Technology, Innovation, and Growth in Colorado

Financial Indicators

Research & Development Financing and Performance
Federal R&D Financing
Colorado Venture Capital Investments

Research & Development Financing and Performance

Summary

The degree to which Colorado industry and institutions conduct research is an indicator of the capacity of the state to support technical growth and innovation. Research performed by Colorado industry is funded internally, or by government contracts. Research performed by Colorado universities and colleges is funded through a combination of federal, state and local government, by industry, by universities and colleges and by nonprofits. In 1995, Colorado industry provided 62% of R&D financing, while the federal government funded 34%.


R&D Financing Critical to Colorado Firms

Two-thirds of Colorado companies responding to the 1999 survey indicated that they conducted R&D activities during 1998. At the low end of the scale, one company reported 1998 R&D expenditures of $1,000, while at the upper end one firm invested $100 million. The median expenditure for R&D was $100,000.

The most prominent form of funding was internal funding. Slightly more than 94% of the companies that conduct research use internal financing, as well as other sources, to fund R&D activities. Slightly more than 70% of these respondents indicated that they fund R&D activities without external assistance. Almost 17% of the companies that conduct research fund R&D through industry partnerships, and slightly more than 10% fund R&D through either Small Business Innovation Research (SBIR) or Small Business Technology Transfer Research (STTR). About 8% use other federal sources, and only 2% fund R&D through universities.

Technical product and process development was a critical factor in the future growth of almost 50% of respondents. Finding financing for R&D activities was identified as an important factor in future success by almost 40% of responding firms and represented a potential barrier to growth for almost half of these companies.

 

Colorado Performance Indicators

In 1995, Colorado industry, government, colleges, universities and nonprofit institutions conducted research supported by a total investment of $2.6 billion. As shown in the chart above, industry performed 72% of all research conducted in Colorado in 1995. This represents $1.9 billion in research investment, of which $1.6 billion was financed by industry and the remainder by the federal government. The percentage of overall R&D performed by industry in the state is about the same as the national percentage.

 

 

Source: National Science Foundation Division of Science Resources Studies, 1998.


Universities and colleges accounted for 15% of R&D activity, with a total of $393 million in expenditures. The majority of this amount is federally funded at $260 million. This is slightly higher than the national average of 12%.

Based on the 1995 expenditure amount, the federal government conducted only 6% of research in the state, federally funded research and development centers (FFRDCs) performed 5%, and not-for-profits 2%.

 

  

Federal R&D Financing


Summary

Federal R&D is an important source of financial support for advancing knowledge and innovation in Colorado, contributing about 34% of total R&D expenditures in 1995. This amount of federal investment in Colorado research is an indicator of the technical capability of Colorado's industry and research institutions to meet national research objectives.


Colorado Performance

Nationally, federal R&D obligations show a small but steady increase since 1992. In contrast, federal funding in Colorado evidenced a sharp decline in 1992 and 1995. Now, over the last couple of years it is slowly increasing. In 1990 Colorado received $1,888 million in federal funds, moving to a high in 1991 of $2,694 million and a low of $951 million in 1995. In 1997, federal research funding in Colorado was $1.3 billion, with $608 million supporting research performed by industry and $269 million supporting research at colleges and universities.

 

 

A total of $1.281 million in federal funds were obligated to Colorado-based R&D activities in 1996. As illustrated in the chart, the primary recipients of federal R&D funds in Colorado in 1996 were industrial firms, with 50.2%.

Universities and colleges were the next major recipients, with 17.7%, followed by intramural activities at 14% and federally funded research and development centers (FFRDCs) with 13.9%. Not-for-profit institutions received only 4%.

 

  

Nationally, the distribution of federal R&D funds varied slightly in 1996. Industrial firms still received the largest share of funding at 45.7% and universities and colleges with 17.8%. However, intramural activities received 24.1%, and not-for-profits received 4.1%. Federally funded research and development centers received 8%. State and local governments received 0.3% which is the same as the Colorado percentage.

 

 

SOURCE: National Science Foundation, Division of Science Resources Studies, 1998.


 
Colorado Venture Capital Investments


Summary

Venture capital sources carefully select and invest in companies with high growth and revenue potential. Nationally, of the $14.3 billion invested in 2,860 deals in 1998, technology-intensive companies received about 84% of the invested dollars, of which e-commerce and enterprise software companies were major beneficiaries. Venture capital investments are a measure of the state's competitive position as viewed by the investment community.


Colorado Performance

The chart below summarizes the investments made in Colorado between 1995 and 1998 by industry as categorized by the venture capital community. As with national statistics, the majority of Colorado investments were in technology fields, led by communications, and software/information industries. In 1998, venture capital investments in Colorado totaled $518 million, or 3.6% of the national total. Technology-based investments far exceeded other industries both in total dollars invested and in the number of investments. A total of 46%
of 1998 investments
were in the communications industry.

Source: Price Waterhouse, National Venture Capital Survey, "Money Tree Survey, Colorado Edition."