With the financial world reeling in uncertainty, a sense of fiscal responsibility infused an entrepreneurial event this week that attracted mostly women. Women make up a slight majority of the U.S. population, but female founders are a teeny, tiny part of the venture world.
“It’s a completely fragile market,” said Danielle Shoots, founding partner and managing director of the New Community Transformation Fund in Denver, which is working on a $25 million fund to invest in startups run by founders of color. “You work in what’s called a cash economy, meaning I have to make $1 to spend the dollar. That’s actually going to be a really good thing as you move forward.”
Shoots was part of a Ladies Who Launch Pathways to Capital panel sharing that there is help available to those with a smart business plan who need some startup capital to get to the next level. The Small Business Administration was there. So was the director of a community development financial institution, a type of local lender that is mission-minded and works with founders who may not qualify for a traditional bank loan.
There was consensus that to improve the economy, women and people of color need to participate in starting and growing businesses. This group is largely left out of the venture funding world that has seen too many one-of-a-kind unicorns lose their luster in recent years.
According to PitchBook, a research firm that tracks the capital markets, female founders received just 2.1% of the $21 billion in venture capital invested last year. That rate jumped to 16.3% if you include a founding team with at least one woman.
“We’re going into a time where if we don’t figure this out with this country, we won’t be the greatest world power. And I don’t think we’re giving that up too easily,” Shoots said. “I think we’ll be like, ‘Hey, let the women and people of color in!’ We need more people participating in the financial systems of the United States of America.”
What’s Working will explore this more next week after I wrap up a story on the state of venture funding. Stay tuned.
It may be April Fools’ Day, but it’s no joke that local business leaders are feeling better about the economic future, at least compared with where it has been in the past nine months, according to the latest quarterly survey by the Leeds School of Business at the University of Colorado. The survey asked the 230 executives about hiring plans, industry sales and other expectations for the next three months. Results were at some of the highest levels since the second quarter a year ago.
It’s still not good, though. Dragging down the Leeds Business Confidence Index was how businesses felt about the national economy, which kept the index in “negative” territory, or below 50. At 45.1 overall, the index improved from the past two quarters, but a year ago it was at 53.9. The survey took place before the collapses of Silicon Valley Bank and Signature Bank.
Is a recession on the way? Almost certainly, agreed 15.3% of participants who pegged a recession to happen before the end of June. Most, however, pushed the date to the second half of the year or next year. About 23.7% were “uncertain.” An official U.S. recession, by the way, is when the National Bureau of Economic Research determines that the nation’s economic activity significantly declined for more than a few months. Sometimes, NBER doesn’t call it until months after that moment hits.
“We argue that whether or not we have a technical recession is somewhat immaterial unless we have some sort of a deeper recession based on an unknown,” Richard Wobbekind, senior economist and faculty director of the Leeds Business Research Division, said during the quarterly survey’s presentation. “The question is now what happened in the last couple of weeks with Silicon Valley Bank and Signature Bank failures and whether or not that banking system stress will create a more significant downturn.”
Brian Lewandowski, executive director of the Business Research Division at the Leeds School of Business, added in a follow-up interview by email: “The general sentiment is still negative, and a majority of respondents still expect a recession. That being said, the incremental improvement in business sentiment (especially sales) is interesting in light of the recession expectations.”
Based on what business leaders shared, CU economists shared some updated forecasts for the year:
- Colorado won’t drop to a 2% inflation rate this year, the rate that the Federal Reserve is striving for. But consumer price growth is expected to slow in Colorado to a 4.3% rise in 2023.
- The state will still add more jobs this year, but at a slower rate of less than 2% in 2023. Last year, the state job growth was 4%.
- Incomes are still growing. Per capita income growth grew 7.9% in the third quarter from a year earlier, which ranked Colorado at the top in the nation. Personal income grew 8.5%, ranking Colorado at second in the same period. This year, personal income growth is projected at 7.9%.
- Colorado’s gross domestic product, which is the value of the goods and services produced, grew at an annualized rate of 2.7% in the fourth quarter of 2022.
What could ease the pain of a recession? More jobs
Jobs are still being added in Colorado, albeit at a slower rate, according to the latest government employment reports. Some of that comes from companies that outright move to the state or expand here. This week, that included Intuitive Research and Technology Corporation, which announced plans to expand in Colorado Springs.
The Huntsville, Alabama, aerospace engineering and analysis firm employs 500 workers, but only three in Colorado. It now plans to open an office in the Garden of the Gods Business Park in August and hire 71 engineers and other workers over the next few years. (The company lists six openings in Colorado Springs on its careers page.) If the company meets hiring goals, the state has approved up to $1.35 million in job growth payroll tax credits, according to the state Office of Economic Development and International Trade.
Intuitive Research is the latest in a stream of corporate expansions in Colorado Springs. Many recent announcements were from companies either in defense or semiconductors, which is also seeing a boon as the government tries to attract manufacturers back to the U.S. In February, Microchip Technology said it planned to add 400 jobs at its existing manufacturing plant, while Entegris, which also has a semiconductor materials manufacturing plant in Colorado Springs, committed to 600 new jobs.
Colorado’s workforce is the largest it’s ever been, at 3,217,000 people, according to February data from the state Department of Labor and Employment. The number of open jobs is still unusually high — the monthly Job Openings and Labor Turnover report has Colorado’s job openings rate at 7% in December, which is higher than the 6.7% in the U.S. Before the pandemic, Colorado’s rates were around 3%-4%. This measures how many job openings there are compared to all filled and unfilled jobs.
“The tight labor market is still a notable headwind in Colorado and across the country,” said Lewandowski, with the Leeds School of Business. “Interestingly, Colorado’s reported job growth slowed down to 1.6% in February year-over-year after growing 4% in 2022. Is this real? Job openings remain high, labor force participation is at a record level, participation rates are still fourth-highest, jobless claims remain low, and businesses are reporting a worker shortage.”
There have been layoffs
The local impact of the massive layoffs by coastal Big Tech companies has been harder to gauge because the announcements are coming from out-of-state headquarters. While Google, Facebook, Amazon and others have operations in Colorado, reports of local layoffs are rare (Twitter acknowledged 87 workers were laid off at its offices in Boulder in November).
Lewandowski said it’s likely that Colorado has “less exposure” to the large layoffs, which tend to impact jobs closest to corporate headquarters. Colorado has other concerns, he said.
“I believe our risk is on the growth side — Colorado has benefited from growth of tech, which is (not exclusively) funded by VC/private equity. I think tighter lending and higher interest rates squeeze early-stage investments,” he said. “Notably, there was a decrease in Colorado’s Information employment year-over-year in February, but not in Professional Business Services.”
But there have been layoffs. In recent months, here are a few recently announcements and reports, according to the layoff tracker site layoffs.fyi:
- Bonusly, the Boulder firm with a digital tool to recognize and reward employees, cut 30% of its staff March 9, according to a Denver Business Journal story. Details of the number of job cuts were not shared, but a year ago, the company said it employed 120. The company had received $18.9 million in venture investment in February.
- JumpCloud, a cloud technology firm in Louisville, laid off 100 workers or 12% of its workforce Jan. 18, the company said.
- Palantir, the data analytics software company that moved to Denver in 2020, cut 2% of its workforce, or 75 people, in February, Reuters reported.
- Gusto, the payroll tech services firm with a large office in Denver, laid off 126 people or 5% of the workforce in February, according to a company statement.
➔ Colorado’s tech jobs expected to grow 3.6% in 2023. The annual CompTIA (short for Computing Technology Industry Association) “State of the Tech Workforce” report puts Colorado ahead of the national growth rate of 3%. At 3.6%, Colorado is forecast to add 8,960 net new tech jobs this year, which is less than last year’s 4.3% gain of 10,174 jobs. But since the report relies on the most recent data from last year, the organization said recent economic events aren’t reflected. Here’s how Colorado ranked compared to other states:
- 5th for its concentration of tech workers compared to all Colorado workers, at 8.3%
- 5th for new tech businesses: Approximately 1,622 new tech businesses opened in Colorado last year
- 5th for economic impact: Estimated at $52.6 billion, the tech economy was 12.2% of the state’s economy
>> View report
Take the poll
You’ve heard from business leaders. Now what about actual Colorado consumers? If you didn’t take this poll last week, here’s another chance: cosun.co/ww-economy2023. We’ll share the results next week.
Other working bits
➔ Denver auditor tracks down $743,000 for workers. When the minimum wage increases, some employers don’t keep up. That’s when the Denver Auditor’s office gets involved. In the past three months, the agency recovered $743,000 in unpaid wages to benefit 1,500 workers. That included $40,938 for 49 workers at a local bar after their employer failed to increase their pay to the new tipped minimum, another $24,000 came from a fast food restaurant on Denver’s border that didn’t pay the city’s minimum wage, and $2,850 from a wellness business that advertised jobs for $11.50 an hour (Denver’s minimum is $17.29). The money is returned to workers (here’s a list of workers with checks waiting). Companies for 2023 were not yet available from the auditor’s office, but here’s the list from 2022. Complaints must be made in writing and can emailed to the auditor’s office. >> File a complaint, Are you owed money?
➔ Colorado offering money to business that create work-training programs. The state-funded Work-Based Learning Incentive Program is providing up to $10,000 per small business to cover the costs of developing work-based learning programs. Funding comes from the U.S. Department of Labor. >> Details
➔ Remote workers in decline? In October 2020, 55% of workers worked from home all the time. It was still the pandemic, of course. But the latest rate is 35%, according to a new Pew Research Center survey. Workers are returning to the office, but you could also look at it this way: Before the pandemic, only 7% worked from home all the time. If anything, 41% of workers opt for a hybrid workspace, with some days in the office and other days at home. That’s up from 35% in January 2022. >> Read report
➔ Unemployed union workers twice as likely to apply for benefits. While only 1 in 4 unemployed workers in the U.S. last year applied for benefits last year, union workers did so at a rate of 57%, according to the latest Current Population Survey. Of all workers who didn’t apply, 55% didn’t think they were eligible, while 17% skipped the chore because they expected to start another job soon. Here are the other reasons. >> See Bureau of Labor Statistics report
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