The Pillars of a Robust Start-up Ecosystem

August 4, 2014

Author:

Law Week Colorado

Even before the onset of the Great Recession, there was a great deal of discussion in the U.S. regarding the future of America’s jobs.  In his seminal book The New Geography of Jobs, Enrico Moretti posits that a “handful of cities with the ‘right’ industries and a solid base of human capital keep attracting good employers and offering high wages, while those at the other extreme, cities with the ‘wrong’ industries and a limited human capital base, are stuck with dead-end jobs and low average wages.”

While the job creation picture in the U.S. is complex, owing to a number of factors including both the off-shoring of lower skilled labor and the digitization of labor, Mr. Moretti does well in summarizing the current state of affairs.  Not long ago certain economists were persuaded that it made long-term economic sense for lower wage/lower skilled manufacturing jobs to move overseas, allowing the U.S. to focus on higher wage/higher skilled jobs here in the U.S., supporting their belief that it was wise to focus on job creation at large companies or all “small” businesses.  More recently, with regard to the digitization of labor, Erik Brynjolfsson and Andrew McAfee, professors at MIT, explained in their book The Second Machine Age, that a largely underappreciated respect for the exponential growth in chip processing speed will lead to an unprecedented number of jobs lost to software and robots/digital mechanization across all sectors.

Studies like Where Should Regional Leaders Focus Their Job Creation Efforts, published this past January, note that with respect to start-ups “. . . for every new traded-sector job created, five new jobs are also created in the local economy through a multiplier effect, making traded-sector businesses the economic engines of the local economy.”  This is where Colorado’s robust start-up and innovation ecosystem supported by cities like Denver, Fort Collins, and Boulder, as well as areas of the state south of the Palmer Divide, the western slope and eastern plains, and unique assets like the cleantech incubator, Innosphere, and the entrepreneurial hub, INDUSTRY-Denver, allow our region to be uniquely and competitively poised.

Innosphere is a 501(c)(3) nonprofit technology incubator formed to accelerate the development, growth, and ultimate success of high-impact technology start-up companies.  Graduating 10-15 companies a year, Innosphere currently furnishes critical support to over 40 entrepreneurial start-up companies by providing essential resources such as assistance with raising seed and growth capital; help with assembling world class management teams and advisory boards; introductions to research centers, seasoned advisors and mentors; and access to top quality professional service providers.

In 2013, Innosphere client start-up companies employed almost 200 full-time employees and another 100 part-time employees, and filed 63 patents.  Fueled by angel investors, last year these companies raised $35 million in new investment, $85.2 million in capital raised to date.  Another unique aspect of Innosphere is its ability to get start-ups past the “valley of death.”  According to Bloomberg and Forbes, 80% of entrepreneurs who start businesses fail in the first 18 months.  Innosphere, which has been in the business of supporting and growing new businesses for over a decade, is now able to have 90% of its client companies still thriving after three years.  Innosphere has three offices in Colorado, its headquarters in Fort Collins, an office at the Colorado Center for Renewable Energy Economic Development at NREL, and its newest office at INDUSTRY-Denver, Denver’s newest hub for supporting entrepreneurs.

INDUSTRY-Denver is a 120,000 square foot development for start-up businesses, entrepreneurial endeavors, and creativity.  In the first of three phases of the development, INDUSTRY-Denver currently houses over 130 technologists and 20 companies.  When completed, the facility also will house Fortune 500 tenants and emerging technology businesses providing the foundation for a global health and science innovation ecosystem as part of the hub’s INDUSTRY Health/Science (IHS) platform.  IHS is intended to be a world-class destination for healthcare innovation that aggregates technology, capital, and entrepreneurs by creating a campus that will support national companies, emerging businesses, and start-ups, along with a world-class business incubator and venture capital.  These are the types of pillars being erected in Colorado that are supporting a very robust and sustainable start-up ecosystem.

Colorado is fortunate to not only have Innosphere and INDUSTRY-Denver as part of our entrepreneurial asset base, but other world-class institutions like the National Center for Atmospheric Research (NCAR), the nation’s leading federally funded research center for atmospheric science, and the National Renewable Energy Lab (NREL), the country’s premier renewable energy federal research facility.  Along with Colorado’s research universities, these institutions, incubators, and forward leaning metros provide a deep and rich environment for the development and growth of our start-up community and a source of high wage jobs.  With these assets in mind, it is no surprise that entrepreneurs across the nation have come to see Colorado as a center of gravity for innovation, an educated workforce, and a start-up environment second to none.

This article is published for general information, not to provide specific legal advice.  The application of any matter discussed in this article to anyone's particular situation requires knowledge and analysis by a lawyer of the specific facts involved.

Copyright 2014 Fairfield and Woods, P.C., ALL RIGHTS RESERVED.

Comments or inquiries may be directed to: Eric H. Drummond