INterview with Mike Freeman, Rocky Mountain Innosphere CEO

By: InnovatioNews Friday June 20, 2014 0 comments Tags: Innosphere, Mike Freeman


Mike Freeman is CEO at the Innosphere, a 501 c3 technology incubator headquartered in Fort Collins with more than 40 client startup companies working in the cleantech, bioscience, digital health and software sectors.

Freeman became Innosphere's CEO in March 2012. He previously served as chief financial officer for the City of Fort Collins and president of Local Government Solutions Group, a consulting company focused on the unique needs of local governments.

Q: Innosphere recently announced it was establishing a satellite office in Denver. At about the same time, Denver-based Galvanize announced it would establish a Fort Collins office. Does this indicate startup incubation in Colorado is becoming more competitive?

A: Not more competitive, just more differentiated to meet the unique needs of entrepreneurs. Innosphere is one of two science-and-technology-focused incubators in the state, the other in Colorado Springs. There are several organizations that also work with startups but tend to have a more focused industry sector approach, including Galvanize, TechStars, Boomtown, the Hub, and others. These organizations are sometimes referred to as accelerators - companies gain access to their program through a competitive process and typically they are in the formal program for 90 days working on meeting short-term milestones and receiving top mentor/advisor input - generally in the mobile/digital sector.  Innosphere focuses on science-and-technology-based companies and deliberately does not serve startups in the digital/mobile. We complement each other, we don't compete, yet we offer differentiated services for startups.  Galvanize in my estimation will help Northern Colorado build out its early digital startup community. Innosphere's office in Denver will focus on working with digital health startups that are FDA regulated (i.e connecting a medical device with a smart device) or they are building enterprise software to address secure communication needs between patients and doctors, or lastly software aimed at improving patient records, or improvement of key business processes for hospitals and/or insurance companies. Our partnership with the PrIME Digital Health Collaborative and INDUSTRY - Denver provide the unique platform for Innosphere to launch into this sector and attract high-quality companies in the digital health sector.

Q: Last year, Innosphere opened a new office in Golden at the Colorado Center for Renewable Energy Economic Development (CREED) on the campus of the National Renewable Energy Laboratory (NREL). What have been and will continue to be the benefits to Innosphere of having an office on the NREL campus?

A: When everyone literally was running away from cleantech as industry, we doubled down and partnered with NREL and it was great move for Innosphere. Our partnership with NREL has matured and blossomed in the past year and the cleantech program has grown significantly. In the last few weeks, NREL hosted an investor forum and more than 50% of the participants at the event were in Innosphere's pre-incubation program, in process to applying to be a client, are a client, or are a graduate of the program.  Innosphere is building a cleantech program of national significance in Colorado with the support of NREL and with our key university partner, Colorado State University. This summer, Innosphere will launch a new group of cleantech companies from our growing program with the Canadian Consulate in Denver with the specific objective of supporting the company's application into the top cleantech investor event hosted by NREL called the Industry Growth Forum in the fall.

Q: Innosphere is partnering with the CSU Energy Institute to manage startup incubation at the new Powerhouse Energy Campus in Fort Collins. How will both the Institute and Innosphere benefit from this partnership?

A: Related to the program expansion in 2013 in cleantech with NREL, Innosphere will continue to expand the cleantech program through the partnership with Colorado State University's Powerhouse.  The Powerhouse facility offers space for startup companies to work within - this is new.  Also, the facility has dramatically expanded test-and-demonstration facilities that will draw in top startup companies into the Powerhouse ecosystem. Our plan with Powerhouse is to build on the Innosphere's ability to attract companies into the incubator program and expanding the program overall to best utilize the Powerhouse facility, faculty and student resources, and incubator space. Simultaneously, CSU Ventures and Innosphere have launched a new effort to reach into the University at an earlier stage to more quickly identify potential technologies of interest and startup possibilities. This new program has allowed CSU Ventures and Innosphere to develop a list of about 10 key technologies being developed that are being specifically targeted for early commercialization.

Q: One of the things Innosphere prides itself on is being able to help its startup clients obtain access to funding. Last year, Innosphere launched a very unique Early Stage Loan Pool.  Home State Bank pledged $250k, First National Bank pledged $300K, and the Colorado Enterprise Fund contributed an additional $250k to make available to Innosphere client companies as early stage debt.  The Colorado Enterprise Fund manages the application and underwriting process and manages the loans. The local banking community is stepping up to help startups, but is this anywhere near what is needed to do the job of providing the funding that is crucial to getting early-stage startups up and running?

A: Innosphere's strategic bank partners really stepped up and created a very unique product for client companies in 2013. Banks play a major role in pumping growth capital into companies, but have to inject capital at specific times in the development of the company that meet regulatory requirements. Most people don't realize that banks cannot invest in early-stage ventures and therefore think that banks are not being responsive to startup needs.  Creating a solution that is funded through our bank partnerships -- but is targeted toward early startup ventures -- was the objective.  Our bank partners and the Colorado Enterprise Fund collaborated to create this early-stage debt pool of funding that has been highly utilized to date.

The big issue we see at Innosphere is the gap in available funding in the early stage of the company that is needed - often called seed funding. This is true risk capital and is very challenging to secure. Investors as this stage are often called friends and family investors, or companies may utilize grant funding if they are university or federal lab-based. Creating a more consistent availability of seed funding is a huge need in Colorado. Angel investors and the state's new Advanced Industry program are shining lights in the ecosystem and both are providing solutions for startup companies. The angel community and state funding under the new Advanced Industry program are beginning to provide more consistent capital sources for companies to access. More significant investments in growth capital are also challenging for Colorado companies, often called venture capital. Venture capital in Colorado is predominantly focused on software startups, which makes sense given software ventures ability to scale at a rapid pace meeting investor expectations for returns on capital. Real challenges have emerged for companies in cleantech and biosciences in the state, post recession.  Many companies we work with are having to look outside of Colorado for funding in these industries. There appears to be no short-term solution for addressing the challenge of limited growth or venture capital in Colorado for certain advanced industries.

Q: Innosphere is marking its 15th anniversary this year. It has gained a statewide reputation as a premiere startup incubator with its deep bench of mentors, funding assistance and strong community support and relationships. In 2013, Innosphere had a record-breaking year with its most client companies ever, $35.3 million in grant, angel and equity funding raised and the creation of 297 new jobs. Is Innosphere hitting its stride, and what lies ahead for the incubator in 2014 and beyond?

A: The Innosphere Board and staff have worked to develop a aggressive, but achievable, strategic plan for 2014 and 2015 - to keep building momentum and grow economic impact. Our plan is to keep doing what is working and continue making improvements in our core processes, programs and services. For example, we have completely revamped our onboarding process for new companies and already launched that this year.  Our calculated expansion into Denver and the focus on an industry area in Digital Health where there are few to no other providers working with startups in an incubator capacity is a good example of how we grow in a calculated but strategic way. Further, building collaborative relationships with organizations like th PrIME Health and Industry Science and Health boost the speed at which we can innovate and bring substantial new resources to the startups we support.

Building on the success of the cleantech program is also a high priority. Growing the relationship with NREL and CSU Powerhouse pose immediate opportunities to continue to expand the overall program and build lasting incubator programs that build scale around a growing industry. Lastly we have focused heavily on capital access in the past 18 months, very much hoping that Innosphere could drive new solutions for addressing the challenge of securing growth capital. While these attempts were ultimately not successful in launching new venture capital funds - our goal - we did significantly advance the capital access models which allowed us to see more clearly that in the balance of 2014 and into 2015 our near term focus has to be coordinating more aggressively with Angel investors to promote Innosphere companies and opportunities.  Better supporting the Angel groups to create syndicate or group investments, and greatly building out our corporate strategic investor network to foster introductions to companies and foster potential exit opportunities for clients provides the core of the capital access strategy for the balance of 2014 into early 2015.

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