and a lot of investors from around the country are investing in Boulder companies,” Feld said.

Some of the most promising startups get incubated by TechStars, a startup accelerator that funds technology-oriented companies and provides education, networking and coaching.

To date, TechStars companies have raised more than $232 million in funding and have hired more than 1,000 full-time employees.

“Almost all of the net new job growth in 30 years has come from new companies,” Feld said. “This engine of job creation is innovation and the creation of new companies.”

Startup Colorado and Startup Weekend are additional initiatives that help nurture the state’s entrepreneurial ecosystem.

Faculty and researchers at Colorado’s universities also generate ideas that attract VC funding which lead to the commercialization of their products. For example, CSU Ventures, a nonprofit 501(c) (3) at Colorado State University in Fort Collins, helps its inventors acquire VC funding and commercialize their products.

“Colorado has a very good climate for entrepreneurship,´ said Todd Headley, president of CSU Ventures. “There’s a lot of innovation coming out of Colorado, and out of the universities. It’s a great place to live, and so people who want to do these sorts of things are here. You want to provide them with the ecosystem and the opportunity to succeed.”

CSU Ventures has helped launch startups like Prieto Battery, a company that invented a revolutionary rechargeable lithium-ion battery technology and Solix Biosystems, a developer of algae-production technology designed to produce algal biocrude and other algal products on an industrial scale.

Wyoming sees less VC – it had only one deal worth $1 million in the first half of 2012, according to the NVCA.

However, vested economic entities in Wyoming have worked to create a business-friendly atmosphere that supports entrepreneurs and helps launch startups.

The state of Wyoming’s federally-funded Small Business Innovation Research operation, its Small Business Technology Transfer Initiative and its Phase 0 Program, are co-managed by the Wyoming Business Council and the University of Wyoming Research Office to incubate startups.

“Wyoming has received over $50 million in SBIR/STTR funding,´ said William Gern, vice president of research and economic development at UW. “Per capita, that’s more than what we should be getting. We think Wyoming was the first state to initiate an official statewide Phase 0 Program, and we think other states have emulated us.”

The Phase 0 program annually provides up to 24 awards to startups in the amount of $5,000 each. Startups are emerging in the state, particularly in the southeast corner, despite a lack of institutional VC dollars.

“There is really getting to be an exciting cluster of tech businesses in the Laramie area,´ said Ben Avery, business and industry division director for the WBC. “There have been six or seven companies that have incubated there, and there’s a cluster of tech businesses that employ collectively 100 people. Over time as these grow, mature and network, we’ll see more investment from private equity.”

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