Traditionally, business people in Colorado Springs choose to invest in real estate, providing little money for venture capital or angel investing for the city’s startups. A local venture capital group wants to change the culture by inviting Denver investors and companies to the Springs.
Organizers and business leaders believe collaboration with neighbors to the north is needed to encourage innovation in Colorado Springs, to develop the type of business environment that thrives in Denver, Fort Collins and Boulder.
Known as High Altitude Investors, the Colorado Springs group is a loosely organized, informal organization with about 20 members, said Ric Denton, who serves as CEO of both the venture capital group and Rocky Mountain Innovation Partners, formerly known as the Colorado Springs Technology Incubator.
It’s not big enough.
“In a city the size of Colorado Springs, I’d argue that we should have between 60 and 70 members, people actively involved in investing in companies,” he said. “But we just don’t have that culture in the Springs.”
In order to raise cash for local startups, Denton and the members of HAI decided to invite the big guns — the Rockies Venture Club in Denver, the oldest, longest-running angel investing group in the United States and the sixth largest angel group in the country.
“We hope this will bring more money to Colorado Springs startups,” Denton said of the new venture. “We need more investment in these companies — and this partnership makes sense. So far, it’s gone pretty well.”
The group held its third joint meeting in the Springs this week, he said.
But it’s not without risk.
“There are some cons,” he said. “One of them is that local investors might start sending their money to startups in Denver. But we think it’s worth the risk to widen the pool of investment money throughout the state.”
The goal, Denton said, is to bring more money to startups no matter where they’re located — helping the state’s entire economy. But he acknowledges that people in the Springs don’t often see the benefit of angel investing.
“There’s a lot of wealth here,” he said. “But there’s not a lot of investment in entrepreneurship. It’s just not how people invest their money. I’d argue that it’s a way of diversifying — invest in real estate, in the stock market, and about 1, 2 or 3 percent in businesses.”
Mostly, his efforts fall on deaf ears.
“It’s a long, hard slog,” he said. “That’s all I can say.”
Different model, less cash
The Rockies Venture Club has a different model that allows investors to provide small sums of cash — as little as $5,000 — to several different companies, spreading the risk, he said. Companies get to pitch at each RVC location — here, Denver, Boulder and Fort Collins — and can raise money at each one.
“Investors can choose to invest in 30 different companies,” he said. “Instead of giving one company $25,000 this year; $75,000 next year, investors can give smaller amounts to different companies.”
Still, not just anyone can be a part of either the Rockies Venture Club or High Altitude Investors. It takes a net worth of at least $1 million to be a certified investor, and that doesn’t include personal homes, Denton said.
The partnership came about in part due to RMIP’s efforts on behalf of the Air Force Academy. The incubator is responsible for marketing Academy inventions to startups and existing businesses alike. Capt. Bryce Luken, an instructor in the management department, volunteers with Rockies Venture Club, helping perform due diligence on companies interested in pitching their event.
“This is how entrepreneurship works,” said Luken, an entrepreneur himself. “You get people in a room and you learn what gets you interested, what you’re excited about — and then you’ve found partners. If you can expand the number of people in the room, good things can happen.”
The Rockies Venture Club seems like a powerful partner for the smaller Colorado Springs organization. The group was founded in 1985 and provides both education and networking for its companies. According to its website, 120 companies pitched ideas in the past 18 months, and 25 percent of them received investment money that totaled more than $25 million.
Help for ecosystem
Chris Franz, president of Peak Startup, says the Denver involvement is exactly what the local community needs, even as the structure between the two groups remains informal and fluid.
“It’s definitely a good thing,” he said. “But the most important thing is that RVC is very adept at recruiting and educating angel investors. That will be good for us locally, to draw those angel investors out of the woodwork, and easing their fears about investing in the future.”
The Denver group also performs due diligence on companies, making sure they have sound business plans and really solid products.
“There are a lot of opportunities to invest here,” Franz said. “But we don’t have a long list of serial entrepreneurs. Most of the startups here are brand new, so it’s hard to evaluate them based on their track record. And that’s what you need — most angel investors are people who have been in the ecosystem as entrepreneurs. What we have here is 44 percent of the economy is aerospace and defense. Traditionally, those are not risk takers.”
While Franz doesn’t worry about local investment going to Denver or Boulder, he is concerned about something else: local companies retaining a shot at investment.
“We definitely want to retain local flavor and keep local startups in the mix,” he said, noting that there won’t be a formal chapter of Rockies Venture Club in the Springs, as there is in Boulder and Fort Collins. “We don’t want to see only opportunities from Denver or Boulder. We want a local balance.” That’s why the relationship will remain informal, he said, the way it’s always been.
“High Altitude Investors isn’t an LLC,” he said. “It’s not really a legal entity. It’s a bunch of certified investors who get together informally to discuss opportunities. It’s a loose affiliation, and I think that will continue.”
Still, having the Denver group involved will mean more success in the Springs, he said.
“It’s another building block in the startup ecosystem,” Franz said. “And it’s one we need to improve on — Rockies Venture Club is one way of doing that.”