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Quick Links: How venture funding has dropped in 2023 | Where local startups can pitch | Minimum wages rising in Denver, Edgewater, Boulder County, Colorado

As funding for business startups has tightened in the past year, two longtime Colorado entrepreneurs are trying something new: they’re giving their money away.

Well, not all of their money, but it’s a token sum to encourage less-connected entrepreneurs to get ideas going. Mike Gellman, who sold his web design firm Spire Digital in 2019, and Chris Glodé, who sold the personal genomics startup HumanCode in 2018 and has invested in several startups, said they were getting antsy sitting around. They’d been toying with starting a venture fund to invest in promising young companies, but not in the traditional sense of fast-growth and massive returns. 

Something different.

“I really kept saying we want you to do your own thing,” said Gellman, who got his start building the first website for one of the granddaddies of dot-com retail, eBags, in the 1990s. 

Mike Gellman, on left, and Chris Glodé, have more than 25 years of business experience in Denver. The duo partnered to start ThingVC, which provides $10,000 to underrepresented founders who have a good idea. (Provided by Mike Gellman)

They launched ThingVC about three months ago with a simple strategy: For ideas that get their attention, they’ll provide mentorship, support and $10,000 for a 5% equity stake. That values the startup at $200,000, which is a bit more generous than what entrepreneurs on the TV show “Shark Tank” tend to get when giving up an ownership stake to celebrity investors.

Gellman says good candidates for a ThingVC investment are in the “pre-founding” stage. They’d consider a college student with an idea for a fashion line. An artist on Etsy. An aspiring chef who’s interested in having a food truck. But most of all, a more diverse set of entrepreneurs who struggle to get a toe into the traditional venture community.

“At this point, the most exciting part for us is to help,” Gellman said. “And not just to help people in general but to help people who aren’t normally getting help (like) the formerly incarcerated who’ve done their time and they’re washing dishes. They deserve a shot. Or immigrants who come to our country and are happy to be here and want to start something. Anyone with a disability. That’s what we found exciting.”

ThingVC is a bit of impact investment mixed with micro ventures. It’s defining its own universe with an online pitch form (300-character limit, please) to get things started. And it’s finding a place in the funding ecosystem, which for entrepreneurs can be anything from family and friend contributions, a credit card or bank loan, crowdfunding or private equity. And it’s not alone. 

In the past two decades, Denver has become known as a startup city, hosting events like Denver Startup Week every September. Founders at all stages attend the event. This year’s event is set for Sept. 18 to 22. (Olivia Sun, The Colorado Sun via Report for America)

Earlier this year, Buffalo, New York-based Good Neighbor Fund expanded into Denver and began offering $1,000 grants to underrepresented founders with an idea. 

“We received over 40 applications and they’re all over different types of industries and people,” said Susan O’Rourke, cofounder of the Denver arm. “We had to scale it down to really be more of an ideation phase, so no recurring revenue but something that is really just an idea that you’re just trying to get off the ground.” 

Good Neighbor Fund’s money is a grant and includes mentorship and support from its “LPs,” a term borrowed from the traditional venture world. But LPs aren’t really limited partners. Rather, they are donors who don’t take an equity stake. Two companies have received grants so far — Sustainably Rooted, started by teacher Tracy Csavina, who wants to create more sustainable spaces; and Homage Design, from founder Lydia O’Connor who creates faux floral arrangements. 

“We want to make sure our money has an impact, too,” O’Rourke said. “Sometimes, I’ll get applicants that have recurring revenue and they want to use it for a photo shoot. And I’m like, ‘Is that really making an impact? Are you taking a leap of faith into entrepreneurship?’ We want this to be someone who has an idea and for years told their friends about it but haven’t really had the resources but with a $1,000 will be, ‘OK, I can do this.’”

Tough year for startups

The funding environment has been harsh for venture investors and founders in the past 18 months. After a record-breaking 2021 for venture capital in Colorado and elsewhere, about half the number of deals and dollars found their way into local companies in the first six months of this year, according to PitchBook, a market research firm that tracks venture funding. It’s taking longer to raise capital and the deals are smaller than in the recent past.

But 2021 had a lot of big investor groups, like Tiger Global and Softbank, plopping down billions of dollars into later-stage and more established companies. That sort of funding has practically disappeared and the environment has slowed for everyone, said Chris Erickson, a managing partner at Range Ventures, a Denver-based micro venture firm that launched a $23 million fund in 2020 to invest in young tech companies at the pre-seed or seed level. 

However, according to Erickson’s calculations, it hasn’t been as rough for Colorado. He took PitchBook data to chart the decline in funding in Denver compared to other top cities. Denver’s dollar decline was 31% between the first half of 2022 versus the same period this year. The number of deals dropped 27% in Denver.

The region fares much better compared to the greatest plunges, like Miami’s 84% drop in dollars and Los Angeles’s 41% decline in the number of deals. 

“The dollars follow people and founders and we’ve continued to have just an amazing influx of super talented people continuing to move here. That’s one of the benefits and why Colorado has not seen as big of a decrease,” Erickson said. “We’re not single threaded in a specific industry. This isn’t like Miami, which was mostly driven by Web 3 activity, which is down a lot. We’ve got some fintech, we’ve got a lot of B2B and SaaS. We’ve got cybersecurity, we’ve got quantum. We’ve got robotics. Having that really broad base of tech is one of our advantages, especially in a downturn when different industries get hit differently.”

Erickson, who cofounded rent-tracking site Apartment List, said there are still a lot of good founders out there and Range Ventures has already “warehoused” some for future investment. Because of funding constraints, he feels like it’s actually becoming a better environment for investors and founders. 

“What you are seeing more of, and I think this is actually healthier, is founders figuring out how to bootstrap a bit or with very little amount of money to get initial traction. What we’re seeing less of (from founders) is just a slide deck, with no lines of code written and asking for millions of dollars,” he said. “Colorado founders tend to be more practical in terms of solving real problems and less likely to be chasing what I call, venture funded science projects.”

A niche in Colorado’s funding ecosystem

In the world of venture capital, $10,000 may not sound like much. But not everyone with a business idea needs to hire engineers and programmers. There’s room for investors like ThingVC, said Erickson, whose own firm is probably out of reach for many very-early startups since its average investment is $1.5 million.

“The more people starting businesses, the more people able to raise capital, the more people who have people around the table who have built businesses before to help with mentorship and things like that. All of those things are good for the ecosystem. And there’s a place for different types of capital that will help everyone,” Erickson said. “Ten thousand dollars can be incredibly meaningful to a different type of business at a certain stage.”

The Denver skyline.
Downtown Denver as seen from Highland Park in July 2021. (Olivia Sun, The Colorado Sun via Report for America)

One of the first ThingVC checks went to Denver-based ALUM, which stands for Accelerated Leadership for Underrepresented Minorities. It was an idea that Daniel Valdez has had for a few years that sprung out of his time as an MBA student at Arizona State University. 

Connecting with experienced mentors can be a challenge for people of color, like himself. There can be a lack of understanding on how to even do it. And even after an introduction, scheduling a time to meet may prove challenging. ALUM would fix that by having mentors provide set specific open hours so mentees can quickly connect. ThingVC’s $10,000 is helping Valdez build some of that out. 

“I can get relatively scrappy, but the digital platform was a little outside of my wheelhouse,” said Valdez, who still works full time as a manager in strategy and consulting at a top professional-services firm. “Really, it wasn’t the funding necessarily. It was (Gellman’s and Glodé’s) experience and what they’ve been able to accomplish.”

Knowing that founders of color make up a very tiny portion of venture-backed companies kept him from thinking further about raising capital. But ThingVC’s mission resonated with Valdez.

“You see on LinkedIn all the time, people virtue signaling like, ‘Oh it’s so bad what’s going on. I wish things were different,’” he said. “There are people who wish and there are people who act. For me to see they’re actually recognizing a problem and doing something about it, much like myself, and putting their money where their mouth is, I immediately submitted my pitch deck and they got back to me within 25 to 30 minutes.”

But the funding certainly helped. Just days before he heard about ThingVC, Valdez put up a GoFundMe crowdfunding campaign to raise $10,000 to pursue his dream venture. 

“One of my friends from a former company that I started, he pitched in and then my sweet younger brother put in $20,” Valdez said. “When I saw (ThingVC) was offering $10,000, I was like, ‘I think the universe is telling me something.’”

Gellman said he and Glodé have a network of contacts from 25 years in the Denver startup and business world. They want to share that and help pre-founded companies brainstorm and form ideas into something more solid, come up with a name and figure out the right business structure. With ALUM, they’ve already scheduled meetings with their clients for feedback and possible beta tests. 

Gellman said there isn’t a set expectation for the return on the investment. The goal is primarily to help startups find success “and give us a return so we can do more deals,” he said. “But we’re not looking at this as a business. We’d be giving it to charity and to some great organizations (anyway) and I think that this to me will be more effective than just writing checks.”

➔ Make a pitch to ThingVC >> Apply

Similar things

➔ Good Neighbor Fund — Making a 60-second pitch video is part of the application process to get a $1,000 grant. Founders from underrepresented communities who are noodling an idea are encouraged to apply — about 80% of its applicants are people of color, O’Rourke said. But even if you don’t get the grant, the program provides resources and mentorship to applicants, thanks to its experienced partners. >> Apply

➔ Energize Colorado — Private donors got involved as the pandemic hit to provide impact investments via low-interest loans. Loans of up to $75,000 are available to new and existing Colorado entrepreneurs. Interest rates are between 2.9 to 8.5%. >> Details 

➔ Colorado Startup Loan Fund — The state’s own small business loan program provides microloans of under $150,000 to Colorado-based companies who don’t qualify for traditional financing. >> Details

➔A list from Access Ventures. The Colorado venture capital firm Access Ventures provides a good round up of active angel and seed-stage investors that fund local startups. >> See the list

Other working bits

Minimum wages going up in Denver, Edgewater, Boulder County and Colorado. Now that the city of Denver and Colorado’s minimum wage is based on inflation, both will be going up again on Jan. 1. 

As the City of Edgewater contemplated increasing its minimum wage above the state’s, it projected wages to 2029 based on possible inflation rates. (Screengrab)
  • The City of Denver announced its hourly minimum wage will increase $1 to $18.29 in 2024 (tipped workers making at least $3.02 in hourly tips will grow to $15.27 an hour). 
  • Based on the same 5.8% increase for inflation, Colorado’s state minimum wage would similarly grow to about $14.44, from this year’s $13.65. 
  • New for 2024: The City of Edgewater joined Denver in May as one of two cities in Colorado with its own minimum wage. Edgewater’s minimum will rise to $15.02 next year, from $13.65. >> More details
  • Also new for 2024: Boulder County Commissioners said Friday they will introduce a new hourly minimum wage for unincorporated Boulder County in 2024. At $15.70 an hour, the minimum will be 15% higher than the state’s. Commissioners will hold a town hall on Oct. 12 in Niwot and a public hearing on Nov. 2. >> Details and event registration
Sky Market. Scenes at Denver International Airport in Denver, Colorado, on Sunday, Jan. 1, 2023. Photo

Denver airport has 500 job openings. Denver International Airport needs help, so it’s hosting a two-hour job fair Wednesday on the plaza connecting the Westin Hotel to Jeppesen Terminal. About 50 employers at the airport will be there looking to fill 500 openings, according to a DIA news release. Parking is $7 at the east and west airport garages but if you’re able to come by RTD, fares are free for everyone this month. The job fair is 10:30 a.m. to 12:30 p.m. on Wednesday, Aug. 9. >> Register

Cable firm offering tuition-free degrees for workers. Charter Communications, which has its large operation in the Denver Tech Center, upped its minimum wage to $20 a few years ago. Now it’s covering 100% of tuition costs for full-time workers interested in pursuing undergraduate and associate degrees or other education. (High-school diplomas and college prep courses are also covered.) Charter, which employs 5,000 people in Colorado, partnered with Denver-based Guild, which connects employers to education as a benefit for employees. Charter’s hoping it helps retain knowledgeable workers. According to Guild, folks enrolled in Guild’s programs “were, on average, 2.2 times more likely to experience internal mobility” compared to those not enrolled. >> Details

Thanks for sticking with me for this week’s report. As always, share your 2 cents on how the economy is keeping you down or helping you up at ~ tamara 

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Tamara Chuang writes about Colorado business and the local economy for The Colorado Sun, which she cofounded in 2018 with a mission to make sure quality local journalism is a sustainable business. Her focus on the economy during the pandemic...