The Colorado tech community cheered when email service SendGrid had its initial public offering in November. Finally, a home-grown business was moving to the level that so many startups aspire to.
Less than a year later, SendGrid last week said it was being acquired for $2 billion in stock by Twilio, a firm that does what SendGrid does only with text messaging. While SendGrid said it’s committed to staying in Denver, Twilio’s headquarters are in San Francisco.
This follows a string of acquisitions that has left the Denver area feeling more like a garden ripe for acquirers rather than one that can get past its startup reputation.
The drive to develop a tech ecosystem that gives rise to our own giant, homegrown company hasn’t abated, however. There are just different routes to that environment, including welcoming a growing number of out-of-state companies expanding here, from behemoths like Facebook and Amazon, to younger Bay Area tech firms, such as Strava and Slack.
But still, to have a local startup hit it big is something many aspire to.
“We want the big win,” said Brian Egan, co-founder and CEO of Evolve Vacation Rental Network, a Denver private home-rental company that has grown to 300 employees since launching in 2010. “We never started Evolve with a specific end goal in mind. We’re very mission driven. And there are times when joining forces with a bigger company is the right idea. But as a community, we have every belief that it can be built here.”
Ten years ago, many of the area’s up-and-coming tech firms didn’t exist. SendGrid launched in 2009. Fast-growing Ibotta, a mobile shopping app company, started two years later and employs around 500 people. And Guild Education, which helps clients from Disney to Walmart offer hourly workers educational benefits, has raised about $71 million from investors since its 2015 inception.
Zayo, another locally revered tech company, was just getting going a decade ago. The Boulder-based company, co-founded in 2007 by former Level 3 executive Dan Caruso, is now an international fiber-internet company that connects office buildings around the globe. Zayo went public in 2014 and in June reported $2 billion in annual revenues.
“We already have a gigantic tech ecosystem and anyone who doesn’t realize it isn’t paying attention,” said Caruso, who is also active in mentoring and supporting local entrepreneurs through organizations like Blackstone Entrepreneurs Network. “We have tech companies that are based somewhere else who are moving here to scale. It’d be nice to start here and scale here, like Zayo, but this isn’t a bad alternative.
“There is so much we should feel good about because it’s created so many jobs and career paths. It’s spawned other businesses and attracts investment,” he said. “And we’ll realize that (more so) if the economy goes into a difficult tailspin.”
Organized efforts are actively helping maturing startups and mid-level companies continue on that fast-growth path to big-company status. Blackstone does it by using a network of founders and executives who’ve been there, done that and now want to nurture nascent CEOs. And that helps feed the ecosystem, said its CEO Greg Greenwood.
“When we have a success story, like Zayo, and people leave the company as millionaires, what I’ve seen is the money cycles back into the ecosystem,” Greenwood said. “There are a lot of angels who built good businesses and sold them and are now investing back in startups.”
Techstars, co-founded in 2006 by David Cohen as a place to incubate tech companies, helped spur a lot of the local excitement in startups in the past decade. And the accelerator has seen multitudes of its startups thrive, fail, raise billions of dollars, get acquired and go public (it tracks its network at techstars.com/companies). The sheer number of startups has earned Denver a reputation as a top startup city. Cohen said that just needs to continue.
“If you start enough (companies), you’re going to get a company that is truly iconic,” Cohen said. “If we have a regular rhythm of those (companies like SendGrid), it’s very powerful. It’s not that one thing happened, but some things happening all the time. There’s also the mafia effect, like the PayPal Mafia. Tons and tons of companies have been created by PayPal employees. We’re going to see that here.”
Metro Denver Economic Development Corp. supports not just growing the local tech companies, but businesses in many sectors as it works to diversity the local economy as a safeguard against the threat of recession. In addition to tech, industries like aerospace, aviation, beverage production, bioscience, telecom, energy, financial services and healthcare make up the nine pillars that the private agency pursues, said J.J. Ament, its CEO.
“One of the things Colorado was exposed to heavily was oil and gas in the (downturn of the) ‘80s. We really set out with the mindset that we really need a more diverse economic base in our region so we’re not disrupted when one goes bad,” Ament said. “… As we grow, we run the risk and reward of having great companies that incubate here, grow and scale, and then are acquired. That’s not unique to tech companies.”
Still, Ament’s team has an emphasis on attracting corporate headquarters. That adds to the local tax base plus offers a diverse mixture of jobs, from entry-level positions to executive posts. It also offers an additional layer of economic comfort in difficult times since a company is more likely to shutter a regional office than the headquarters. The challenge for Metro Denver EDC has become what happens after a local company gets acquired by an out-of-state firm.
“It is our obligation to help the (acquirer) know the reasons why (the acquiree) was so attractive. It was their ability to find talent, it’s the business ecosystem here. You can continue to scale and grow the company here if you leave it here,” Ament said, adding that nearly half of his job is spent retaining local companies. “Don’t forget how it grew into this in the first place.”
When CenturyLink acquired Broomfield’s Level 3 Communications last year, it promoted local Level 3’s boss Jeff Storey to CEO. Storey still lives in Colorado, as does a large chunk of former Level 3 employees. And when a Canadian aerospace firm bought satellite imaging firm DigitalGlobe last October, the combined company, called Maxar, announced about four months later that it was moving its entire corporate headquarters to Westminster.
SendGrid, too, is committed to staying in Denver, where it moved its headquarters to in 2016 after starting in Boulder. The company will become a wholly-owned subsidiary of Twilio.
“We are committed to Denver as the hub for SendGrid’s headquarters, and our office here remains essential to us as we attract, motivate and retain a robust talent pool,” SendGrid CEO Sameer Dholakia said. “We we will remain here and open and continue to run our shuttle bus which brings in our employees from Boulder each day.”
Colorado Technology Association CEO Frannie Matthews points out that ecosystems are popping up all over the state, not just Denver. The mountain towns are attracting outdoor-recreation companies and entrepreneurs who want to live in a less congested part of the state. Colorado Springs has become a hub for cybersecurity companies, likely due to the proximity of U.S. Space Command, Peterson Air Force Base and the Air Force Academy.
“We also have more national labs in Colorado than nearly any other state and with that, we’ve got a lot of resources that are available to us and opportunities for collaboration,” Matthews said. “We’re used to this small company being gobbled up by big companies, but I think there’s going to be a model change. We’re going to see more public/private partnerships and a lot of ways to thrive and not just by becoming a large company.”
The way Egan, with Evolve, sees it, Denver just needs more time. He moved to Denver from the Bay Area back in the mid-2000s and doesn’t remember much of anything going on in Colorado until Techstars launched in 2006. Silicon Valley’s ecosystem got its start decades ago.
“They’re 50 years into their ecosystem. There are really well-understood constructs (in Silicon Valley) around how people come out of companies, the education system and a system that spawns others,” Egan said. “We’re just so early in the process. But I don’t think we need to be anything. We just need to be a really great version of Denver.”