Thu July 19, 2012

Boulder Sets Pace for Venture Capital Funding

Boulder Valley companies received more venture-capital investment than any other region of its size nationally last year, and through the first quarter of 2012.

KUNC's Emily Boyer spoke with Boulder County Business Report publisher Chris Wood about what’s driving the investment.

Boyer:Companies in the Boulder Valley raised $375 million in venture capital during 2011 and through the first quarter of 2012. How exactly does that compare with other regions of a similar size?

Wood:It compares very well, Emily. That amount, which originated with PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters, is $100 million dollars more than similarly sized technology hubs in Chapel Hill, North Carolina, and the Pacific Northwest, and $210 million more than what was raised in Baltimore.

And we’re seeing it in a lot of different industries, including software, bioscience, aerospace and Internet.

Boyer:It seems like a lot of money is coming into the Boulder Valley. But how does it measure up to what larger markets bring in?

Wood:As you would expect, it’s a lot less than the big technology hubs in Boston, New York or the Silicon Valley area – Boston alone raised $3.5 billion dollars over the last five quarters. But the real significance is in venture-capital funds raised per capita.

A recent study by University of Colorado at Boulder researcher Brian Lewandowski found that Boulder County ranks No. 3 nationwide in venture capital on a per capita basis, raising $1,275 for every resident. That puts it behind only San Jose and San Francisco, California. San Francisco is tops, by the way, raising $2,900 per resident.

Boyer:So the Boulder Valley is securing a lot of Venture Capital dollars. What factors are driving these investments?

Wood:It’s a very good question, and it flies in the face of some belief that the region doesn’t get enough attention in terms of venture capital. What it is getting, is spurred by the University of Colorado and the overall innovation economy in the area.

One source from the National Venture Capital Association told us that, once you have a critical mass of startups, VC investment begins to feed on itself, and venture capitalists from Silicon Valley start believing that it’s worth their while coming to Boulder.

And once you begin to have successful exits for VC companies, that tends to lead to more investments.

Boyer:Now, a moment ago you said something that would seem contrarian, that some believe that the region doesn’t get enough attention from venture capitalists. Why is that, considering how much Boulder has received recently?

Wood:That’s been a pretty constant complaint among companies in a lot of different industries in the Boulder Valley. We’ve seen some very successful fundings — more seem to be announced every week — but a lot of local entrepreneurs complain that they can’t get attention from venture capitalists, and they wish that more of the firms were based locally.

Boyer: It seems these numbers indicate more attention is being paid to the Boulder Valley by venture capitalists. But what are some of the other ways local entrepreneurs raise money?

Wood:One long-time method has been Mom and Dad, or other family members, but many entrepreneurs also look for what’s called “angel” investors. These are generally high-net-worth individuals who will invest in companies individually.

The Boulder Valley has a strong network of this type of individual, many of whom are successful entrepreneurs in their own right. Now, with VC activity also picking up, the Boulder Valley’s profile should keep getting bigger.

Chris Wood is the publisher of the Boulder County Business Report.

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