Cherwell investment results in best Colorado Springs venture capital quarter total since 2000

April 12–A $50 million investment in Cherwell Software LLC in February was the only venture capital invested in a Colorado Springs startup during the first quarter, but it was enough to boost the local total for the period to the highest for any quarter in nearly 17 years and was the biggest investment in any Colorado company so far this year.

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The deal was the largest in the Springs since email provider USA.Net received $60 million in March 2000; that deal didn't make the list until the second quarter and total for the first quarter of this year is the largest since funds invested $67.6 million in local firms in the second quarter of 2000, according to the MoneyTree Report from accounting giant PricewaterhouseCoopers LLP and technology research firm CB Insights. Even if no other local startup receives venture funding this year, the total for the year would still be the most since such investments totaled $66.6 million in 2001.

Cherwell will use the $50 million from investment giant KKR to make acquisitions and expand its information-technology service management product line, which helps large organizations get more out of legacy software systems that tend to stop working when updates clash with previous custom features.

Cherwell's deal was the largest of 43 venture investments made in Colorado startups in the first quarter totaling $344.5 million, which was nearly double the total for the first quarter of 2016 and more than half of the $686 million invested in Colorado companies during all of last year. Nearly three-quarters of the first quarter total came in 10 investments of more than $10 million, including $40.7 million in Boulder pharmaceutical company miRagen Therapeutics and $33 million in Englewood supersonic jet developer Boom Supersonic.

“This is great for Colorado Springs,” said Rob Ward, a PricewaterhouseCoopers audit partner in Denver. “There continues to be (growing) interest in Colorado in the last couple of years, focused on the Denver–Boulder corridor. Hopefully with the growth of the military and opening of the National Cybersecurity Center, we will see interest growing in the Springs and the rest of the state.”

Nationwide, venture funding recovered somewhat in the first quarter from a weak fourth quarter to 1,104 deals totaling $13.9 billion, but the total was down 11.6 percent from the same quarter in 2016 and is the second-lowest quarterly total in the past 2 1/2 years. Nearly 20 percent of the total went to five deals of $300 million or more, including $900 million to Grail, which focuses on cancer detection; $500 million to Social Finance, which helps alumni lend to students at their alma mater, and $447.9 million to online lodging giant Airbnb.

“We are seeing the U.S. funding environment slip into its new normal. 2015 was irrationally exuberant and the 2016 pullback was a reaction to that,” Anand Sanwal, co-founder and CEO of CB Insights said Tuesday in a news release. “However, 2016 was more of a soft landing than a wholesale popping of the bubble which pundits have been predicting since 2009.”

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