Talent, financing, IP on minds of Boulder innovators

BOULDER — The Front Range is a national hub for innovation, but it’s not without its stumbling blocks: financing, talent acquisition and protection of intellectual property, to name a few.

CEOs of startups, entrepreneurs, leaders of accelerator and economic development experts discussed the state of Boulder’s innovation economy at BizWest’s CEO Roundtable on Tuesday.

Financing

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One major topic of discussion was the issue of how innovative startups can gain access to capital.

For Zoe Welz, founder of Uzio Technology LLC, an ag-tech startup born out of her time at University of Colorado Boulder, there’s been a difficulty in finding investors.

“Something I’ve been seeing in raising our round is investors like investing in what they see as themselves 20 years ago,” she said. “But how do I do that when all the investors are male and I’m female?”

There’s a question, in fact, if there is enough funding in Colorado for seed-stage startups. Although there are angel investors in the area, many of them seem too risk-averse to look at funding early-stage startups.

Murad Kablan, CEO of Stateless Inc., said although there are angel investors in the area, his company ultimately got venture capital from the Bay Area.

“Investors here don’t take risks like other VCs,” Kablan said. “They’re more metrics driven. But you go to the Bay Area, and money starts coming. The risk factor is not here, they’re more risk-averse I guess.”

In fact, Stewart McGrath, CEO of Section.io, said that when his company was looking for venture capital, he was told a few times he should move his company out to the Bay Area.

Jason Searfoss, chief financial officer for the Boomtown Accelerator, said that when it comes to convincing area investors to make risky investments, it can be a chicken-or-the-egg scenario.

“Perhaps the ideas are not big and grand enough to get people to write the checks at a risky phase,” he said, “or perhaps investors are more conservative. I don’t know the answer but it’s one of those two things.”

There’s also the argument that there is enough seed capital in Colorado, but it’s the nature of being in a startup to compete for that financing.

“There’s a very limited number of Series A and B financing in Colorado, but there are 20 seed firms with money here,” said Fletcher Richman, co-founder of BubbleIQ. “There are lots of companies trying to raise seed money and lots are not going to make it. There’s pretty good seed money here, but how the system works is a lot of startups are not going to make it.”

One way to potentially get around the financing struggles is to carry the cache of having gone through an accelerator in the area.

“It helps in terms of connection,” Kablan said. “They do a great job of putting you in front of VCs.”

Still, despite going through the Catalyze accelerator at CU, Jordan Marinovich, CEO of plant-based milk company Boulder Sun LLC, said he struggles to get financing.

“We need a small amount to get to the next phase of what we want to do, and investors won’t pay it until they know for sure it will pay off,” he said. “We’ve had some pre-seed traction but no good sales numbers, yet. We need money to get sales, and we need sales to get money.”

Daniel Yedidovich, CEO of smart-home tech company Hearth, went through a similar experience.

“We went through Catalyze,” he said, “and we had conversations with a few people about investment, but it didn’t get us far enough. You can have more when you have proof of points of sales, interest, more funding to do innovation.”

Another way some startups might be able to get funding, however, is through grants. Clif Harald, executive director of the Boulder Economic Council, said the Boulder area had nine times the number of SBIR grants than its innovative peer cities, according to a recent innovation report.

“We’re trying a few things to bridge the gap,” said Shawn Meier, CEO of Quoala Code. Meier said his company was doing things like applying for SBIR grants and CU’s Venture Challenge.

Talent

With unemployment in the region so low, leaders of innovative companies are thinking about alternative ways to fill the talent gap. One way to do so, suggested Pam Narowski, vice president of strategic development for Boulder Bits, is to hire people with transferable skill sets that might not necessarily be in the tech world, but could learn.

“There are ways to plant seeds in the community,” she said. In a way, that’s already happening, through government initiatives, said Clif Harald. Programs like Skillful are looking for people who can be trained in tech based on the skills they already have.

“We’ve got to look outside of the conventional,” Harald said, “because what we’re currently doing is working for companies or talents.”

Meier said he’s already seen that mindset put to action, when he worked with a graphic designer who learned how to do mechanical design and excelled at it.

One concern Brad Bernthal, director of the Silicon Flatirons Center, has, is the rising cost of living keeping away skilled talent.

“By virtue of the university, we bring in students aged 18 to 26. Boulder is a magnet for serial entrepreneurs. But I’m concerned about the layer of 25- to 35-year-olds,” he said, adding that the demographic is thinking about buying housing and their families at that age. “The quality of life and affordability is going to be a challenge and it’s going to get worse if we’re not paying attention to housing and transportation.”

Intellectual Property

One early investment entrepreneurs can make in their company is protecting their intellectual property.

Pat Perrin, an attorney with Berg Hill Greenleaf & Ruscitti, said an important step innovative companies should take is recognizing if they have some IP to protect and how best to protect it. That can mean more affordable methods, like copyright protection or trademarks, or it can mean investing in a patent, which can be expensive but can ultimately save your business.

“I think it’s important to spend a little money to get some advice,” Perrin said. “For the higher ticket items, you pay a larger price if you make a misstep, like blowing your ability to ever get a patent.”

David Kerr, also an attorney with Berg Hill, reminded entrepreneurs that after they start selling or promoting their product, they only have one year to get a patent.

The attorneys also added that when forming a startup, an employee agreement can be key. If a company is primarily using independent contractors and don’t have a contract with them, then the independent contractor can ultimately own all the work they do, not the company.

And Kerr added that making these decisions now can save a lot of heartache — and money — down the road.

“People will make emotional decisions,” he said. “But they have to decide when something bad happens if its an existential threat or just a competitor. IP can be a very emotional thing. People are willing to bankrupt their company to stick it to the person they think stole from them.”

Participants

Brad Bernthal, director, Silicon Flatirons Center; Clif Harald, executive director, Boulder Economic Council; Murad Kablan, CEO, Stateless Inc.; Jordan Marinovich, CEO, Boulder Sun LLC; Stewart McGrath, CEO, Section.io; Shawn Meier, CEO, Quoala Code; Pam Narowski, VP of strategic development, Boulder Bits; Fletcher Richman, co-founder, BubbleIQ; Jason Searfoss, CFO, Boomtown Accelerator; Zoe Welz, founder, Uzio Technology LLC; Daniel Yedidovich, CEO, Hearth. Moderator: Chris Wood, editor and publisher, Bizwest. Sponsors: Jim Cowgill and Jeremy Wilson, EKS&H; Giovanni Ruscitti, Pat Perrin and David Kerr of Berg Hill Greenleaf & Ruscitti