Denver South panel unlocks the secrets of how start-ups are funded

BY FREDA MIKLIN – STAFF WRITER

Eric Byington leads the entrepreneurship ecosystem and startup support work while providing support to the Smart Cities efforts at Denver South.

Eric Byington, Denver South’s director of entrepreneurship, opened its June 3 program by sharing his vision of Project Nexus, Denver South’s navigator for entrepreneurs, partners, and investors in the startup space: “A thriving and connected ecosystem that supports the formation of local startup companies and attracts top talents and entrepreneurs from around the world.” 

Mike Freeman, CEO at Innosphere Ventures (IV), said that his fund works with science and technology companies in the early stages. IV’s goal is accelerating the growth and exit of client companies that are likely to be acquired in the near term. IV’s focus is on companies that are positioned to access capital, acquire customers, build talented teams, accelerate top line revenue, and execute a successful exit. 

To become a client, companies apply for IV’s commercialization program. They are then subject to an in-depth assessment, after which IV works with the company to identify risks and assigns a mentor to help them progress from one business stage to the next.

Why do startups fail? Freeman pointed to a study by CB Insights, which identified the top risk factors as the market and competition, being able to manage cash, the ability to track investment, and having a complete team.

Emily Klein is the program manager of the Rockies Venture Club (RVC), a non-profit angel investing group dedicated to accelerating economic development by educating and connecting investors and entrepreneurs. She is also Director of the Women’s Investor Network. RVC has been operating since 1985 and has funded 1,500 deals. They hold 140 conferences, workshops, and other events each year and have 220 accredited angel investor members. RVC funds companies in cleantech, life sciences, and technology. Klein said that there are around 400 Angel Groups in the U.S. that back 64,000 startups annually and are responsible for generating over 275,000 new jobs.

She explained that Angel Investing is focused onscalable startups. They can create strategic partnerships with larger companies to achieve community, social impact and sustainability. Angel investors could include credit unions, crowdfunding, loan funds, and funds comprised of stocks, bonds, and real estate.

Charles Fred, co-founder of True Space, is well-known for helping entrepreneurs create conditions for sustainable growth, taking them from the start-up phase to the middle market. His firm worked with the Gallup Organization on a multi-year research project to objectively identify the operating conditions required for a small business to consistently reach that middle market. 

The major conditions the study identified that a successful startup needed were: 

  • Alignment of its focus, mission, and structure;
  • Discipline in its accountability, governance, and measurement;
  • Predictability of its assumptions, versatility, and revenue/sales;
  • Endurance in its engagement with employees’ and other stakeholders’ credibility, community, durability, and recognition, as well as its employees’ compensation and benefits;
  • Creating value in its enterprise.

True Space and Gallup quantitatively determined that scores in these areas determine consistent growth and value creation. They also noted that scores were unrelated to a company’s age and unaffected by the gender, race, or educational background of the entrepreneurs. 

Fred shared that there are 2.1 million U.S. firms today after the start-up phase ($1.87 million in revenue) that have yet to reach the middle markets ($10 million in revenue).If they all reached the middle markets, they would create 17 million new jobs. “Start-ups have the best job-creation potential of all businesses operating across the country today,” he said. He added, “We have another big problem. Only 20 percent of the 2.1 million businesses are women-owned and only two percent are black-owned. We have to change the equation of what is driving start-ups. We also have to help these businesses build and grow.”

fmiklin.villager@gmail.com

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