With record new business filings and consistent rankings as one of the top five most innovative and entrepreneurial states in the country, all eyes are on Colorado as a hub for start-ups.
“We’ve created, I think, the deserved reputation for being a great place for the creative class—entrepreneurial, innovation-oriented, well-qualified individual—to go out and have a life,” says
JB Holston, the executive director of the Blackstone Entrepreneurs Network. “Not just a career but a life.”
And while that designation is driving a true migration to the Front Range, what’s less discussed is where the money to launch these new ideas comes from. While Silicon Valley’s venture capitalists and the East Coast’s long-endowed family funds carry near-legendary status, Coloradans are taking matters into their own hands.
Getting Started
For most entrepreneurs, the dollars and cents can be the most challenging part of getting a business off the ground.
The idea to launch Under the Sky Event Rental came to Rebecca Anderson when she told her seatmate on a flight to Denver about her wedding. She and husband Patrick had their intimate wedding under katas—Nordic tents that resemble Native American tepees. But, she had only seen them rented in her native United Kingdom.
“That planted the seed,” she said.
Back in the U.K., there are roughly 30 kata rental companies, up from just seven in 2007. When she inquired about distributing, she found out her company would be the first in the U.S.
“They’re just perfect for Colorado,” Anderson said. “They match the outdoor beauty.”
The Andersons decided they’d need help getting started. And, they’d be on a tight timeline in order to start renting the tents at the start of this year’s wedding season. They turned to the Denver Metro Small Business Development Center (Denver SBDC), an affiliate of the Chamber.
“I thought if we were going to look into it we should write a business plan and see whether it was viable and give ourselves an instructor and some support,” Anderson said.
They got on track with Leading Edge, where they wrote their plan, and Loan Request Preview—a companion program led by Denver SBDC consultant Dale Clack that introduces a business and its owners to a large number of lenders. To date, the program has led to $2.1 million in loans awarded.
“I wasn’t positive we were going to get lending,” Anderson admitted. “I felt like it was kind of a longshot.”
They were floored when they heard back from four lenders right away. Now, their tents are en route to Colorado, which will be their first market. They hope to expand to other areas in the next two to three years. Anderson says they wouldn’t be where they are today without the Denver SBDC.
“It made us accountable,” she said. “The consultants are a resource that I think every small business should know about.”
Scaling Up
It’s not just start-ups that need a hand.
Gazelles, those companies that are on pace to grow by at least 20 percent over four years or more, are also getting support to ensure they become the region’s next big employers.
“In Colorado there’s a terrific innovation and entrepreneurship ecosystem, including a lot of support for early-stage start-ups. But, there’s a lot less support and focus on scaling up some of these companies that have gotten to the point where they’ve got really big, interesting prospects,” said Holston, whose Blackstone Entrepreneurs Network (BEN) helps Colorado’s gazelle companies grow.
BEN is focused on aerospace, energy, health, natural foods and products and technology companies—areas where Colorado has perennially been competitive.
While Holston loves the entrepreneurial spirit here, he cautions that “if we don’t have some of these (companies) become really big employers down the line, we’re going to have a real imbalance in the ecosystem, particularly with the influx of Millennials and a general influx of highly talented, highly qualified folks looking to build their careers here on the Front Range.”
Once a company is selected to join the network, they focus on creating connections to help the company move past any barriers to growth.
While capital can be part of the conversation, “in most cases capital is not the constraint,” Holston said.
But, by creating a peer network, they’re building local resources. Recently, Zayo Group—a Boulder-based telecom company that went public in October—offered a master class with its CFO Ken desGarennes on preparing and launching an initial public offering.
Colorado ranks fourth in the nation for IPOs, based on the number and value of IPOs as a share of total worker earnings, and it’s helping these companies grow.
“We now have a local CFO who can say, ‘I’ve been there, I’ve done it, let me show you what it is that you need to know,’” Holston said.
Be Pitch Perfect
What’s key for any business looking to raise capital is to have a well-balanced pitch, said Rockies Venture Club Executive Director Peter Adams.
“There is no template really,” he said. “You’re telling a story and every pitch should be unique.”
The most common pitfall he’s seen in the angel and venture capital world is too much of a focus on the what, not the why: “They talk about their product the entire time and they forget they’re selling equity in their company.”
While Rockies Venture Club has connected entrepreneurs with investors since 1985—it’s the longest-running angel investment group in the country—Adams says there’s more that can be done to invigorate investment here. He notes that while there are some 16,000 angel investors along the Front Range, only about 1,000 are actively investing.
“We need a better way to motivate the inactive angels,” he said.
With more focus on education for investors and events to make more connections, he thinks they’ll see more interest.
When it comes to funding, those connections often prove invaluable, from start-up to scale-up to going public.
Creating that strong network of business leaders and creating a tie to the community is important, Holston said: “The more companies are embraced in the community, the more likely they are to grow here because they’re just that much more connected.”
Kick-Start Raising Capital
Denver Capital Matrix – As a small business or entrepreneur, use Denver’s resource directory of funding sources.
Loan Request Preview – This Denver Metro SBDCs program facilitates the process of finding a loan by connecting business owners with lenders.
Pulse – This free online financial management tool, powered by BodeTree, connects business owners to financing resources.
Funding Options Panel – The Denver Metro SBDC’s triannual workshop panel introduces business owners to different types of funding options.
Trout Tank – The Denver Metro SBDC’s triannual event gives business owners the opportunity to pitch to the lending community.
Colorado Crowdfunding – In this Meetup group members can learn more about types of crowdfunding and how to successfully launch campaigns.
Sara Crocker is the communications manager for the Denver Metro Chamber of Commerce.