Bill seeks to jump-start high-tech businesses

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One of the first bills introduced in the Colorado General Assembly is aimed at giving startups and small businesses in certain sectors a much-needed financial boost.

Supporters say the bill could be exactly what technology, aerospace and engineering companies need to get off the ground and recover from the recession. Detractors say that the funding sources aren’t yet identified — and that Colorado Springs hasn’t seen much of the venture-capital money flowing out of the state’s Office for Economic Development and International Trade.

Called the Advanced Industries Accelerator Act, the bill basically gives grants — ranging from $50,000 to $500,000 — to businesses in seven industries: engineering, aerospace, advanced manufacturing, bioscience, electronics, clean-energy technology and infrastructure engineering.

The concept is backed by Gov. John Hickenlooper, who sees the benefit of helping such companies.

“We can boost Colorado’s advanced industries by increasing their access to capital,” he said. “These types of bipartisan efforts will … sustain a long-term, innovative ecosystem that creates highly skilled jobs.”

Ken Lund, executive director at OEDIT, also is an enthusiastic supporter.

“We know there are seven industries that produce 35 percent of the state’s exports, provide 20 percent of jobs and 30 percent of the wages,” he said. “Those have a high impact. The bill gives money at each level to projects that increase jobs and move technology from the research phase to commercialization.”

Also for second-stage funds

Beyond startups, he said the bill would help smaller companies who need second-stage funding.

“It’s not for the multinational companies who are already here,” he said. “But companies who already have customers — maybe a little bit bigger than the startups.”

It also assists the state’s universities and federal labs by providing more money to concepts that are ready to move beyond the research phase. Colorado’s research institutions — including the University of Colorado Colorado Springs and Air Force Academy — bring in $2 billion each year in research money.

The bill will accelerate the commercialization process, reducing the time to market. UCCS is among the institutions keeping an eye on the legislation.

“We believe this bill is a step in the right direction,” said Martin Wood, vice chancellor of university advancement.

The Colorado Springs Regional Business Alliance is also tracking it, weighing the pros and cons.

“It’s still very early,” said CEO Joe Raso. “There’s a lot of detail — and the devil’s in the details. If it passes, we’re going to work with our partners at UCCS to try to speed up the tech transfer process. We’re going to take a very active role.”

Ric Denton, CEO of the Colorado Springs Technology Incubator, said if the program were structured correctly, it could be a “breath of fresh air” for the state’s small- and medium-sized businesses.

“It looks like it’s a great opportunity for the state to build an entrepreneurial base,” he said. “It seems to be similar to the small-business innovation research program at the federal level, and if it works like that, it will provide capital for those small businesses just when they need it.”

Still some uncertainty

But Denton has questions. How much money will be available? Where it will come from?

Some money already has been identified, Lund said. The state could use money from its clean-tech, bioscience venture capital fund that’s already set up. Legislative leaders are identifying other sources for the grants.

“If it’s not enough money, it won’t make a big difference,” Denton said. “A couple million dollars in a single program won’t affect enough businesses to create jobs. It’s going to have to be a lot of money, and it’s going to need to be spread out. If the program’s only around for a year or so, that won’t work either.”

He also wants to know where the money is going. He points out that the state currently offers venture capital funding for certain tech start-ups — but no Springs business has gotten any of that money.

“We need to make sure that the money doesn’t stay in Denver,” he said. “It’s got to be structured so that good companies, from all over the state, can apply for the grants.”

He’s also skeptical that the Office of Economic Development is the right place to vet proposals for the grant money. Instead, he’d like to see experts in the selected fields decide on companies.

“We don’t want to throw money around on companies that might not make it,” he said. “If it’s going to be effective, the companies have to be vetted very carefully.”

Denton said the state’s economic development office was the perfect place to administer the funds, but vetting proposals should be left to the experts.

“I bet they could get a whole Rolodex of experts, so the money goes to the right places,” he said.

Lund says that Colorado Springs companies could see the benefits of the program. He points to Bal Seal, which announced expansion plans last summer, and DPix, a digital imaging company headquartered in the Springs.

“Bal Seal is a great example of an advanced manufacturing company that could benefit,” he said. “But really, any tech transfer from UCCS, something from the labs at the Air Force Academy, those would be great fits too.”

Of course, the state isn’t just handing out cash to desperate businesses. There are qualifications to consider: 50 percent of employees have to be in Colorado, and the company has to provide matching money.

“We require $2 of private money for every $1 of state money,” Lund said. “We have a strong philosophy that if you can’t get backing from the private sector, a grant from the state probably won’t help.”

Grants at a glance

Proof of concept grants

  • Research performed at Colorado institutions
  • Limited to $150,000
  • Preference given to projects that focus on technologies that cut across disciplines and research institutions.
  • Matching funds shall be $3 of state funding for every $1 of institution money.

Early-stage capital and retention

  • 50 percent in Colorado
  • Limited to $250,000
  • Preference to companies that provide services or products across multiple industries.
  • Matching funds shall be $2 of private money for every $1 of state money

Infrastructure

  • Grant size limited to $500,000
  • Preference given to projects that focus on technology cutting across industries or research institutions.
  • Matching funds $1 of state funding for every $2 of private money.
  • Preference for research and development, production and commercialization facilities.
  • Preference for workforce development through centers of excellence tied to industries’ workforce needs.