Denver-Area VC Funding Declined 52%, But Life Sciences, Aerospace Offer Hope For Rebound
Total venture capital funding in the Denver-Boulder market declined by roughly 52% year-over-year through the third quarter to $1.6B as the tech industry waded through economic headwinds like high interest rates and stubborn supply chain bottlenecks, according to new data from CBRE.
The Denver area's declining VC funding followed a seismic 2022 when the state captured about $3.5B, driven primarily by investments in the tech sector. Those investments ultimately helped some tech companies afford to lease office space, but leasing activity among those companies has declined from roughly 40% of leases signed in the metro area to about 16%, CBRE data shows.
Despite the decline, the report also suggests that the market’s aerospace and life sciences sectors seem poised to grow, especially as they adopt more artificial intelligence technologies.
“AI will continue to account for a growing share of tech investment and likely be a primary catalyst of the sector’s rebound in VC funding,” the CBRE report says. “Colorado AI companies have seen a nearly tenfold increase in VC funding since 2020 compared to the total from 2015-19.”
Denver-Boulder’s life sciences industry is one of the strongest in the country, thanks to the market’s strong talent pipeline, low vacancy rates and burgeoning tech sector, experts told Bisnow last summer. The market’s aerospace sector has seen similar growth as new product categories like classified spaces as a service have emerged.
VC funding reached a five-year low nationwide, according to global consulting firm KPMG. One reason for the decline is that VC funders are taking more time to ink deals as macroeconomic conditions paint an uncertain picture.
“Many VC investors took more time to evaluate deal opportunities, conduct additional levels of due diligence, and identify companies with well-defined paths to profitability,” the KPMG report says. “VC investors also prioritized companies within their own portfolios during the quarter, spending more time on the ground with them to help them improve their operations and financial position.”
CBRE found that the Denver market has runway to grow as life sciences and aerospace companies in the market attract investor interest. Life sciences and aerospace companies combined to receive 41% of the total VC funding through Q3, according to CBRE data. That is equal to the amount that the tech sector received over the same period.
Life sciences companies in Denver-Boulder attracted 186% more VC investments through Q3 2023 than they did at the same time in 2022, while aerospace and defense contractors saw their VC investment total shoot up by roughly sixfold. On the other hand, tech VC funding dropped by 76% year-over-year in the first three quarters of 2023.
The market’s overall strength also seems to be benefiting early stage life sciences and aerospace startups more than established companies, CBRE’s data suggests. About 55% of the $1.7B of VC funding companies in the Denver area received through Q3 went to early stage startups like Louisville’s AMP Robotics, which led the charge with a $180M raise during the year. Early stage startups attracted 40% of VC funding in Denver-Boulder in 2022.
