10 Things to Know About BEN, Blackstone, and Colorado’s Gazelles
BEN Colorado’s twofold mission is to help the next wave of companies with high-growth potential scale up and become leaders in their industries while also helping to strengthen ties within and between important high-growth industries in Colorado’s economy.
To do so, BEN Colorado will create a network of entrepreneurs and executives with successful track records leading high growth companies. Those experts will offer guidance and advice to the leaders of promising companies.
The network will focus its efforts on Colorado’s aerospace, bioscience, digital technology, energy, and natural foods sectors.
For a detailed look at BEN Colorado and what it hopes to accomplish, Xconomy talked with BEN Colorado executive director J.B. Holston and Phil Weiser, dean of the University of Colorado Law School and executive director of Silicon Flatirons, a research center at the law school. Here are the ten key things about the initiative:
1) Who is running BEN?
Holston is responsible for making BEN successful in Colorado. He describes his job as being part facilitator, part “rainmaker.”
“My role is really chief concierge. It’s introducing people and making things happen in a seamless, egoless way,” Holston said.
That’s the modest way of putting it. Holston’s also responsible for making sure the network reaches a critical mass of companies, mentors, and master entrepreneurs, and that it provides value to the emerging companies from the very start.
“My time is largely going to be spent making sure the networks are well connected and that particularly that we’ve got a great group of committed advisers and a great group of companies,” he said.
Holston is in a good position to make all this happen because of the connections he’s made over the years as a prominent figure in Colorado’s tech industry. From 2004 though 2010, he was CEO of NewsGator, a software firm that makes collaboration tools for businesses and is now known as Sitrion. He remains chairman of Sitrion’s board and also is a member of the Colorado Innovation Network’s board of directors.
Holston will get assistance from Silicon Flatirons, which will provide a small support staff to help with programming and tracking BEN’s progress, Weiser said. The center, which is part of the University of Colorado’s Law School, is well known in local entrepreneurial circles for hosting conferences and giving organizations like New Tech Colorado a venue to host events and some financial support. Specific duties and the nature of the programming remain to be determined.
Silicon Flatirons will act as the program’s “steward” on behalf of the Blackstone Charitable Foundation to make sure the $4 million grant is being used wisely to create something with a lasting impact, Weiser said. The grant is for three years.
Having an established organization like Silicon Flatirons oversee the program was a priority for Blackstone.
“They were looking for both what’s the right region for them to develop that network in, and secondly who’s the right steward in that region,” Weiser said. “They had a two-pronged inquiry, and over time they began to become more enamored of Colorado and the potential that was here, and specifically in Colorado they looked around widely for different entities that had the capability to steward this grant and be a facilitator, and they concluded Silicon Flatirons was the right place to go.”
While Holston and Silicon Flatirons will lead the network, they also have an advisory board filled with highly successful entrepreneurs and executives to assist them. Among them is Zayo Group founder and CEO Dan Caruso, Rally Software Development CEO Tim Miller, Foundry Group managing director Brad Feld, and Wild Oats Markets and Sunflower Markets co-founder Elizabeth Cook.
2) How will BEN Colorado operate?
While BEN Colorado’s leadership team has an ambitious vision to bolster Colorado’s tech industry, its goals at this point remain more qualitative than quantitative. Exactly how BEN Colorado will achieve that vision remains to be determined.
“It’s still a work in progress, and BEN itself is a startup, so some of that will take root over time,” Weiser said. “Over the summer we’ll be refining and experimenting with the model, and at that point we’ll be building it to critical mass.”
First, BEN Colorado will round up advisers and companies that could benefit from mentorship. It especially is trying to recruit “master entrepreneurs” who can provide more detailed mentorship and work with individual companies over long periods of time.
“The idea is building a set of advisers, some of whom will become master entrepreneurs, and then having regular engagement points both with master entrepreneurs and the emerging entrepreneurial companies,” Weiser said.
Holston said BEN Colorado will be very flexible about what kind of help it offers, understanding that companies in different industries will have different needs. The key feature is likely to be introducing promising companies to mentors who have the right skills to help those particular companies.
“I think you’re going to see a lot of different models for engagement,” Holston said. “What the work looks like between advisers and master entrepreneurs and the companies will evolve as a function of what the companies need.”
“There might well be cases where some of the advisers get very engaged with companies for an extended period of time, because that’s a good fit. But there are going to be cases too where teams of advisers work for a relatively short period of time on a strategic issue for a company and help the company get on to a different path, and they won’t have to work beyond that,” he said.
It’s the kind of consultation that will mostly take place behind the scenes, Holston said.
Holston said partnering with existing organizations like industry associations is also possible.
3) What is BEN Colorado adding to the existing entrepreneurial ecosystem?
Colorado has become a hotbed of startup formation over the past decade, and the state has benefited from the rise of an “ecosystem” filled with organizations and companies focused on helping entrepreneurs.
At the highest level, there’s the Techstars startup accelerator, which is a three-month boot camp for some of the world’s more promising startups. It was founded in Boulder and ranks as one of the most successful accelerator programs.
At the grassroots level, there are organizations like New Tech Colorado, which hosts monthly meetings for aspiring entrepreneurs and gives fledgling companies the chance to make their first public pitches.
With so much going on, it might seem like every niche has been filled. But that’s not the case, Weiser said.
“There’s increasing collaboration at the startup layer, but not necessarily at the scale up layer, and across sectors, there might not even be much collaboration at all,” Weiser said. “I believe there’s a real opportunity to give both specific companies support as well as more broadly to build interconnected ecosystems, which will have positive impacts as well.”
BEN is focusing its efforts on five industries: technology and broadband; natural foods; energy; biotech and health; and aerospace. Locally, those industries are considered to be some of Colorado’s strongest, but while they’re heavily concentrated in Colorado’s Front Range, there isn’t much intersection between them.
The network wants to change that to benefit companies that have potential for rapid growth, which Holston likens to “gazelles.” He believes lessons learned in one industry can transfer to another.
“The theory of the case is that we have these disaggregated, somewhat disconnected silos of great expertise and experience that if we can connect in a functional fashion, particularly around companies that can be ‘gazelles,’ we’ll increase the probability that more of those companies become gazelles,” Holston said.
4) Focusing on scaling up, not starting up
BEN will be highly selective about the companies it helps.
“What will be unique about us is the type of companies we’re helping. They’re not going to be early stage startups,” Holston said.
Instead, BEN is looking for companies that have grown past the startup stage and are looking to scale up.
While companies will have to show both promise and results, they are likely to be early enough in their lifespans that they have not settled on a long-term strategy. Mentors from BEN could help them set a strategy.
“You’ve got to be a real company with real revenue and employees, but whose level of ambition and outcomes is yet to be determined,” Weiser said.
BEN Colorado is taking this approach for several reasons. First, startups and entrepreneurs are being well served by organizations like New Tech Colorado and events like the startup weeks in Denver, Boulder, and Fort Collins, Holston said.
“There are all kinds of things helping earlier stage companies at the moment. You can argue we need more of that, but there’s a lot of really great stuff going on. I think everyone’s agreed there’s really not much attention focused on this particular issue, which is let’s get some scale-up successes,” Holston said.
Colorado already has demonstrated it is fertile territory for startups, but its track record for creating companies capable of going public or remaining independent over the long run is not as strong, Holston said.
Indeed, many of Colorado’s most successful or promising tech companies get acquired. In April, for instance, Twitter (NYSE: TWTR) purchased Boulder-based Gnip for an undisclosed price. Gnip collects and archives public social media activity and was one of the few companies with complete access to Twitter’s “firehose.”
It is also rare for startups in the state, especially software startups, to go public. One recent exception was Rally Software Development (NYSE: RALY) last year. With a market capitalization around $325 million, Boulder-based Rally is considered to be one of the Colorado tech industry’s biggest successes.
“We have too many companies that get to a certain point and then stall out or sell out,” Holston said. “I think that if we can intervene and help them get on a different strategic arc, then we will have succeeded.”
That doesn’t mean there won’t be any indirect support of startups. Holston said the network might support existing community events and organizations that focus on startups as long as the network can add value.
Of course, if the help the network provides leads to more billion-dollar companies, more IPOs, more experienced entrepreneurs and executives, and more money flowing into Colorado, odds are good early stage startups will benefit too.
5) Helping gazelles with their problems
Holston frequently uses the word gazelle to define the type of company the network wants to help. He admits it’s a concept without a fixed definition, but the main idea is that the company has the potential to grow into something very big.
“It could be $500 million, it could be $5 billion, but it’s a company that has a prospect to get to a very large valuation, that’s how I think about it,” Holston said.
At first glance, gazelles might seem relatively rare in Colorado, especially in the industries BEN Colorado will focus on. To use one very rough measure, the Denver Business Journal’s 2014 Book of Lists counted 64 public companies in the state with market capitalizations above $500 million. The publication used data from mid-2013.
Two biotech companies, Clovis Oncology (NASDAQ: CLVS) and Array BioPharma (NASDAQ: ARRY), made the list, as did Ball (NYSE: BLL), the parent of Ball Aerospace & Technologies. No software company made the cut. In comparison, Massachusetts has eight software companies with market caps over $500 million (with seven of them are over $1 billion).
“Historically, the view is we have a lot of companies that could get to that but don’t get there,” Holston said.
But it doesn’t have to be that way, Holston believes, if companies with potential for growth could get help from people who are already in Colorado.
“There’s a tremendous amount of experience and expertise that could help them avoid that kind of an outcome, if we’re thoughtful about opening up those networks,” he said.
How can BEN and its master entrepreneurs help? Gazelles face “a unique set of issues” that startups or even successful established firms don’t face, Holston said. One is finding “C-level” and other senior executives who have experience building billion-dollar companies and who know how to manage rapidly expanding companies that might have hundreds of employees spread across the world.
That requires different skills than building a startup, and people with that kind of expertise generally have to be recruited from outside Colorado, he said.
Another issue is buying up rivals. Acquisitions are an important way of scaling up companies, but the founders and managers of gazelles might not know what it takes to successfully acquire and integrate a competitor.
Holston said that’s where the advice of a mentor who has done that before, even if she is not in the same industry as the company that needs help, could be very valuable. And while Colorado companies tend to be acquisition targets rather than acquirers, he said that there are enough potential mentors in Colorado to help companies develop acquisition strategies.
6) How will BEN find gazelles?
Holston acknowledges there isn’t a ready-made list of gazelles and it isn’t clear how many there are in Colorado.
“I don’t know if we know, that’s the short answer,” Holston said.
But based on meetings with companies and hearing the chatter among the various industry networks, Holston is confident there are many out there.
“There’s a general belief we must have 100 entities with these characteristics, but that’s not a very scientific assessment,” Holston said. “Are there 100 prospective billion-dollar valuation companies lurking in Colorado? Probably. Will we have 100 that will get to that valuation in three to four years? Probably not.”
The criteria to qualify for BEN Colorado’s assistance are yet to be determined. Holston said he will work with the network’s advisers to draw up guidelines that will be released by the end of May. The guidelines will vary by industry, and in practice BEN will be pretty flexible and allow for judgment calls.
Factors like revenue growth, venture capital funding, number of customers, and number of employees are likely to be considered when determining which companies qualify.
In the meantime, Holston is not waiting around. He said he’s already making connections with companies and advisers that have expressed interest in being part of the program.
“Right now we are casting a very broad net, both on the adviser and on the company front. We’re encouraging any company that thinks they have gazelle-like prospects to reach out and contact us,” he said.
While Holston and BEN’s advisors will be working their own personal connections to find companies, he concedes they could miss some candidates, which is why they’re also taking applications.
“There are going to be great companies that we just don’t know about because they’ve been heads down doing great work, and they never had the chance to stick their heads up,” he said.
Holston said he wants to be able to tell some success stories within 60 to 90 days.
“We’re already talking to companies, I’ve already got advisers engaged with companies, and we are accelerating the pace at which the networking is happening already.
7) Challenges and problems ahead
There’s great excitement about Blackstone’s involvement and the network’s potential, but there are a number of potential pitfalls, Holston said.
First, BEN Colorado will be breaking new ground. While the Blackstone Charitable Foundation established a program in North Carolina’s Research Triangle in 2011, Weiser said that initiative is more focused on startups spun out of area universities that are in an earlier stage of their development.
Neither will BEN Colorado be involved in technology transfer, for which there are many models, including the technology transfer office at CU.
That means there isn’t a playbook for Colorado to follow, Holston said.
“This hasn’t been done before. It’s not like there’s a model. There are things like this that have been happening in certain ways, but nothing exactly like this happening with this set of characters,” he said.
Holston said a second challenge will be avoiding the perception that the network is only for software and IT companies and has a narrow geographic focus. An example he gave would be creating the impression that BEN Colorado is oriented toward Boulder-based software startups at the expense of other companies and industries.
“Everyone who participates across the geographies in these industries, we need them to feel this is helpful for them, and if this is felt in anyway to be competitive or exclusive, that would be bad,” Holston said.
BEN also will need to stay entrepreneurial and be willing to try things that might not work out, he said.
“It would be very easy to get caught up in process and not just getting shit done,” Holston said.
8) How will the $4 million be used?
Along with the Blackstone connection, a lot of attention has been given to the $4 million the Blackstone Charitable Foundation is putting up. That money will go toward supporting BEN Colorado.
“We’re not going to be giving out money or anything like that. It’s an operational budget for staff and programming,” Weiser said.
BEN’s leaders are working out how they’ll use that money, Holston said.
“Exactly how we spend that budget is going to be determined as we roll forward over the next 60 to 90 days,” he said.
9) What role will Blackstone play?
Blackstone is one of the world’s largest global investment and advisory firms, and according to its website it manages $272 billion in assets for public and corporate pension funds and academic, cultural, and charitable organizations, among others. Blackstone (NYSE: BX) is publicly traded, and as of Tuesday it had a market cap of $16.9 billion.
The firm’s charitable arm, the Blackstone Charitable Foundation, is responsible for the local network. It’s part of a $50 million program known as the Blackstone Entrepreneurship Initiative, which will create networks similar to BEN Colorado and BEN North Carolina around the country.
The relationship with the firm and foundation comes with few strings attached, Weiser said. Blackstone hasn’t made a commitment to invest in the companies in the network, he said, and while the foundation wants to see that its money is well spent, it is largely up to Holston and Silicon Flatirons to give the program its shape.
“The Blackstone vision is they want to help get this launched and then it’s up to us to maintain it in whatever form that we can that’s sensible and sustainable,” Weiser said.
That doesn’t mean Blackstone won’t be involved and contribute to BEN Colorado’s success.
“The firm is a huge asset, and their excitement and engagement is part of the opportunity as well, so we will look for good points of connection and leverage,” Weiser said. That could include connecting local companies with mentors from Blackstone.
There’s also the intangible value that comes with having what Holston called “the Blackstone imprimatur,” which is a sign it believes Colorado is one of the leading centers for innovative companies and has faith in its local partners.
10) Building a legacy
Blackstone’s $4 million will support BEN Colorado for three years, but Weiser and Holston hope to establish something that lasts well beyond that.
“Our vision is that we’d be able to incorporate this into the community for longer than that,” Weiser said.
At best, BEN could help provide key assistance to several gazelles that make the leap to billion-dollar companies, which would lead to an influx of cash and managerial talent into Colorado. Those companies could become “tentpoles” that lead to spinoff companies that also go on to success, Holston said.
“If some companies get to a bigger outcome by virtue of BEN existing, then I think we will have accomplished our goal,” he said.
Another measure of success would be breaking down silos so successful entrepreneurs and executives in various industries continue talking with each other.
Ultimately, Holston said he’d like BEN Colorado to be a vital part of Colorado’s innovation ecosystem for years to come.
“There are a lot of things in Colorado that have started over the years that have started and stopped, maybe because they were funded by government, or they weren’t managed to add value over the long haul. This shouldn’t be one of those,” Holston said.