Amazon. Google. Facebook.
In the last 20 years, America has seen companies launched in garages and college dorm rooms transform into technology behemoths.
California’s Silicon Valley, unarguably the leading hub for high-tech innovation and development in the U.S., has some friendly competition.
Recently taking fourth on Forbes’ 2020 “Best Places for Businesses and Careers” list, the Mile High City of Colorado, Denver is attracting a large number of start-ups, investors and entrepreneurs all in search for a premier hot spot for their startup.
Named by USA Today as a prime location for startups, Denver and its neighboring city Boulder, have quite a history of attracting startups. Companies with Denver area roots include MapQuest, Photobucket, Chipotle Mexican Grill, Rally Software, Ping Identity, LogRythm, SendGrid, ReadyTalk, TrackVia, Cloudzilla, Forkly and hundreds more.
So why is Denver such a hotbed for startups, specifically in the technology sector?
What Makes Denver a Top 10 U.S. City for Startups & Entrepreneurs
#1: Building a Business Environment Tailor-Made for Tech
Denver is developing a thriving, tech ecosystem buoyed by state and local resources that embrace business. From 2010 through 2019 tech employment in Colorado grew by 28%. Tech workers make up an estimated 10.5% of the state’s workforce.
“Denver has always had a very intentional strategy about what we call our ‘start up, scale up, grow up’ ecosystem when it comes to entrepreneurship,” says Deborah Cameron, the chief business development officer for Denver’s Office of Economic Development. “It began by scanning our environment to see what was really needed and studying other successful locations.”
A low corporate tax rate, an educated workforce and a plethora of resources make Denver business-friendly. But it’s also the intangibles, like a collaborative culture and a better work-life balance, that make the city work so well for business.
But Denver— and the entire state of Colorado — still has its challenges, particularly competition for skilled talent amid ever-increasing job growth. Regardless, Denver is undoubtedly undergoing a tech boom and is forging a path for business that other cities may want to follow.
#2: The Influence of Colorado’s Government
Techstars was the driver of Denver’s rise, but government policy has also played a pivotal role.
Denver Mayor – Michael Hancock says startups are one of his top priorities. “I want Denver to be seen as the startup and small business capital of the nation,” Hancock insisted.
Similarly, Colorado Governor John Hickenlooper, himself a successful entrepreneur before entering politics, has also made startups a central focus. He recently launched a Colorado Innovation Network (COIN), which aims to connect the 29 different research laboratories in Colorado with entrepreneurs from across the state.
“The idea is to take innovation and new ideas and accelerate them, in order to increase jobs,” Hickenlooper said.
On the policy side, Hickenlooper has made a concerted effort to enact favorable tax policies for entrepreneurs, while also removing the bureaucratic red tape typically associated with starting businesses.
“When I became governor, we went to all 64 counties across the state, and we asked them, ‘What do you need?'” Hickenlooper continued. “We got the same answer from all over the state: less red tape. So, we are going through every single regulation and getting rid of everything that we can.”
Perhaps the biggest point of emphasis for Hickenlooper and Hancock, however, has been attracting millennials to Colorado by making Denver a vibrant, livable city.
“We needed to really understand what things people are looking for when they choose a city to live in,” Hancock shared. “And that is being able to live in a house that they can afford, being safe in their city and being able to access the mountains. It is also about the vibrancy [of the city] and the after-hours entertainment.”
Hickenlooper, who founded the Wynkoop Brewing Company in downtown Denver before getting elected mayor of Denver in 2003, has been deliberate in his approach to building up Denver as a millennial hub, dating back to his days as an entrepreneur.
“Today, we’re harvesting the work that was done 10 or 15 years ago. Back when I opened my restaurant, we decided that we wanted to make Denver a walkable city and a city that had density and nightlife.”
Hickenlooper made conscious city-planning choices that have served to benefit young professionals. “We were very careful not to have a nightclub district, because we thought these end up becoming pretty dangerous places, and it would be very hard to create a residential community alongside that,” Hickenlooper continued. “In addition, we built our baseball stadium, football stadium and basketball arena all downtown. We wanted things centralized.”
“We decided we were going to really focus on young people.” So, bike paths. Music. Culture. Outdoor recreation. That really got the millennials here.”
#3: Millennials Flocking to Denver
More tech companies are coming to Denver. Fortune 500 companies like Amazon, Facebook, and Arrow Electronics all have offices there. Denver also has welcomed homegrown companies like SendGrid, an email delivery service acquired by the cloud communications company Twilio for $3 billion.
“Fifteen years ago, we couldn’t get coastal investors to come here to Denver,” said Chris Onan, co-founder and CFO of Galvanize, a tech campus and startup hub in the heart of Denver. “There has been a wildly noticeable shift in the last five years.”
From 2010 through 2014, the Denver metro area attracted more than 100,000 out-of-state residents, the fifth-largest influx in the country. Colorado millennials also now outnumber Baby Boomers for the first time in the state’s history. Denver-based entrepreneurs are now creating startups left and right.
“Denver is differentiated by its quality of life, pool of young tech talent and infrastructure,” says Jeff Wilkins, CEO of Motili, a property management technology platform. “The area also isn’t dominated by tech the way the San Francisco Bay Area is. You’ll meet as many people that want to open a microbrewery as create the next great app.”
#4: Business Incentives and Low Taxes
Colorado offers a job growth incentive tax program that gives businesses income tax credits for creating jobs the state wouldn’t have otherwise. There are tax credits for new business development, business expansion, relocation and for job creation in enterprise zones or economically-disadvantaged areas. Companies also benefit from sales and use tax refunds for investments in the manufacturing, biotechnology, renewable energy, and medical and clean technology industries.
Kyle Sherman, CEO of Flowhub, a WeWork Triangle Building member, says his company, which creates compliance and point of sale software for cannabis dispensaries, took advantage of the state’s research and development tax credit. This is a 3% credit for taxpayers and companies who increase research and spending on product development or new lines of business within enterprise zones.
Though Denver charges a head tax ranging from $4 to $5.75 per employee a month, businesses benefit from the state’s low 4.63% corporate tax rate. As of the 2016 fiscal year, for every $1,000 of corporate income, Colorado effectively taxed $2.17, according to the Colorado Fiscal Institute. The rate can be as high as $9.38 in some states. Colorado also is one of nine states with a flat income tax (also 4.63%), ranking the fourth-lowest rate in the country.
#5: Infrastructure and Business Resources
Denver has a robust transportation infrastructure. Along with a rapid transit light rail and bus system, and free transportation in parts of downtown, the city is home to Denver International Airport — the state’s top economic driver. The airport has nonstop service to most U.S. cities, Europe, and Asia for easy executive travel.
“We felt that to build a really strong company culture, you’ve got to have diversity and some kind of stimulation around. When you walk outside, there are restaurants, things are accessible, there are parks — you get all of that downtown — there’s life,” Sherman says.
“The local government has invested considerably in mass transportation and cultural amenities like public parks. The local investment in public infrastructure gave us confidence the city would be able to scale along with us,” says Josh Reeves, CEO and founder of Gusto, a human resources, payroll and benefits solutions provider that has grown its Denver team to more than 500 employees in the last three years.
The city and business community also have invested in building the business ecosystem. WeWork has opened 10 locations in Denver to support the growing business needs in the area.
The city partnered with the Colorado Technology Association and the Downtown Denver Partnership in 2015 to create the “Commons on Champa.” The public space, which hosts more than 200 annual events, is “the crossroads for entrepreneurship and innovation in Denver,” Cameron says.
#6: A Collaborative, Balanced Work Culture
What differentiates the area from other tech hubs is “one word — collaboration,” says Kristin Russell, president of global services at Arrow Electronics and the state’s former secretary of technology and chief information officer.
“In many other cities and communities in which I have work and lived, there just isn’t the level, interest and intent around collaboration. The concept of ‘the high tide rising all boats’ is never more true than in Colorado,” Russell says.
Patrick Quinlan, CEO of the ethics and cloud compliance platform Convercent, says as more technology companies have come to Denver, the level of collaboration has grown.
“One of the real benefits of starting and building Convercent here is the CEOs are very supportive of each other. When I have a question, thought or concern, I can drop somebody a note or jump on a five-minute call,” Quinlan says. “It’s a helping culture, not a competitive culture.”
That extends to how people work. With easy access to the outdoors, Denver combines urban living with a relaxed culture. For example, across all of its 10 Denver locations, WeWork provides wellness programming to members, including regular yoga classes, meditation sessions, massage and spa pop-ups, various Denver-based wellness brand highlights, and more. Other companies offer employee perks ranging from Yoga Wednesdays to dog-friendly workplaces. Gusto even gives employees a free round-trip ticket to anywhere they choose after their one-year anniversary.
Frannie Matthews, president and CEO of the Colorado Technology Association, says even with this laid-back environment, the tech community is very productive.
“We’ve got a great ecosystem here, but it doesn’t mean we’re out mountain biking on Thursday afternoons,” she says. “It means we love where we live and we love the recreational aspects of it. But this is a work-hard community. I see that ethic across the state.”
“There’s largely a rejection of burnout culture here in Colorado. When you go to the coasts, you often see people working 20 hours a day and sleeping in their offices. Here, we value not doing that, and we believe that actually makes us move faster.”– Megan Espeland, Revolar Co-Founder
#7: Female and Minority Entrepreneurs Enjoying More Success
One positive, if perhaps unintentional, benefit of the city’s open culture is female and minority entrepreneurs seem to be thriving here, less plagued by the diversity issues that tend to manifest themselves in the Silicon Valley and New York City. Denver was recently declared the best place in the United States to start a company as a female founder.
One person who has actively supported Denver’s female entrepreneurs is Sue Heilbronner, who is the CEO and co-founder of MergeLane, a startup accelerator program that specifically invests in female-led companies.
“Women are less likely to apply for things when they’re not sure they meet all the criteria,” Heilbronner said. “We had a theory that women were just not applying as much to accelerators, so we’ve actively reached out to 1,300 companies that have at least one female in leadership.”
Heilbronner says MergeLane has enjoyed tremendous success since she started the company five years ago, a fact she attributes to Denver’s culture of openness. “One of the ways bias ends up getting perpetuated is when networks are extremely tight,” Heilbronner continued. “If networks are porous and open, all sorts of people who don’t look like the people who typically run networks show up. I think that’s really what we’re seeing here. An open community definitely favors women.”
Heilbronner also says she has enjoyed widespread support from Denver’s startup community, starting at the very top. “I think both men and women in this community are open to being in this dialogue.”
Colorado’s elected officials have made a deliberate effort to support female and minority entrepreneurs. “We are making a deliberate effort at all stages to have greater diversity among founders and recruit founders of all backgrounds,” said Congressman Polis confidently.
Governor Hickenlooper, too, says diversity has been his core focus since he served as mayor of Denver. “We made a big effort to have full diversity and make up some of the disparity that’s been here,” Hickenlooper said. “I think 48% of my appointees were people of color, and 62% were women. In every case, we can say we always hired the best person for the job. We never sacrificed excellence for diversity.”
Denver Mayor Hancock, who is himself African-American, echoed that sentiment. “If minorities and women are successful, we’re all successful,” Hancock said. “Denver, in its DNA, has always been an open and accepting community in terms of minority and women business.”
“Denver, in its DNA, has always been an open and accepting community in terms of minority and women business.”– Mayor Michael Hancock
Confronting Challenges to Business Growth
One of the main challenges Denver faces is competition for talent.
One of the things that makes the city so business-friendly is the educated workforce. Forty-one percent of residents have at least a bachelor’s degree, compared to 25% of the workforce nationally. But with Denver’s 2.9% unemployment rate, competition for talent is fierce.
“Denver is a small city, but it’s growing very rapidly. It’s harder to scale in a small city because the bigger you get, the harder it is because you have to poach people from other companies,” Sherman says. “We also have virtually a negative unemployment rate. That makes it difficult to scale.”
The key to addressing this challenge, business leaders say, is to build the talent pipeline across the state. The Office of Economic Development has focused on building sector partnerships to bring together higher education and business groups to address the pipeline problem. Cameron says some local schools with two- or four-year degree programs now offer short-term credentials to accelerate upskilling the local workforce.
But the state also isn’t resting on its laurels. Colorado launched a $500,000 marketing campaign in 2018 called “Pivot to Colorado” to lure tech talent from Silicon Valley. State agencies and tech companies collaborated on the effort, but only future numbers will tell whether this self-proclaimed “poaching strategy” works.
Whether Denver’s tech community grows because of this approach or by cultivating homegrown talent, business leaders say the time is right to start, grow and scale the country’s the next generation of great businesses.
“It’s a great time because many problems are waiting to be solved,” Reeves says. “A business exists to fix something, so every problem is an opportunity.”
Where Denver Goes from Here
It may sound like a startup utopia today, but as word of the Denver’s appeal spreads, some entrepreneurs worry that Denver could start to lose its tight-knit, community feel.
In fact, Hickenlooper is already planning an aggressive marketing campaign that will seek to paint Denver as a place for entrepreneurs to set up shop. “We’re going to focus on making this the greatest place in the country for entrepreneurs,” Hickenlooper continued. “You’re going to start seeing skiing ads, and other things like that in certain markets, that say, ‘Come out here and have a great vacation, and you also might want to start a business.'”
It remains to be seen whether the unique characteristics that have distinguished Denver’s startup community will change in turn. “Denver isn’t a flyover city anymore,” Onan said. “We can get venture investors, corporate executives and media who never would have come to Denver 15 years ago.”
“I think it is already changing. There’s no doubt that as we continue to have success, we’ll probably lose a little bit of that ‘Hey, everyone should probably help someone and make time’ feeling. That’s just a natural thing,” Onan believed.
But while Denver is certain to change, Onan is confident it will retain its millennial appeal. “It’s going to change,” he said. “Two years from now, it is going to look a lot different. But that’s what millennials are all about, constant change. This place is still going to have that cool and friendly feel.”
And despite his reservations about how the city will continue to evolve, Onan has absolutely no plans of jumping ship anytime soon.
“I don’t like to use the word ‘never,’ but I’m never going to leave here,” he said confidently.