Scaling the Peak: Denver Out to Follow Boulder’s Entrepreneurial Ascent

3/28/13Follow @MichaelXBD

When Bart Lorang decided to build his startup in Denver just over a year and a half ago, the city wasn’t exactly a lonely place.

Denver has a lively downtown, cool neighborhoods, and a diverse and energetic population. Lorang is the co-founder and CEO of FullContact, which is developing a cloud-based system for managing online contacts. Although he lived in Boulder, Lorang had worked in Denver’s tech industry for 10 years, and he knew Colorado’s capital and largest city was world class.

But something was missing. Young, driven people were everywhere, but they weren’t talking much and swapping ideas. The city’s top CEOs, innovative engineers, and rising entrepreneurs didn’t bump into each other on the street. Even with several large tech companies and startups that had grown into established companies, the vibe was a bit corporate.

There was nothing wrong with Denver. It was just missing some things Lorang had come to love from his experience in Boulder, a thriving city of 100,000 nestled against the Front Range, about 30 miles northwest of Denver.

The contrasts were on Lorang’s mind in 2011 because FullContact had just graduated from Boulder’s famed TechStars startup accelerator program and was looking for a permanent home. Every summer, TechStars becomes the nerve center of about a dozen fledgling startups. Many have stayed in Boulder, but a few have relocated to Denver.

Outside TechStars, Boulder’s small downtown pulsates with entrepreneurial energy. Leaders of growing tech companies, serial entrepreneurs, venture capitalists, and “hackers and hustlers” that haven’t made it—yet—fill coffee shops, restaurants, and bars.

By the summer of 2011, Boulder had established a reputation as a city on the rise, with profiles in The New York Times and magazines and on cable news channels.

It was tough to leave, and FullContact’s founders had a real debate, Lorang said. An unintended consequence was it gave Lorang, who lives in Boulder, a new way to look at the two cities.

“I see the differences every single day,” Lorang said.

What Lorang saw made him want to work with Denver’s entrepreneurs and tech executives to recreate the Boulder model with a Denver twist. Together, they joined forces with local leaders to organize events and meetings where they could share ideas and get to know each other. Now, the community is beginning to coalesce, often with help from friends in Boulder.

Making contact

FullContact is a company trying to solve the problem that bedevils anyone trying to connect with people on the Internet—how the $%@# do they keep all their e-mail, LinkedIn, and other contacts organized. The firm is trying to build a cloud-based system that works across platforms to compile contact info and keep it up to date.

FullContact has raised almost $9 million in venture capital and now employs about 27 people in Denver’s lower downtown, or “LoDo,” neighborhood. LoDo is probably best known for its nightlife. In Lorang’s view, people don’t seem to connect during the day, especially the way they do in Boulder.

“On Pearl Street [downtown Boulder’s pedestrian mall], it’s really hard not to bump into people, like CEOs, vice presidents, and engineers,” Lorang said.

Pearl Street has passionate advocates who could move their companies almost anywhere else. Niel Robertson, founder and CEO of online advertising management company Trada, is one of them.

Robertson believes the closeness of everyone in Boulder is one of the city’s greatest assets. Trada is the anchor tenant of one of the largest buildings on Pearl Street and shares space with a handful of new startups.

Robertson has investments in companies in San Francisco and Boston, but he spent the past 14 years in Boulder. Along with Trada, which has raised $17.5 million, Robertson co-founded Service Metrics, a Boulder-based company that developed website performance monitoring tools. It sold for $280 million to Exodus in 1999.

He remembers when the idea of basing a startup in Boulder was almost laughable.

But now they’re there, and the close proximity to entrepreneurs and executives is a key factor in Robertson’s desire to remain in Boulder. People can walk a few hundred feet to a coffee shop for quick 15-minute meetings to work through problems their companies face, Robertson said.

“That’s invaluable for an entrepreneur,” he said. “All you need is there within a five to 10 minute walk. As someone who loves technology and startups, it’s like Disneyland.”

That wasn’t the case in Denver, so to get to know everyone, FullContact threw a party on Sept. 6.

“I’m like, look, nobody knows each other. We need to get them all in the same place and get them drunk and partying,” Lorang said.

The event was a success, attracting more than 1,000 people, and it sparked the idea for the first Denver Startup Week, which took place between Oct. 22 and 27.

The event, filled with presentations during the day and informal get-togethers at night, is an idea from Boulder’s playbook. (Boulder’s fourth startup week is coming this May, and it has evolved into a festival celebrating startups and entrepreneurs and helping people find jobs.)

More than 3,500 people turned out to more than 70 events at Denver’s version. Unlike Boulder, Denver organizers relied partly on support from established companies and organizations like the Downtown Denver Partnership.

No matter who supports it, though, nothing draws that many people together unless people are ready for it.

Entrepreneurs and companies in Denver were ready.

That’s because Denver has long had great entrepreneurs and great companies, according to Erik Mitisek, one of the organizers of Denver Startup Week. They just hadn’t found their voice or each other.

Mitisek is a serial entrepreneur based in Denver since 1999 who has played a role in seven startups. His most recent company is Next Great Place, a three-year-old startup with 12 employees, eight of whom work out of its headquarters along the South Platte River, just north of downtown Denver. Next Great Place creates an online community of travelers with access to travel experts and low rates for trips to destination locations. It has raised $3.25 million from VCs.

Along with Next Great Place co-founder and president Tom Filippini, Mitisek helped build Denver-based Exclusive Resorts, a luxury travel club. Former America Online chief executive Steve Case bought a majority of the company in 2004, and it remains downtown.

Over the past decade or so, Denver-based startups like NewsGator, Ping Identity, and ReadyTalk have grown from startups to successful companies with hundreds of employees, but they haven’t received the attention similarly sized Boulder companies seem to get, Mitisek said.

“There’s been a lot of great companies here for a while, but I don’t think their stories have been told,” Mitisek said. “The tech economy and the digital economy in Denver are really starting to stand on their own two feet.”

Getting together and developing a sense of community is a good first step.

One of the lessons the leaders of Boulder’s startup scene try to teach is the need for a “give before you get” attitude, according to Robert Reich, a Boulder-based serial entrepreneur. He is the founder of New Tech Colorado, a self-described “community of over 9,000 geeks who live and work in Colorado.”

The group hosts monthly meetings in Boulder, Denver, and Fort Collins, where companies can pitch their ideas to an audience of hundreds and get honest feedback. Leaders of local companies regularly visit to find employees.

Michael Sitarzewski is working to create that on a smaller level. Sitarzewski is co-founder and CEO of Epic Playground, a small startup formed in Boulder that is building audience engagement and analysis tools for online media. Epic Playground graduated from the TechStars Cloud program in San Antonio, Texas. The company’s product, MediaGauge, has been built, and now Sitarzewski is courting online publishers.

Since 2010, Sitarzewski has helped run the Denver Open Coffee Club, an informal gathering of technophiles that meets every other Tuesday. The club started after Sitarzewski realized how many regulars traveled to the Boulder Open Coffee Club from Denver, he said. He wanted to build a bridge between the cities and a place where people in Denver could connect, and launching a Denver club seemed like a good idea.

“It was about trying to bring some ‘Boulder ideas’ to Denver and the startup scene there,” Sitarzewski said.

About 40 people typically attend the meetings, which have shown some results beyond relationship building. “People have been hired, jobs have been secured, and deals have been done because of DOCC,” Sitarzewski said.

Making the next great place

Creating a critical mass of companies in a specific neighborhood in Denver remains a challenge. Boulder’s activity is concentrated in about four blocks. Denver is a sprawling city. Some are trying to overcome that.

An example is Galvanize, a 30,000-square-foot workspace that’s created room for dozens of entrepreneurs, including permanent offices that can accommodate companies with up to a dozen people.

Galvanize’s biggest local backer is Jim Deters, a serial entrepreneur who co-founded Ascendant Technology, which is based in Austin, Texas. Ascendant was doing $90 million in revenue with approximately 600 employees before Avnet acquired it in 2012.

Deters and his partners want to create density and a center to Denver’s startup scene, Galvanize managing director Tony Mugavero said. Since rushing to open in time for Denver Startup Week, it has hosted more than 70 events and has become the home of the Denver New Tech Meetup.

Galvanize also will offer companies seed capital, and it hosts classes on subjects like user interface design. Ultimately, its leadership wants to combine three Cs— community, capital, and curriculum, Mugavero said.

Galvanize’s work has been noticed by local startup scene veterans like TechStars Boulder managing director Nicole Glaros, and many Boulder entrepreneurs are Galvanize advisors.

Mobilizing veterans

According to Glaros and Robertson, getting help from experienced entrepreneurs who have led IPOs, sold a company, or gone through a long slog is essential. In Boulder, these mentors provide advice, make contacts, or become early clients.

“As an entrepreneur in Boulder, you can get a meeting with almost anybody, and there are dozens of people willing to help you. That’s the notion of giving back in action,” Glaros said.

Tom Higley is a Galvanize supporter and is giving back. He co-founded Service Metrics with Robertson and was its CEO. He then went on to found StillSecure, a network security company based in Superior, a town outside Boulder.

Higley now lives in Denver, where he has started a small startup named Vokl, which he calls a kind of “Instagram for Business.” He also is organizing a new event that will bring together 10 entrepreneurs in Denver for 10 days to build companies to address 10 significant problems that for-profit businesses could solve. They will compete for $500,000.

It’s set to take place in October.

Waiting for the breakthrough

While the story emerging in Denver is a nice one, the city’s advocates are aware that pieces are missing—especially the marquee company that has a huge exit or IPO and proves to outside investors that the area is worth taking a close look at.

“We just have to have some notable successes…that handful of breakthrough companies that define a region and a state,” Mitisek said.

It is an issue for the entire region, Higley said. He doesn’t remember much that has come along over the past decade that has had the impact of Service Metrics’ $280 million sale, especially because it was a stock deal and the shares quadrupled in value by the time they could be cashed in.

“Since then, what can you point to that would persuade outside investors they should invest in startups located here?” Higley asked.

Higley is convinced access to venture capital is part of the problem. A number of VC firms opened in Colorado during the late-1990s boom, and some had a regional focus, but many couldn’t raise multiple rounds to keep investing, he said.

The state’s top VC firm is the Foundry Group, based in Boulder. Foundry Group’s history in Boulder goes back to 1995, when managing director Brad Feld moved to the city. From Boulder, he co-founded Mobius Venture Capital. After Mobius stopped making new investments, Feld co-founded Foundry Group in 2007 with fellow Mobius veterans.

Mobius invested in Service Metrics and StillSecure, and both companies’ founders benefited greatly from their close working relationship with Feld, Higley said. Feld remains a StillSecure member.

That type of symbiotic relationship is hard to recreate without more VCs who are enmeshed in the community.

Foundry Group “invests everywhere, but it can deploy money to companies in Boulder it really loves,” Higley said. In Denver, “you can truly be connected to Foundry Group, but it’s not quite the same.”

A firm based on the coasts with billion-dollar funds could send a partner here, but that doesn’t look likely until more companies break big, he said.

Higley believes a handful of Boulder or Denver companies might help change that. Rally Software, a Boulder-based developer of tools for agile programming, is slated to have an IPO soon. Companies like SendGrid, which splits its staff between both cities, and FullContact look like they could be on their way.

People in Boulder and Denver are pulling for them.

“We’re really supportive of companies that are standard bearers. We all want to see the exits I’ve described,” Higley said.

That would send a message about Boulder, Denver, and Colorado to entrepreneurs and VCs everywhere, although it’s something locals already know.

“This is doable. We can scale companies here,” Higley said.

Michael Davidson is the editor of Xconomy Boulder/Denver. He covers startups, venture capital, clean tech, energy, aerospace, telecoms, and whatever else happens above 5,280 feet. Contact him at mdavidson@xconomy.com. Follow @MichaelXBD

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