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Colorado startup technology firms receive less money from investors
[September 11, 2006]

Colorado startup technology firms receive less money from investors

(Gazette, The (Colorado Springs, CO) (KRT) Via Thomson Dialog NewsEdge) Sep. 9--Fewer investors are pumping money into Colorado technology startup firms at the earliest stages, a principal with a Boulder venture capital fund said Friday.

The decline in so called "angel" investors, wealthy individuals who provide early funding to startups, has reduced the number of companies that make it to the stage when venture capital funds invest, said Christopher Scoggins of Sequel Venture Partners.

"There is a real lack of angels to provide the $200,000 to $300,000 needed to build a prototype" that companies can use to win product orders, Scoggins said. "They help to create the pipeline" of companies in which venture capital funds consider making an investment.

Scoggins made his comments to about 40 members of the Peak Venture Group, a local networking group for entrepreneurs and investors, at the Wyndham Hotel. Sequel is a $410 million group of venture capital funds that mostly invests in Colorado and nearby states.

Angel investors have been reluctant to invest in Colorado startups in the past few years after many of those investors lost much of their investments in startup companies during the technology industry collapse in 2000-2002, Scoggins said.

Venture capital funds have become more cautious in recent years, and as a result aren't as willing to invest in startups during their earliest stages. The funds would rather wait to invest until companies have begun generating revenue, Scoggins said.

Venture capital money invested into Colorado Springs companies last year hit a 10-year low -- the $11.4 million invested into local companies was the least since 1995. Such investments statewide are increasing, but at a slower rate than the rest of the nation.

"The number of deals and amount funded (nationwide) have recovered to 1998 levels, but we still aren't there yet in Colorado. We are at least two or three quarters behind," Scoggins said. "We still have incredible technology and entrepreneurs working here."

Venture capital is money provided by outside investors, often wealthy individuals or pension funds, to finance new or growing businesses. Such investments generally carry high risk but offer the potential for returns than can sometimes exceed 1,000 percent.

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