After years of steadily building the local startup ecosystem, Colorado broke-out this year with record levels of venture activity across the state.
Colorado startups raised nearly $2.5 billion across 390 venture capital deals in 2019, according to the latest Venture Monitor report from PitchBook and the National Venture Capital Association.
That number is up from $1.6 billion in 2018 and more than doubles 2017’s total of $1.2 billion in deals.
Rich Maloy, venture partner at SpringTime Ventures, said this total is an indicator of the state’s hard work in building its innovation ecosystem.
“To me this shows a maturation of the Colorado startup market--this is the success of a decade's worth of hard work,” he told Colorado Inno. “Considering that the number of new businesses started is a leading economic indicator, and the number of new businesses in Colorado has been growing for years, 2019 being a big year is likely that late stage investments are catching up with the growth that's been happening here for many years.”
"How do we stay Colorado and not become outpriced like other hubs?"
Bolstered by a record fourth quarter, Colorado looks to be entering 2020 with momentum. The state brought in nearly $800 million across 91 deals, making it the largest single quarter in Colorado since PitchBook began collecting data in 2013.
The quarter was headlined by Guild Education’s $157 million round, as well as Inscripta’s $125 million Series D.
Predictions for 2020
Looking ahead to this year, Maloy is cautiously optimistic that Colorado can continue to ride this wave.
“Most of the local funds are still actively deploying capital, so we should still see strong investment numbers, but I have no idea if they will continue at this level,” he said.
Delaney Keating, managing director at Startup Colorado, shared Maloy’s sentiment about growth, but wondered about the impacts of an election year.
“Given certain economic factors I do think we will see continued growth, but the 3rd and 4th quarters feel more unpredictable given that it is an election year with an increasingly uncertain public. Though for Colorado, the variable may barely be noticeable,” she said.
While this was a banner year for venture activity in Colorado, there is still much to be done to build the local innovation ecosystem.
Clay Gordon of Stout Street Capital said an increased focus on early-stage companies will help to boost the local scene.
“The Denver/Boulder areas need more VCs willing to lead and write larger checks in the early stages of a startup. We see a lot of unfunded opportunities that could accelerate growth in the market and can fuel more innovation and job growth,” he said.
National Trends
When it comes to national trends, U.S.-based companies raised about $136.5 billion across more than 10,700 deals in 2019, according to PitchBook.
2019 VC activity was slightly lower than 2018, when U.S. companies raised $140 billion across 10,500 deals. The dip was due to a slower fourth quarter, PitchBook says. But overall, the data, released Tuesday, shows that venture capital raised by U.S. companies has been steadily rising since 2006.
Female-founded companies saw record activity on both a capital and deal count basis, raising $18 billion across 2,184 deals in 2019, compared to nearly $17 billion across 2,057 deals in 2018.
Keys to Success in Colorado
Colorado’s startup ecosystem has long been known for its ‘give-first’ ethos, developing this reputation for the supportive community that has been created.
It’s easy to get lost in the numbers, pushing to break fundraising records year-over-year, but that isn’t what makes Colorado special, Maloy and Keating said.
“Building a business is a long-term game, growing an economy is an even longer-term game. If we stay focused on what has made Colorado successful we can continue that success for the coming decade and beyond,” Maloy said.
“I think we need to be having more conversations about the sustainability of the ecosystem given the economic trajectory of Colorado. How do we stay Colorado and not become outpriced like other hubs? As more and more communities across the US level-up their service and support for entrepreneurs how will we stay competitive and at the same time preserve the culture of Colorado, especially in its rural communities,” Keating added.
As the level of local investment grows and Colorado’s garners increased national attention, Gordon sees a real opportunity for the state to make some noise.
“We feel there is plenty of room for the venture activity/startup funding in Colorado to grow from being a minor market into a significant market,” he said. “Especially by positioning itself as a magnet for middle of the country startups and VC investments.”
Chicago Inno’s Katherine Davis contributed to this report.
