Number of Investments in Colorado Companies Reaches Five Year High

7/18/14Follow @MichaelXBD

Last year was almost a billion-dollar year for Colorado’s venture-backed companies, and over the past five years investors have bet $4.2 billion on emerging companies in the state.

That’s according to CB Insights, a New York City-based company that tracks venture capital and private equity investments. The firm released a report this week taking a look back at the past five years and examining investing trends.

According to CB Insights co-founder and CEO Anand Sanwal, the data shows investors are interested in a range of industries and are placing more bets on Colorado startups.

“Colorado has a pretty thriving investment ecosystem that spans multiple industries. The market has not seen the investment funding growth of other markets, but the early-stage ecosystem is thriving as evidenced by the state’s increasing number of deals,” Sanwal said in an e-mail.

There’s one point worth emphasizing: the data is for all industries. CB Insights determined the share of the deals and dollars received by tech companies—those working on Internet, mobile, computer hardware, and software—but data about IPOs, mergers and acquisitions, and geographic comparisons include all industries.

Here are five interesting items from the report, which can be read in full on the CB Insights blog.

—More deals, but not more dollars. More Colorado-based companies are raising money, with the number of deals reaching 281 last year, up from 249 in 2012 and 118 in 2009.

But investors are writing smaller checks. Last year, Colorado companies raised $930 million. That figure was up from the $750 million raised in 2012, but below the $1 billion raised in 2011.

—Tech leads the way. CB Insights noted that Colorado has a diverse industry base, with VC dollars spread between tech, healthcare, energy, and others. But tech leads the way most years, and last year was no exception, with 49 percent of the investments, or about $455 million, going to tech companies. Also, 49 percent of the 281 deals involved tech companies.

—The roles of Boulder and Denver. CB Insights found that “the vast majority” of investment activity involved companies based in Boulder or Denver. Since 2009, 55 percent of funding dollars and 58 percent of the deals have gone to the two cities.

That’s not terribly surprising. What is more interesting is the differing trajectories of the two cities. Boulder’s deal frequency has, in CB Insights’ words, “stagnated” at around 80 per year, with 82 deals taking place in 2013.

A more charitable reading might call that “consistency.” But the amount of VC dollars flowing to companies has dropped. Last year, VCs invested $209 million in Boulder companies, which was a three-year low—in 2012, Boulder companies raised $270 million, while in 2011 they raised $350 million.

Denver, on the other hand, is posting very steady growth, and for the first time eclipsed Boulder in the number of deals and the amount invested, with 90 deals worth $274 million in 2013, up from 71 and $233 million in 2012. The five-year trend is even more interesting—in 2009, there were only 20 deals, which totaled $95 million.

—Local VCs play a big role. CB Insights measured the activity of local venture capital firms, and it found local firms are the most bullish about Colorado startups. Seven of the 12 most active firms were headquartered or had partners based in Colorado. The most active were Foundry Group, Access Venture Partners, and High Country Venture, which together invested in 60 Colorado companies over the past five years, the report said.

But the news isn’t all good. A few of the firms that were most active in Colorado, including Appian Ventures, Sequel Venture Partners, and Vista Ventures, haven’t invested in new companies or raised new funds in several years.

—Exit activity. The report tallied up 101 exits in 2013, down slightly from 108 in 2012. Eight of last year’s exits were IPOs, but only one—Rally Software Development’s (NYSE: RALY) $84 million IPO—was for a tech company. So the truism that Colorado’s best companies are bought before going public remains the case.

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

By posting a comment, you agree to our terms and conditions.