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.
A number of individuals who have great ideas for new products never obtain the funding they are seeking. One reason for this may be that they have created workable product plans but not full business plans. In reality, both are essential parts of starting up a successful organization.
Venture capital may be less accessible for investors in Colorado and other locations outside of the Silicon Valley, according to one report. It found that almost half of every dollar of venture capital goes to Silicon Valley. Los Angeles, New York and Boston receive almost a third of all investments, so there is less than 25 cents of each dollar remaining for the rest of the country. In 2015, five states didn't receive any venture capital investments.
In order to become successful, small business owners in Colorado and across the country need capital, but securing it may be difficult. There is some advice available for entrepreneurs who are just starting out and need venture capital to help them reach their business goals.
Entrepreneurs in Colorado have traditionally found it difficult to compete for venture capital funding with nascent companies located in major business centers like New York, Chicago and Los Angeles, but the growing popularity of crowdfunding could be helping to level the playing field for them, according to a study. Researchers from the University of California, Berkeley and Yale University looked at business startup projects listed on the crowdfunding website Kickstarter, and they discovered that these offerings were often of great interest to venture capital firms.
If you have a good idea for a new business but are unable to secure the seed money to get it off the ground, you might look to angel investors as potential alternatives to traditional business capital funding. Angel investors are often more aggressive than are other investors and often enjoy investing in businesses that are high risk but which offer potentially high returns.