Jul. 29–Investments placed into startup Colorado companies grew slightly between April and June, and while observers say it suggests the marketplace is warming up again, they also say winning overventure capitalists is still a long haul.
And most agree that until private investors take more of the risks expected of them, the recovery will advance at an all-too-slow pace.
Fueled by $156 million raised by Englewood-based WildBlue Communications, 18 Colorado businesses captured $229.5 million — a 49-percent increase from first quarter, according to the MoneyTree Survey released today.
Nationally, an eight-quarter slump was snapped when investments slightly rose from first quarter’s $4 billion to $4.3 billion. Colorado ranked fourth in the country, behind California, Massachusetts and Texas.
In the Boulder area, though, second quarter mustered roughly half of its predecessor’s $85.6 million.
“Everybody felt like this was the most difficult it’s been in 30 years for raising money,” said Robert Anastasi, an executive vice president and co-founder of Louisville-based Zenodata Corp., a financial services software maker that raised $12.3 million during second quarter. “So many of these guys are so risk-averse, they’re like banks.”
The MoneyTree Survey from PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association showed most investments in Colorado sided with the sure thing.
Early-stage firms — those with a product in testing or early production — received 10 percent of capital, while expansion stage companies with products already on the market nabbed 82.5 percent.
In the Boulder area, three of the four companies tracked by the MoneyTree Survey — Anark Corp., ElectroFiltration Technologies Inc. and AirCell Inc. — were considered expansion stage or older.
Only Zenodata’s fund-raising, its first attempt at attracting institutional investors, was classifed as early stage.
Such investor reluctance must change in order for innovation to proceed and strong companies to emerge, said John Metzger, a board member for the Rockies Venture Club, a funding networking group.
Research and due diligence are key factors, but at some point, venture capitalists have to take chances, he said.
“What venture capitalists are, are risk-takers,” he said, adding sentiments appear to be shifting again that way.
Chris Wand, a principle with Mobius Venture Capital in Superior, agreed.
“We are seeing a little bit of thawing in the market, a glimmer of hope if you will,” said Wand, whose firm orchestrated six deals during the quarter. But ” VCs have to be willing to take some risks.”
Anastasi said Zenodata drew two top national firms, as well as Boulder-based Sequel Venture Partners. His firm was lucky and good, able to show revenues and a working product, he said. But he fears for those in the earlier stages of life because VCs “are being extremely shortsighted,” he said.
Some potential confidence-builders are afoot, though, experts said: There’s renewed talk of initial public offerings and increased mergers and acquisitions activity, both viewed by VCs as key exit strategies for realizing returns on their investments.
And, capital expenditures for hardware, software and other technology are due since the bulk of such purchases came at least four years ago, in anticipation of Y2K.
The MoneyTree Survey showed Boulder County companies logged only $29.8 million for second quarter. The study didn’t include Superior-based Xaffire Inc., a product of a merger and $13 million cash infusion in June.
The Ernst & Young/VentureOne U.S. Venture Capital Survey, a separate report released on Monday, included Xaffire, which would push Boulder County-related investments to about $43 million.
Matt Kosmicki, a technology partner for PricewaterhouseCoopers in Denver, said news of both Colorado’s and the country’s gains were positive news.
That two software companies, a telecommunications business and an industrial-related firm received funding “is a nice cross-segment” for Boulder and its neighboring communities too, he said.
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(c) 2003, Daily Camera, Boulder, Colo. Distributed by Knight Ridder/Tribune Business News.
