Partnership Between Innosphere and IN2 Grows Local Resources
After more than 20 years, Innosphere has learned that “it’s a miracle when a company gets out of the primordial soup of startups to the million-dollar mark,” says CEO Mike Freeman. “And then getting to $10 million takes more than a miracle.”
But the Colorado-based science and tech incubator, a recipient of a 2017 Wells Fargo Innovation Incubator (IN2) Channel Partner Strategic Award, has come up with a variety of miracle-making solutions to this problem. And with the help of IN2, Innosphere is now working on a two-year grant to “Scaleup Colorado.”
As part of a long-term strategy to grow cleantech, the IN2 program, co-managed by the National Renewable Energy Laboratory, doesn’t just fund startups, but the larger ecosystem of institutions that support and train them. That group of 55 institutions, called IN2 Channel Partners, includes prestigious research universities and research labs, and sustainability focused business incubators and accelerators. In 2017, Wells Fargo awarded more than $1 million in multi-year funding to its Channel Partners to address gaps in clean-energy technology development and commercialization.
Innosphere is one of the IN2 Channel Partners. With locations scattered up and down Colorado’s Front Range, Innosphere accelerates the success of high-impact science and technology-based startup and scaleup companies, and its Cleantech and Advanced Materials program continues to support and graduate companies from the program. Its partnership work with IN2 has three prongs: bringing in more local investors, bridging that $1 million to $10 million growth gap, and a specialized program to further develop the Internet of Things startup ecosystem (that took a surprising turn).
Shaking the Aspen Trees
One challenge immediately evident to Colorado entrepreneurs working in commercializing science and technology is that 75 percent of venture capital is based in California, New York, or Massachusetts. Innosphere developed a plan to develop the local venture-cap community, including angel investors and family offices, despite competing investment options.
“Real estate is really hot in Colorado, so that’s what many people are investing in,” says Freeman.
To compete with real estate and to accelerate the growth and exit of Innosphere’s client companies, the incubator founded the Innosphere Fundand mounted an educational campaign (with a road show around the state) to introduce direct investing as a wealth management strategy. Innosphere’s credibility in vetting startups was critical to both the success of the Innosphere Fund and the success of the “Innosphere Investor Network” which is a group of active, accredited investors seeking highly-vetted, investment-ready opportunities in technology startup companies.
Past the First Ten Employees
Innosphere’s second project area addressed the “miracle” of startups going from $1 million to $10 million in annual revenue. Its staff helped startups develop sustainable cultures – reorganizing and formalizing the internal processes of startups passing the watershed mark of their tenth or eleventh employee.
“The nature of founders is that they don’t like structure – but this is the point where you need structure,” said Freeman. Innosphere’s Scaleup Colorado project assisted six new companies through that curve, focusing on the areas of raising capital, financial and exit planning, talent acquisition, operational excellence, and business development.
They Went Looking for Gadgets, and Found AI Instead
Innosphere’s plan for 2018 included developing a cohort of startups working on connected devices – the Internet of Things (IoT) that they imagined would be a counterpart to Colorado’s innovation scene, which is dense with energy-related ventures.
In doing this, they found artificial intelligence (AI) to be the emergent theme in local innovation. In startup after startup, “AI was the wrapper for everything,” says Freeman. Therefore, this year Innosphere will be mounting programming and support work around AI – specifically, AI for industrial uses like transportation, energy, agriculture, and water. A strategic coincidence: these are the same areas into which IN2 is expanding or planning expansions.
What does this look like locally? Two examples of the last incubator cohort offer examples where AI sorts through datasets far too large for human analysis: one, an energy-arbitrage startup for commercial real estate, and the other in waste water processing.
Catalyze, a Boulder startup in Innosphere’s latest class, uses data analytics enabled by machine learning to design solar plus storage systems for commercial real estate holders.
Kando, an intelligent waste water monitoring service, uses AI to harvest usable data from wastewater devices. Like Catalyze, there is an IoT component, but AI was really the new enabling technology.
As its IN2 work continues, Innosphere will run a customized AI incubation program, sharing best practices from leading AI research programs, and working with utilities and established companies to find new opportunities for AI to improve business processes. Innosphere’s State of AI program kicks off later this year and, if all goes well, participating companies will likely make it out of the soup.