Apr 24, 2023 - Business

Why Colorado startups see hope in this economic environment

Data: PitchBook and NVCA; Chart: Sara Wise/Axios

It may not be a funding frenzy, but compared to the rest of the country, Colorado is bucking the trend of tanking startup investments.

Why it matters: Amid a turbulent time in the startup space, the tech industry remains a major driver of Colorado's economy and could act as a key cushion in the event of an increasingly likely recession.

Driving the news: Startups in Denver raised nearly $582 million in the first quarter of the year, according to the most recent data from PitchBook.

  • That's up 60% from the first quarter of 2019, and down just 13% from the last quarter of 2022.

The big picture: Compared to 2021, Colorado's 17% dip in funding last year was less than half of the national average's 35% decrease, a recent report titled "The State of VC Colorado" shows.

  • Furthermore, the number of startup investments in the U.S. plummeted by 56% from Q4 2021 to Q4 2022, while deal activity slipped by just 28% in Colorado, an analysis by cap table management firm Carta finds.

State of play: Colorado's budding startup ecosystem has fostered company building and drawn top talent to the state, industry experts say.

Yes, but: Compared to pandemic-era boom times, funding for Colorado startups has slumped — a trend line that local venture capitalists predict will continue throughout the year.

What they're saying: "Founders out there will have to figure out how to make it, and unfortunately, that means working for less, hiring less and growing slower," Brian Wallace, a managing director of Access Venture Partners, told the Denver Business Journal.

What's next: 12 startup companies, including Denver-based RideiQ, recently completed their three-month accelerator program hosted by Techstars, an investment company co-founded by Gov. Jared Polis that is now the largest startup network in the world.

  • Company founders are now actively seeking investors, and many expressed hope and excitement for the future during their demos at Google’s campus in Boulder earlier this month.

What to watch: Experts say the number of startups funded this year is a better indicator than the overall amount invested to determine whether the startup market is bouncing back in a big way.


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