Is Boulder losing its startup mojo?

Boulder County historically has been among the top spots in the country when it comes to launching startup companies. From a business standpoint, what’s not to like? Financial-news website 24/7 Wall Street recently ranked the Boulder metropolitan statistical area — encompassing Boulder County — No. 1 nationally in terms of most-educated residents.

Other stats are equally impressive: Boulder has been named the No. 1 Best Place to Live by U.S. News & World Report for two years in a row, and CrowdSpring named the city among the “15 Best Cities in the United States for Startups and Entrepreneurs” for 2022.

The area also ranks highest in the entire western region when considering personal income, and with more than 300 days of sunshine annually, even the weather is enticing.

But some observers see dark clouds looming over the Boulder Flatirons, with stagnant population, workforce shortages, high housing prices and the high cost of commercial real estate negatively affecting startups’ ability to launch and to hire talented workers.

While Boulder continues to rank highly in some lists, it has fallen in others, or is not represented at all:

• Inc. Magazine ranked Denver No. 3 in the nation for entrepreneurial activity in 2021, while Denver and Colorado Springs made the publication’s list of top 50 U.S. ‘Surge Cities,’ with strong startup ecosystems. Boulder was nowhere to be found in those rankings.
• Another recent list of 11 Best Cities for Startups from StartupSavant.com put Denver at No. 3, while making no mention of Boulder.
• Real estate investment firm Roofstock published data on U.S. cities with the most startup business activity. For “small” metro regions, Boulder comes in at No. 7 nationally, in a virtual tie with Fort Collins and lagging behind Greeley, which was ranked fourth. The data also showed higher startup formation rates for both Denver and Colorado Springs.
• Moving.com left Boulder off its list of the 8 Best Cities for Startups.
• Embroker left Boulder off its list of 10 Cities for Lowest Startup Costs.

Such slights have caught the attention of some in the business and economic-development community.

“A  few years ago, we were at the top or near the top of every list of leading startup communities,” said John Tayer, president and CEO of the Boulder Chamber, “and we notice that we’re starting to creep down those lists. And that is an indication that some of the key factors that play into what makes a quality, supportive startup and entrepreneurial environment are beginning to get the attention of not just the folks that put those lists together, but even more concerningly, are they beginning to actually impact those who are making decisions about where they may begin to advance their creative endeavors.”

Many rankings include a heavy dose of subjectivity, but objective data also cause concern.

Gary Horvath, a Broomfield-based economist, noted what he sees as a possible problem in the latest report from the U.S. Census Bureau. While Boulder County enjoyed fairly steady population gains from 2010 to 2017, the numbers leveled off between 2018 and 2020, increasing by less than 1% overall.

The city of Boulder’s population, meanwhile, has been a virtual flat-line since 2015. To Horvath, that spells trouble.

“Everything is driven by population,” he said. “If we don’t have population, we don’t have a workforce. It’s that simple.”

And one of the problems in Boulder County is available space. “It’s kind of landlocked, which is something I think you can’t overcome,” he said. “There’s just not a lot of room to expand. There’s still going to be growth, but it won’t be the exceptional growth you see in other areas,” such as Adams, Douglas, El Paso, Larimer and Weld counties.

But while Horvath points to stagnant population as a problem, Erick Mueller, executive director of the Deming Center for Entrepreneurship at the University of Colorado Boulder’s Leeds School of Business, said he hears complaints about the area being overpopulated.

“Some of the conversations I’ve had with startup founders is a concern about overpopulation — is the charm maybe fading a little bit about this amazing mountain town nestled in the foothills, are we getting a little too crowded and becoming the next Silicon Valley in some of the negative ways in terms of congestion and overpopulation and a tremendously high cost of living that comes with that?” he said. “But in working with a lot of companies in Boulder County, they’re not seeing the slowing of the population as an issue, other than how that plays into trying to attract talent.”

That high cost of living is a concern shared by many community leaders.

“I think a lot of the jobs are going to go where people can find houses, so housing is an issue … and it’s becoming unaffordable (in Boulder County),” Horvath said. “And that’s not going to change.”

Combining the city’s growth restrictions with high demand, and now a heightened housing crunch brought on by the recent Marshall Fire, makes for a perfect storm of skyrocketing real estate prices. According to Homes.com, the Boulder market is the most expensive on the Front Range, with the average price of a house for sale sitting at just less than $1.2 million.

And the latest numbers from Information and Real Estate Services LLC, the Loveland-based multiple-listing service for the region, point to a continued escalation of housing prices:

• Boulder median sale prices for single-family homes increased 28.3% year over year in February, with the 2022 median at $1,587,450 and the 2021 median at $1,237,000.
• Longmont recorded a 17.9% increase, from $509,000 in February 2021 to $600,000 in 2022.

Mueller acknowledges the problem. “It’s tough because housing is tight, it’s expensive, and people are having to move two or three concentric circles away from Boulder to be able to afford something,” he said. “I think we just have to be deliberate about it as a community … we need to be creative in how we support the middle-class worker to be able to live and work and enjoy Boulder County.”

Cost of housing influences the rankings and thought process of would-be entrepreneurs, Tayer said.

“That’s why we as the Boulder Chamber are very focused on making sure that we supply a diversity of housing, that we make sure that our commercial spaces have the flexibility to adapt to new industry models and to accommodate new entrepreneurial ventures,” he said.

Scott Sternberg, executive director of the Boulder Economic Council, an arm of the Boulder Chamber, said the BEC is doing what it can to help.

“As businesses grow, their access to all of the different aspects of a workforce that are required to run a business becomes a challenge, and housing is an area that is of concern. To that point, the Boulder Chamber has formulated the “Boulder Together” program, and one of the key elements is workforce housing, and we’re very active in consolidating and convening the community to identify issues that are relevant to the local businesses and then look for ways that we can improve the situation, either through advocating for more affordable housing or working collectively with the city to enhance our ability to have a vibrant workforce here.”

But a search of online resources shows just how tight the affordable-housing market has become. The Boulder Housing Partners website lists three apartment projects in development that will provide a total of 373 units. Thistle, a nonprofit organization working to preserve affordable homes and rentals in the county, has 25 current listings, while the city of Boulder’s Affordable Homes Program shows just four.

And as the workforce disperses, it follows that transportation needs to be addressed. “Workforce mobility … is a key element,” Sternberg said. “Before the pandemic we had anywhere from 60,000 to 70,000 commuters coming into work in Boulder every day. Now these reduced work schedules in the office and some RTD challenges have impacted the transportation network. We recognize the fact that we have a very important startup role in the state, so anything we can do to enhance our ability to create these viable businesses, we’re doing.”

Horvath questions the local infrastructure. “Is [U.S.] 36 adequate for commuters? Well, the improvements they made to it have helped, but I guess we’ll find out. If everyone starts working back in the office, we’ll see what happens,” he said.

Horvath raises another issue revealed in the census data — less ethnic and racial diversity. Boulder County’s white/non-Hispanic population, at just above 77%, is substantially higher than both national (60.1%) and state (67.7%) shares.

“Diverse means diversity of thought, diversity of gender, diversity of race and ethnicity, all that. But the population in Boulder just isn’t diverse,” he said, “which is crazy because you’ve got the university there, it should be an extremely diverse town. I think the studies have shown that when you have companies that are more diverse you’re going to have companies that have better ideas and are more profitable.”

Sternberg agrees. “There have been concerns around the diversity of the population. The chamber is a nexus for exactly those kinds of interactions … We have executed programs that are in conjunction with, for example, the Latino Chamber. We’ve also had programs where we highlight Black-owned businesses through our Equity Amplification program, so in many ways, the conversation around diversity begins with conversations around the challenges that we face. We feel the chamber gives these issues visibility to both policy makers and the community at large so we can understand how we go forward.”

Another possible threat to Boulder County’s booming startup and innovation economy is competition from its neighbors, including Denver and communities in Northern Colorado.

“One of the things, looking forward, as the state has grown, it has diluted the importance of Boulder,” Horvath said. “That’s not a negative thing, it just means there are more places businesses can go.”

Horvath sees all of this as a natural progression. “Thirty years ago, Boulder was a business hub, and now that hub is more regional as opposed to being just Boulder … and regional economies are important.”

Sternberg said an expansion of the region’s entrepreneurial and startup infrastructure is a plus, crediting the Metro Denver Economic Development Corp.’s Code of Ethics, which encourages cooperation among communities.

“We collectively work together to develop the (Metro Denver) region first, so we strongly believe that this way of working together across municipalities has been directly responsible for the holistic growth of the region,” he said. “For instance, the aerospace industry is very strong in Colorado … We recognize that there are assets like Ball Aerospace, like Lockheed, there are (Northrop) Grumman offices here in Boulder but also facilities in Colorado Springs and Littleton. This all aggregates up to a healthy economy, and so recognizing our roles and working together to ensure that we’re telling the right Colorado story, the right metro Denver story, is something we participate in under this code of ethics.”

Despite such speed bumps, perhaps the area’s biggest asset when it comes to the startup and innovation economy remains the abundance of federal laboratories, as well as the University of Colorado Boulder. The Harvard Business Review lists investment in institutions of higher education as the No. 1 way to drive economic growth, noting how they act as engines of innovation and job creation.

“I think CU is critical to the ecosystem,” Mueller said. “One of our secret sauces as a university is the really great connections and the bridges we have with our local community. Business leaders come in to guest lecture our classes, they mentor our students … it really is this collaborative spirit in Boulder, and those experiences make a natural path for students to stay here and work and start their career here after they graduate.”

Sternberg also identifies the university as one of the driving forces behind Boulder’s innovation economy. “We are a high-intelligence- and knowledge-based community, and, of course, that is impacted by the university. We always have concerns around access to talent, at all strata of employment, but we have a steady pipeline of Ph.Ds and engineers that come out of the university.”

And the area has continued to attract venture capital. CU Boulder’s Leeds School of Business measures the health of the state’s business economy annually and noted in its 2022 outlook that “… the high concentration of advanced technology and entrepreneurial activity in Boulder County continues to fuel venture capital investment in local early-stage companies. According to data from CB Insights, Boulder County venture capital investments increased from $483 million in June of 2020 to nearly $970 million in June of 2021. Venture capital funding received by Boulder area companies represented 24% of the state total.”

Mueller doesn’t expect the venture-capital well to dry up any time soon.

“I see it continuing for a number of reasons,” he said. “First, the development of the ecosystem will continue to just get richer and richer, we’ve got amazing CEO talent that doesn’t like to be on the sidelines so they’ll continue to build ventures … we’re getting talent from Silicon Valley and New York and Chicago who are choosing to relocate to Boulder County. Second, people aren’t going to leave Boulder once they’re here, it’s an amazing place, so we have really great talent that VCs want to invest in and a lot of CEO talent that VCs will back to start their next venture. So I see that trajectory continuing moving forward, I haven’t seen any signs of it slowing down in that regard.”

But Tayer said Boulder must address systemic problems for such trends to continue.

“We recognize that entrepreneurship and innovation are at the core of what has been a successful, vibrant economy, not just for Boulder, but for our state,” Tayer said, “and we need to continue to make sure that we are able to use all of the rich assets that we have in technology development, in the education attainment of our population, is allowed to then develop into continued entrepreneurship and innovative ventures.”