Entrepreneurs in Colorado should know that the type of name that they have for their startup could be a factor in the amount of funding they are able to obtain. Startup names that are easy to pronounce are favored by investors in the early and late stages of a startup's development. Angel investors, venture capitalists, crowd funders and IPO investors tend to provide more funding to these companies.
Innovative companies in the insurance industry have enjoyed significant growth in venture capital over the past two years. Some Colorado investors may notice an obvious contradiction between the insurance industry's focus on risk management and venture capitalists seeking speculative high rewards. However, the recent turn should not be a shock, according to analysts.
Businesses seeking seed capital from investors may need to redouble efforts in light of second quarter data in 2017. In Colorado and the nation as a whole, numbers point to larger amounts of venture capital pouring into a smaller number of firms. Appeals to international investors resulted in big gains for businesses in certain sectors. These gains over 2016 increases follow similar ones in the first quarter.
Venture capitalists and angel investors often provide entrepreneurs in Colorado and around the country with crucial startup capital when traditional banks will not. The venture capital industry has changed noticeably with the emergence of micro funds that concentrate mainly on initial seed money, and most industry experts expect the focus of venture capitalists to continue to evolve in the years ahead.
Start-up companies in Colorado and around the country are renowned for both needing and blowing through large amounts of cash. The needs and uses are typically expected and written into the business plan used to secure seed capital. After the business has significant cash flow, however, owners may forego the formal business plan until a catastrophe strikes, cash flows enter negative territory or owners face some other reason for seeking capital.
Entrepreneurs in Colorado may have great ideas for startups that require them to seek venture capital so that they can finance their businesses. In Silicon Valley, for instance, there are a large number of unicorn companies precisely because of the influx of venture capital. The success there has led some governments to try to incentivize venture capital investments by offering subsidies.
Colorado investors many be interested to learn that the deployment of clean energy technology is facing a decline in venture capital deals and funding. The national trend in cleantech funding showed a 30 percent drop in funding over a five-year period ending in 2016, according to a new report from the Brookings Institution. Cleantech is an umbrella term for several sectors, such as solar power and energy storage. The loss of funding for these sectors is hitting new business ventures harder, and some regions are faring much better than others.
Prospective entrepreneurs in Colorado who are seeking business financing may consider using venture capital. They may benefit from learning a few facts about the state of venture capital.
Colorado entrepreneurs who are interested in funding their businesses using venture capital might be interested in learning that in the first three months of 2017, venture capitalists invested more than $16 billion in nearly 1,800 companies. Of that capital, half of it went to more than 500 companies in California. However, of the companies that did receive venture capital investments in that time, 69 percent were not in California. Companies in Washington D.C. and 46 states all received venture capital investment.
Venture capital funding is essential for many new businesses. However, companies with female founders in Colorado and elsewhere tend to receive much less funding than companies founded by men.