Economist: Startups Showing Increasing Impact on Colorado’s Economy

Colorado is wrapping up a record year for startups, and according to the state’s leading economic forecaster, they could be having a growing impact on the Centennial State’s economy for years.

Richard Wobbekind is the executive director of the Business Research Division at the University of Colorado at Boulder, and he oversees the university’s annual Colorado Business Economic Forecast. His models, along with the business, government, and academic leaders surveyed for the report, foresee the state adding 61,000 jobs and continuing to grow faster than the national average.

Wobbekind presented the forecast this week, and I interviewed him after the presentation to get his opinion on trends affecting the tech industry and entrepreneurs. Here are some of his thoughts.

-He’s Bullish on Startups of All Kinds. Wobbekind’s forecast was the proverbial 30,000-foot overview, looking at all major sectors of Colorado’s economy, but even from that distance it was possible to see startups were having an impact.

And those startups are not just in tech; they range from restaurants to consulting firms to lifestyle product makers.

One stat Wobbekind includes in his forecast model is the number of new business licenses issued by the Secretary of State’s office. It is a blunt data point, but over the years it has acted as a gauge for the formation of startups, and it is increasingly important, he said.

“Our view is on the startup side of the equation… it has been a very critical factor in the recovery,” Wobbekind said.

In 2012, more than 83,000 new businesses were formed, and through September of this year, 67,500 new businesses received licenses, according to the secretary’s office. That puts Colorado on track for a record year.

“We think that’s really significant, not just for right now, but in terms of momentum,” Wobbekind said. “Once those companies that survive year one and maybe year two, they start to become employment engines.”

Not all will survive, but on the whole they seem to have staying power, judging by the rate of renewals.

“What you can tell is we’re not seeing half of them disappear overnight,” Wobbekind said.

-Lean times look to give Colorado entrepreneurs a push. “There has been a great deal of business creation over the past four years,” Wobbekind said. While some could say that’s despite a sluggish economy, he feels otherwise.

“A lot of people who got laid off would say, ‘I always thought about starting a company anyway, this just gives me an incentive.’ The recessionary effects almost build in the initial momentum for more startups,” he said.

-Creating better communities. Wobbekind is based in Boulder, and while his focus is on broad, statewide economic trends, he’s followed the discussion about Boulder’s evolution into a startup community.

From his perspective, the key to building a sustainable community that will have a major impact is to build major companies and keep them locally owned. The example he pointed to was Rally Software Development, (NYSE: RALY), the Boulder-based company that went public this April.

“For the state, it would be great if more of the companies turned into Rally and IPOed and stayed in the state and got bigger and bigger, because when you do this selling out, and someone buys it, it raises the wealth of the investors, but they often take the technology and move the company,” Wobbekind said.

Rally’s story runs counter to the more frequent tale of Colorado technology startups being bought by larger companies and then ultimately leaving the state, Wobbekind said. Keeping homegrown companies in Colorado with local ownership is better for Colorado businesses, but also the residents.

“You typically get a lot more philanthropy from companies that actually live here,” he said.

-Colorado Springs Surprise. This summer, the Kauffman Foundation released a report saying four of the ten most “startup dense” communities were in Colorado. They were Boulder, Fort Collins-Loveland, Denver, and Colorado Springs.

Boulder’s been at the top of surveys like that for years, and business, government, and academic leaders in Fort Collins and Denver have worked hard to burnish their cities’ reputations. But Colorado Springs—a major military town with an abundance of defense contractors—ranked unexpectedly high in the eyes of many people in Colorado.

“I was a little surprised by Colorado Springs, so I’d like to see what kind of data they’re using,” Wobbekind said.

Wobbekind said he wasn’t familiar enough with the report’s data to really analyze its findings, but in general it reflects what he’s learned from living in Colorado for decades and teaching at its top business school—the state seems to attract people who are a bit unconventional and are willing to take risks, both in their personal lives and careers.

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