Where have all the start-ups gone?

The 1980s are remembered in Colorado as “bust” years in the state’s traditional “boom-bust” cycle.

Oil and gas companies floundered. The real estate unraveled as foreclosures and commercial vacancies reached record heights. Workers left the state to find the jobs that had evaporated here.

Still, amidst all the noise of recession, Northern Colorado in the ?80s experienced an age of entrepreneurism — startup and spin-off companies — that would help to foster a new boom in the ?90s.

Companies like Advanced Energy, Avert Inc., Colorado Memory Systems, Comlinear, Duke Communications, Factual Data Corp., and StarTek Inc. hatched during the ?80s, all to become significant local employers over the following decade.

So far in the current decade, no such flowering of business seeds seems to be unfolding for Northern Colorado. Save for a smattering of success stories, there seems to be a dearth of homegrown companies born in the ?90s poised to lift the local economy out of its current struggles.

One explanation, ironically, is that prosperity in the ?90s may have bottled up the entrepreneurial class.

“Those companies were created out of the ?80s and early ?90s when the economy wasn’t that robust,” assessed Larry Kendall, chairman of The Group Inc. Real Estate. “We had, I think, a greater pool of creative talent (in the ?80s) to create companies like that.”

Put another way, workers were busy — and well compensated — with their booming employers.

“There wasn’t much of a point in starting a new business when you could go to work for a big company and it looked like it was a secure, life-long job,´ said Dave Dwyer, a Fort Collins attorney and director of Vista Ventures, a venture capital firm. “Now we see it isn’t as secure as it used to be.”

“One of the positive sides of a slow down is the creative burst of energy that occurs,” Kendall said. “You have very talented people suddenly looking for ways to create companies and create products. That’s probably what will happen over the next couple of years.”

Recent job losses at Hewlett-Packard Co., Agilent Technologies, LSI Logic and other technology companies might supply the talent pool for the coming decade.

“When you’ve lost a job, you have less to lose,” speculated Gerard Nalezny, president of Community First National Bank in Northern Colorado. “There may be something happening under the surface that’s really below your radar screen and mine.”

The ?80s were not an easy time around here, but those guys got going. Neither you or I would have had Advanced Energy on our radar screen in those first few years.”

Another possible damper on entrepreneurial evolution in recent years was the changing condition of capital markets. In the 1990s, as Wall Street catapulted forward and investors eagerly chased every manner of opportunity, young companies could launch initial public offerings with relative ease.

For instance, Advanced Energy, Avert, Factual Data, Heska Corporation and StarTek all went public in the 1990s.

Access to IPO funding has been lean since 2000, as investors have been hesitant about risking money on unproven companies.

“For those companies to mature and go from the entrepreneurial phase to the venture capital phase to the public offering phase, you have to have that third phase — that IPO availability,´ said David Jordan, a mutual fund manager of the Fort Collins-based First Focus Fund. “If you can’t do that, then the VCs (venture capitalists) don’t get their money back and then they don’t have money to give to new ventures.”

Recent signs of a stock market recovery could be create more fertile ground for start-ups.

“I’ve noticed in the (Wall Street) Journal recently that the number of IPOs has begun to pick up lately,” he said.

The influence of the national economy on suppressing entrepreneurial success cannot be diminished, said Bill Neal, a commercial and residential real estate developer. But Northern Colorado could ease some of the impacts with a more aggressive stand on corporate recruiting, he said.

“(Former Gov.) Romer proved that could be effective,” he said. “I remember when we formed Fort Collins Inc. (the predecessor to the Northern Colorado Economic Development Corp.) We opened an office in Orange County (Calif.) and went in and recruited successfully a number of software companies. That became politically unacceptable in the ?90s.”

Northern Colorado start-ups have also suffered some fatal blows before they could realize their potential as economic forces.

Sixth Dimension Inc., one of the stars of the Fort Collins Virtual Technology Incubator, started in the late 1990s and grew to 30 employees before it was dismantled and relocated to another state by new owners.

“I really thought Sixth Dimension was (going to prosper),´ said Kathy Kregel, executive director of the Fort Collins Virtual Business Incubator. “Maybe it’s going to happen, but not here.”

Northern Colorado has also suffered from its geographic distance from venture capitalists and financial expertise.

“Fort Collins has been pretty much a backwater,´ said Dwyer.

Dwyer noted the history of start-up Internet publishing company NetDelivery, started in Fort Collins in the mid 1990s by Tom Higley. “He was a Fort Collins guy ? but he moved to Boulder because he could get services and the people he needed.

“Unless we can provide the infrastructure for those companies, that will happen more. That’s kind of what we are trying to avoid with Vista.”

Like the rest of the country, dot-com companies tried and failed in Northern Colorado once venture capital cash was withdrawn. Notable losses included Cybercrop.com and Vantage Corp, both agribusiness ventures tied to the Internet that started fast — each growing to about 70 employees — before fading away.

Negative attitudes toward growth have also proven an obstacle to business, said David Neenan, founder of The Neenan Co., a leading commercial builder on the Front Range.

Regulation has “crippled” the spirit that inspired start-up companies in the ?80s, he said.

“Right now, if you say you’ve got a software firm and you’re trying to figure how to do some whiz bang technology, or you’d like to be near the river, or you’d like to live where you work, or ?I need this space right away,’ then you have to call the city manager,” Neenan said. “You have to pull strings to get things done.”

Neenan was referring to the plight of Laramie, Wyo.-based In-Situ Inc., which has proposed plans to build a new headquarters near the Poudre River in Fort Collins. The company, which makes technology to measure water quality, has found opposition to its plan from some city officials, who fear the project could harm the environment.

“It’s very, very out of favor to be an economic engine,” Neenan said. “And I think it’s because of the abundance we’ve had from the last decade. We got really abundant, then we got wasteful and took it all for granted.”

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