Brad Feld

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Colorado Venture Capital Statistics – Misleading Again

Oct 24, 2005

Well – it’s about 20 days after the end of the quarter and the Ernst & Young / Venture One survey of venture capital funding is out and the Denver Post and Rocky Mountain News feel compelled to comment on it.  I really like Roger Fillion who wrote the RMN article (I don’t know Will Shanley who wrote the Denver Post article), but as I said to Ross Wehner from the Denver Post last quarter, “Who Gives A Fuck?”

Whether the data is right or not, the conclusions are misleading.  Both articles assert that the market for VC investment in Colorado has “grown” over 2004 and that it – according to local VCs – “has definitely gotten stronger.”  But – no one really digs into the data beyond suggesting that through Q3 Colorado firms have raised $469.2m vs. $386.8m in 2004 and that in Q305 Colorado firms raised $131.7m vs. $107.8m in Q304. 

As I suggested last quarter, one deal – Webroot – raised $108m – and most of that was to buy out the founders (is this a VC deal or a private equity deal done by VC firms?).  This quarter, one deal – Replidyne – raised $62.5m – in a well executed late stage deal.  If you leave Replidyne in (it is a VC deal, albeit one that skews the numbers) but take Webroot out, Colorado is actually at $361.2 through Q305, behind 2004!  Interestingly, in the quarter, Colorado saw 13 deals in Q305 and 13 deals in Q304 – that seems equivalent to me (although my logic is rusty: 13=13 is true, correct?)

It’s all about how you analyze the numbers and – in the rush to simply publish that “things are good” or “things are bad” – the papers do everyone a disservice by not really digging into the actual data.  I’d love to see the full list of fundings in Q305 in the articles on the web compared to Q304 with some thoughtful analysis of what is actually going on in the market.  As a local player, it feels “about the same” to me as last year, although I spent two thirds of Q3 in Alaska and the balance of it on the road so I’m a lousy data point also.