Colorado continues to thrive as a leading state for innovation, but troubling signs could lead to problems down the road, according to a Colorado State University economics researcher.
Stephan Weiler, a professor of economics, said numbers revealed in his second annual Colorado Innovation Report indicate that while entrepreneurship in the state is thriving, the overall picture for startups and their support system shows some flaws that could lead to future problems for Colorado’s economy. The 2013 report, commissioned by the Colorado Innovation Network (COIN) of the Office of Economic Development and International Trade, and conducted by CSU, was released to launch Colorado’s Innovation Week.
“We tried to make a non-partisan, objective evaluation of what our softs spots might be,” Weiler said. “What we learned is that Colorado does well in terms of headline statistics, and is well-positioned overall. But if we want to remain in this position or advance our standing, we need to think about what’s going well now and also the things that are keeping us from doing as well as we could be. In that sense, these challenges are also opportunities for Colorado to become even more innovative – and be recognized for proactively working to reach that goal.”
Among the findings in this year’s Colorado Innovation Report:
- Startup businesses in Colorado fail at an unusually high rate over the first five years. If Colorado merely reached national survival rates for these nascent businesses, it would add more than 3,000 establishments and 35,000 jobs over a five-year period. Once those businesses survive those critical first five years, however, they generate jobs as well as strong returns for both owners and workers at substantially higher rates than the U.S. overall.
- The study affirms Colorado’s reputation for having a highly educated workforce, but that workforce is dependent on the wave of skilled Baby Boomers who came to the state from different areas of the country and are now retiring. The state pipeline to replace the existing talent pool may not be reliable given that in-state high school and college graduation rates are average at best and that fewer educated workers are moving to Colorado.
- As for ideas, while public sector funding for research and development in Colorado remains strong, R&D by private business in the state lags significantly. Nationally, three-fourths of research and development activity comes from the private sector.
- Colorado ranks below the national average in the amount of early-stage capital for startups. However, the state could temper that disadvantage with its large number of community banks and bank branches, which should allow for more relationship lending for innovative investments.
“People need to appreciate the importance of these small establishments,” Weiler said. “We have a high density of small businesses but the youngest, potentially most innovative ones have trouble surviving. If they do survive, they grow jobs, and they grow income for the owners and workers. That’s good for everyone.”
While Colorado remains strong in certain aspects of entrepreneurship, Weiler said the state cannot afford to rely on past success.
“The sweet spot we had with a low cost of living relative to the coasts, great talent arriving – and staying – from all corners, and a lot of easy capital is over,” Weiler said. “It’s going to take more care to think about the state moving forward over the next 10 to 20 years, considering issues like small business survival, the education of our workforce, innovation financing, and research and development overall. I’m hopeful that this report, and ones to follow in coming years, can help us inform the debate.”
Findings from the 2013 Innovation Report will be presented Wednesday from 11 a.m. to 1 p.m. at CSU’s Denver Center as part of Denver Startup Week. Admission is free. The report is available online at http://innovation.colostate.edu/