CEOs on Colorado’s Advantages, Challenges, and Boulder vs. Denver

6/24/14Follow @MichaelXBD

Life is good in Colorado, both for tech startups and the people who run and work for them. At least that’s the opinion of five of Colorado’s leading entrepreneurs who sounded off about running tech companies in the state. They spoke last week at the Colorado Venture Summit in Denver.

The summit brought together CEOs from some of Colorado’s top startups and tech companies and partners from venture capital firms across the country. The goal was to help connect promising or thriving companies with investors who are not familiar with Colorado, according to David Gold, chair of the organizing committee. Gold is a managing director at Access Venture Partners, a Denver-area venture capital firm.

But it also gave the CEOs or former CEOs a chance to share their experiences. The panelists were Webroot CEO Dick Williams; Sovrn CEO Walter Knapp; Sympoz co-founder and CEO John Levisay; Layer3 TV co-founder and CEO Jeff Binder; and Jud Valeski, co-founder and former CEO of Gnip, which was bought by Twitter this spring. Valeski left the company when the deal closed.

Sympoz, which does business as Craftsy, and Layer3 TV are headquartered in Denver, while Sovrn and Webroot are based in Boulder and Broomfield, respectively. Gnip was founded in Boulder and will become the nucleus of Twitter’s planned office in the city.

Each of the panelists met two criteria: they helped found and build successful startups, and they also spent a number of years working outside the state.

That gave them perspective on Colorado’s strengths and weaknesses. They were pro-Colorado, as you’d expect from people who choose to keep their companies here, but they also shed light on issues startups and growing companies face. Here’s a recap of their remarks.

(For the perspective of three venture capitalists who are based outside Colorado, check out this article.)

Colorado’s advantages

Colorado’s strengths include cost and culture.

Employees, especially engineers, do not command the very high salaries seen in the Bay Area, plus there’s greater loyalty, Knapp said.

That last factor can’t be overlooked.

“Churn is wickedly expensive,” Valeski said. “The tax on your organization and therefore your execution is super high….[Turnover] is just low here, and that’s a very distinct advantage.”

There also are intangible benefits, like a different type of lifestyle. Levisay worked in both New York and the Bay Area, and his family decided to move to Colorado several years ago.

“This was a better place to build a life, and a fantastic place to build a business,” Levisay said.

Binder said that factor—along with the area’s status as a hub for the cable and satellite television industries—was on his mind when he relocated Layer3 TV from Boston earlier this year. The company is expected to employ more than 300 people in the next few years.

“It’s the people, it’s the culture, it’s the attitude. It’s those things that help you build a workforce that’s interesting, fun, aggressive and competent, and so for us it was really looking at Denver as a place with those resources,” he said.

Colorado’s Challenges

Binder also said he’s learning there are real challenges. Most are related to the size of Colorado’s talent pool.

“It’s an intensely competitive market for development personnel,” he said. It was enough that Layer3 TV ultimately decided to keep its software development team in Boston.

He thinks scaling quickly might be difficult as well.

“The size of the community is still a challenge if you have to hire a lot of people quickly,” Binder said. “It’s the challenge of a smaller metro area, but it’s not specific to Denver.”

Levisay disagreed with that, noting Sympoz has been able to find and keep the engineers it needs. What he’s found lacking are executives with expertise in consumer-focused marketing.

Knapp believes there is a shortage of higher-level talent.

“At the VP level, there are a lot of really competent people that know their domain,” Knapp said. “There’s a very thin layer here of ‘C-level’ talent, the people who can look broadly and holistically across the whole organization.”

His theory is that’s because very few successful Colorado startups have reached “escape velocity,” or the point where they can be independent companies ready to go public. The ones that show that potential, like Gnip or Lijit (which evolved into Sovrn after being bought in 2011 by Federated Media), tend to get acquired by out-of-state companies.

That results in a shallower talent pool of executives who have successfully led their companies through the later stages of a startup’s life cycle, he said.

Boulder vs. Denver is played out

Throughout their history, there’s been a rivalry between Denver and Boulder, which is about 30 miles to the northwest. Part of it is political, part of it is social, and part of it is just based on hometown pride.

The competition bled over into the tech industry as well. Boulder had its entrepreneurs and startups clustered around its quaint, compact downtown, while Denver had its executives and large companies concentrated in the very corporate Denver Tech Center, which is just south of the city.

The divide arguably created different cultures that didn’t mix well, and there wasn’t much effort to make connections. Locals sometimes express concern about differences, but it bemuses transplants like Williams and Levisay.

“I think we ought to just get over it,” Williams said.

To Levisay, the rivalry seems like it’s trumped up.

“There are too many organizations that are creating deliberate parochialism between the two,” he said.

He noted Boulder and Denver are closer to each other than San Francisco and San Jose and “should be viewed as a more contiguous tech community.”

Pragmatism seemed to be at the heart of the panelists’ views.

After taking over Webroot, Williams decided to relocate the company to Broomfield, which is halfway between Boulder and Denver. Webroot’s hundred or so local employees were pretty evenly split between the two cities.

“It’s where your employees live that matters,” he said.

Geography also was a deciding factor in Layer3 TV’s thinking when it moved its headquarters to downtown Denver, Binder said. It’s a more centralized location that allows the company to draw employees from the south Denver suburbs and the Tech Center.

Even Boulder-bred Sovrn and Gnip are looking or looked beyond their hometowns.

“There were absolutely limitations as we grew,” Valeski said. “It was becoming very clear that we were going to have to come up with a different local talent acquisition model,” one that allowed for employees who did not want long commutes to work remotely.

Knapp said the challenges tech companies that are scaling up face are regional ones, and the CEOs and leaders from the cities need to get together to find solutions that will benefit both communities.

Michael Davidson is the editor of Xconomy Boulder/Denver. Contact him at mdavidson@xconomy.com. Follow @MichaelXBD