When Flatfile CEO David Boskovic was looking to get the company off the ground, he didn’t look any further than Colorado, where he was based. Flatfile, which enables bulk data transfers between businesses, is a remote-first company, but about 40 percent of its workforce is based in the state, Boskovic said.
“Hiring, finding great talent in Colorado, and being able to pay competitively for that talent is a lot more accessible than building a company in San Francisco,” Boskovic said. “I’ve always favored remote companies. This wasn’t a COVID decision.”
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With COVID-19 and remote work causing many people to reconsider where they live, cities like Austin, Denver and Salt Lake City have increasingly come into the spotlight as emerging startup hubs.
Crunchbase News has written about Austin and Utah’s tech scenes plenty in the past, but it’s been a while since we’ve looked at the startup ecosystem in Colorado. And now, since more people are eyeing the Centennial State because their jobs are no longer tied to San Francisco or New York, we thought it was time to run the numbers on how Colorado compares as a startup hub.
In recent years, Colorado has become a hot spot for San Francisco Bay Area tech companies to open secondary offices. Tech giants like Google, Facebook and Salesforce all have offices in the state, as do private companies like Gusto and Robinhood. And notably, Palantir Technologies, the data analytics company going public this week, recently moved its headquarters from Palo Alto, California, to Denver.
But Colorado’s startup ecosystem has also been growing from within, with local companies raising billions in venture capital and seeing large exits. According to Crunchbase data, 2018 saw the most venture capital investment into Colorado-based startups in the past five years, with about $2.4 billion invested across 401 deals. Last year wasn’t far behind with $2.3 billion invested across 357 deals. It should be noted that 2018 and 2019 combined had eight “supergiant rounds,” or deals that were above $100 million.
In Denver particularly, 2019 saw the largest amount of venture capital investment into startups based in the city. About $931 million was invested in Denver-based startups across 152 deals, according to Crunchbase data. In 2020 so far, of the nearly $700 million that has been invested in Colorado-based companies, about $298 million went to Denver-based companies. This year so far has only had one funding round that was at or above $100 million (DispatchHealth‘s $135.8 million Series C).
Colorado’s tech scene isn’t exactly new—IBM, for example, opened a research center in the state in the 1970s. But it was around 2005 or 2006 that tech really started to accelerate in the state, according to Seth Levine, a founding partner at Colorado-based investment firm Foundry Group. Denver-based accelerator program Techstars was founded in 2006 and Foundry Group, one of the most active investors in the state, was founded in 2007.
The “tipping point” for Colorado’s startup scene to explode happened somewhere around 2010, Levine said. Before then, recruiting people to work in Colorado was harder because they were often concerned about Colorado being a place where businesses could scale and concerned about the maturity and size of the tech ecosystem. As Levine put it, if the job a person moved to Colorado for didn’t work out, would there be other opportunities in the state or would they have to move back to where they came from?
But following multiple large exits for companies, and people realizing the other appeals of living in Colorado, those concerns have been alleviated.
“I feel like we reached some sort of critical mass somewhere in the 2007 to 2010 timeframe and that stopped being a question and that’s accelerated companies moving here and companies being started here because there was this greater access to talent and greater access to capital,” Levine said.
Also of note is the phenomenon of large tech companies acquiring Colorado-based companies. Microsoft, Google and Twitter, to name a few, have all acquired Colorado-based companies, giving the tech giants a presence in the state. Several Colorado-based companies have also gone public since 2015:
The livability of Colorado has also been a major attraction, according to JJ Ament, CEO of local economic development group Metro Denver Economic Development Corp. Downtown Denver is the city’s urban core, but it’s not far from the mountains and country, making activities like hiking and skiing very accessible. And Denver itself is relatively easy to get to—it’s only a couple hours by plane to either coast and major airlines like United, Southwest and Frontier all have hubs at Denver International Airport.
“The talent clustering around these various industries has been tech-heavy over the last 10 years for sure,” Ament said. “More and more companies are discovering they have a great place to live, they have a talented workforce, and, while we’re not cheap anymore, we’re still a relative value, pricewise, to the coasts. The combination of those things have made us really attractive for those folks, and I think COVID has really accelerated that trend.”
The helpfulness of Colorado’s startup community has also been a big plus, Bokovic of Flatfile said. That sentiment was echoed by Nicole Glaros, chief investment strategy officer at Techstars. Glaros recalled how in the past when a startup would fail, the startup community would rally around the founder, organizing a happy hour to celebrate the founder and assist him or her with a job search or next venture.
But with COVID, there will likely be more startups based in Colorado, Glaros said.
“We’re just seeing a lot of new startups come in, and a lot of early-stage VCs pop up, too,” Glaros said, adding that investors have been reconsidering where they’re based. “So as that grows, that will just feed the cycle.”
Illustration: Dom Guzman