Investments in local firms are highest in years

Venture capital investments in Colorado Springs and statewide surged during the third quarter and are at their highest levels since 2001, even as such funding nationwide has started to slow, according to a pair of quarterly reports released today.

The local jump in venture investments was almost entirely the result of $28.5 million pumped into Springs-based software developer Accellos Inc., the largest financing of a local company since USA.Net Inc. landed $31 million in February 2001. Accellos used some of the money to buy a Connecticut-based transportation-management software company and plans to make up to seven other acquisitions over the next three years.

With the addition of the $10.4 million raised by XAware Inc. and Intelliden Inc. earlier this year, local venture investments totaled $38.9 million for the first three quarters of the year, or more than six times the amount raised by local companies during the same period a year ago. This year's local venture investment total already is the most for any full year since 2001 and exceeds the total for the previous three years combined.

Statewide investments in the third quarter surged 54.7 percent from a year earlier to $274.7 million, mostly because of $104 million landed by Fort Collins-based AVA Solar Inc., according to data compiled by Dow Jones VentureSource. That pushed the total for the year to $638.6 million, up 8.4 percent from the same period a year ago and just $17.1 million less than venture funds invested in Colorado all of last year.

A similar report, called the MoneyTree Report, from Thomson Reuters, PricewaterhouseCoopers and the National Venture Capital Association, found venture investments in Colorado in the third quarter were flat at $196 million, but that report included neither the Accellos deal or a $50 million investment in Greenwood Village-based WildBlue Communications Inc. That report said statewide venture investments so far this year are up 40.4 percent from a year ago to $665.2 million.

"Given what is happening now in the financial markets, we should be pleased with the confidence that venture capital firms have showed in Colorado companies," said Bob Puls, a PricewaterhouseCoopers partner in Denver who specializes in venture capital.

"Venture capitalists still have money and are looking at deals, but there is no question what has happened in the (financial) markets will affect venture capital funds."

That slowdown is already apparent in the national numbers. As it becomes increasingly difficult to cash out of their previous investments, venture capitalists are gradually closing their financial spigots in what could be the start of a long, dry spell for entrepreneurs.

Although a drought hasn't set in yet, it's looking inevitable as the ripple effects of a worldwide financial crisis rattle venture capitalists.

The trepidation was evident in the third quarter, when the venture capital flowing to startups totaled $7.1 billion, a 9 percent decline from the same time last year, according to national data in the MoneyTree Report. It marked the first quarterly decline in year-over-year venture capital investments since the final three months of 2005. And it was the largest decrease since the spring of 2003, when the industry was still recovering from losses sustained in the dot-com bust.

Now, venture capitalists are girding for the most challenging period since an Internet bubble that they helped create finally burst in 2001.

"We have been through this before and, hopefully, we have learned some lessons," said Mark Heeson, president of the National Venture Capital Association.

The comedown this time shouldn't be quite as jarring in this cycle, mainly because venture capitalists haven't been as loose with their money as they were during the dot-com boom. Venture capitalists invested $200 billion from 1999 through 2001. In the nearly seven years since then, venture capitalists have invested a total of $168 billion.

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Contact the writer: 636-0234 or wayneh@gazette.com. The Associated Press contributed to this report.