The Rise of the Fintech Industry in Colorado
A Bay Area fintech startup is setting up shop in the state
Colorado will soon welcome Robinhood, a Bay Area financial technology (fintech) startup, to its growing software and technology industry, following the approval of $9 million in job growth incentive tax credits by the Colorado Economic Development Commission (EDC) in September.
According to Michelle Hadwiger, deputy director of the Colorado Office of Economic Development and International Trade (OEDIT), the state rarely hands out these types of incentives.
Robinhood is a brokerage firm that offers “commission-free trading of stocks, ETFs, cryptocurrencies and options through a mobile app,” according to Forbes. The firm has six million customers and was valued at $5.6 billion as of February 2019. With this incentive, Robinhood is expected to create as many as 791 jobs over an eight-year period with salaries averaging $81,722 annually. The Denver Post reported the company will set up a temporary office in Denver while it looks for a more permanent space in either Denver, Douglas County or Arapahoe County. The office is expected to be Robinhood’s second largest location after its California headquarters in Menlo Park.
Fintech companies help businesses and investors manage their financial operations, including billing needs, project-based financing as well as investments by utilizing specialized software and algorithms. Built in Colorado, a resource for Colorado startups and technology companies, estimates that there are 146 fintech companies in the state, 13 of which are Colorado-based, with total funding reaching $698.6 million.
A report by the Colorado Office of Economic Development and International Trade (OEDIT) shows that the state ranks fifth in startup activity, with Fort Collins-Loveland, Boulder, Denver, Colorado Springs and Grand Junction consistently ranking among the top 10 for high-tech startup density. The same report highlights that “Colorado’s tech sector accounted for 14% of the states GDP in 2017, the fourth largest share in the U.S.”
Funding, too, is abundant for Colorado tech. Between January and August 2018, the information technology sector in the state raised $958 million in venture capital and private equity. Of this, $68 million came from state investors. Furthermore, fintech accounted for 18.3% of the funding raised, following business-to-business (B2B) services at 22.2%. Edtech and healthtech accounted for 10.4% and 9%, respectively. In the Denver-Aurora metro area alone, fintech venture capital fundraising reached $29.5 million last year, according to figures cited by Forbes Finance Council.
“With all the investment pouring into the region, it’s no surprise that Colorado has become a hidden gem for talent and is quickly becoming one of the nation’s top places for job seekers,” says Bethany Parker, Forbes Finance council member and VP of fintech company Xero’s business platform in the Americas. “With Denver’s established tech presence, the city has plenty of talent and leadership for fintech companies to choose from.”
Colorado's Growing Software Industry
Currently, there are as many as 14.4 million direct and indirect software jobs in the United States, an increase of 7.3% since 2016, with a total value-added gross domestic product (GDP) of $1.6 trillion and direct value-added GDP of $845 billion, according to the latest job growth and GDP report by Software.org: BSA Foundation. Research and development (R&D) investments made by software companies are estimated to be around $82.7 billion, accounting for 22.1% of all domestic business R&D in the United States.
In Colorado, the number of jobs created by the software industry has increased by 25.1% since 2016 to 194,697 jobs. This equates to a direct value-added GDP of $20.4 billion. As much as $1 billion is invested by software companies R&D. This investment accounts for 28.6% of all domestic business R&D here in Colorado. These numbers represent an increase of more than 10 percent over a three-year period.
While California was ranked the most innovative economy in the country earlier this year, followed by Massachusetts and Washington, Colorado was the only landlocked state to rank as a top 10 innovator, according to Bloomberg’s 2019 U.S. State Innovation Index. This index looks at “research and development intensity, productivity, clusters of companies in technology, ‘STEM’ jobs, populous with degrees in science and engineering disciplines and patent activity.”
Job creation has meant that unemployment rates in Colorado and the U.S. have remained at historically low levels of 2.9% and 3.7%, respectively. The state economy is expected to continue to expand at a more moderate pace through the end of the year, according to the Colorado Legislative Council Staff September 2019 Economic and Revenue Forecast. Governor Jared Polis’ Office of State Planning and Budgeting issued similar forecasts of moderate economic growth compared to that of the previous two years.
Sara Farr Guy is a writer and editor based in Colorado Springs. She is a recipient of the Edward R. Murrow Press Fellowship, and former public broadcast journalist as well as a journalist and editor for a number of international publications, including Macau Post Daily, Macau Daily Times and Macau Business.