Banking & Finance  June 9, 2023

Mercury 100, IQ Awards panel: Innovators brace for change

BERTHOUD — The Boulder Valley and Northern Colorado’s business innovators and entrepreneurs are a resilient and adaptable bunch, traits they’ll likely need to lean on in what could be a fairly tumultuous period in the months to come.

A trio of experts on the local innovation economy — Dorsey & Whitney LLP partner Gina Cornelio, Innosphere Ventures CEO Mike Freeman and FirstBank executive vice president Nicole Walusis — reflected on the ecosystems current conditions and took a peek into the future Thursday evening during a panel discussion at BizWest’s Mercury 100 and IQ Awards ceremony in Berthoud. 

Venture-capital investment has recently made a drop that percentage-wise is reminiscent of the Great Recession in 2008, Freeman said. While that concept is certainly daunting, he said, the overall pool of venture money deployed is an order of magnitude larger now than it was a decade and half ago. 

Still, “it is a very difficult environment raising VC right now,” Freeman said. “… There are fewer options for local venture capital” and founders may have to give up more equity than they’re accustomed to to access what capital does exist. “Don’t raise right now if you can,” he cautioned.

Startup entrepreneurs are “really good at spending money and not good at saving it,” Freeman said. “Slow the spending down,” he warned, because while “early-stage capital is still relatively available,” secondary funding rounds are fewer and farther between than in the recent past.  

Cornelio agreed, recommending that founders “stretch it out” if they have an existing capital runway. “A lot of clients are having a hard time getting the next round,” she said.

Incubators such as Innosphere, which has a strong relationship to government agencies that offer grant funding to young and innovative companies, can be a good option for startups looking for a boost, Freeman said, “That is a pathway to go for sure.”

Unlike venture investment, “the nice part about grants is that you don’t give up any equity,” Cornelio said.

Borrowing from banks, often an alternative to venture firms for entrepreneurs looking to raise capital, may seem unappealing due to the current interest-rate environment, but Walusis said it’s worth considering. “Even at high interest rates, sometimes it makes sense to borrow,” she said.

The financial sector took a scare this year with the collapse of several high-profile players such as Silicon Valley Bank. Those bank failures, however, “are not indicative of an overarching systematic problem within the banking industry,” Walusis said.

The out-of-state banks that have struggled are often undertaking “nontraditional, higher-risk activities,” she said. “Colorado banks are in a sound position,” and operate in more traditional ways that are “drastically different” from the failed banks.

While there are certainly headwinds in certain sectors, portions of the local innovation economy are still moving full steam ahead.

Cornelio pointed to clean-tech as a sector that’s not slowing down, and Freeman and Walusis said that they expect the life-sciences and biotechnology space to remain hot.

Related Content