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Freeman’s Priority: Access to Capital

Northern Colorado Business Report, Steve Lynn – Mike Freeman, CEO of the Rocky Mountain Innosphere, finally has taken control of the organization that he helped build as chief financial officer of the city of Fort Collins.
Freeman, who engineered the financial deal for the Innosphere’s new building, has spent the last few months as a CSU Ventures consultant. He had not been able to start immediately at the Innosphere because of an ethics law that prohibits government officials from being employed with private-sector groups in which they were involved in financial dealings within six months.

Now, Freeman appears to be inheriting a solid operation that has benefited from the commitment of Innosphere staffers and board members. But he knows he has more work to do.

Freeman has already taken steps to further develop the organization. With the departure of the Innosphere’s chief operating officer, he has hired Northern Colorado financial services veteran Doug Johnson as vice president for capital access.

Freeman no doubt will draw on his public and private-sector background and four years as an Innosphere board member to aid clean-energy, technology and scientific startups at the Innosphere. His main focus in the coming months will be focus in the coming months will be securing capital for entrepreneurs.

Question: What qualifies you for the position of chief executive officer of the Innosphere?

Answer: I’ve not put together a technology startup. In this case, that’s OK because the skill-set that’s needed here isn’t necessarily being a successful entrepreneur.

This organization in a lot of ways is entrepreneurial. Frankly, I feel like some days it’s as much of a startup as any of the companies we’re working with.

I think what I’m bringing to the table is really strong management skills, a lot of financial experience, fundraising and strategy.

I think in a nonprofit environment, you have to have all those components. We have phenomenal board members, entrepreneurs, advisors, mentors. We’re flooded with great talent.

We don’t need an entrepreneur sitting in this role. What we need in this role is someone who understands how to make the organization successful, how to align it effectively with the clients and what they need and execute.

It’s all about getting stuff done and that’s what I’m good at. I have run a couple companies, but they weren’t product-based; they were consulting.

I understand business development, marketing, finance in a small-company environment, so I can relate to the companies in that regard.

Engineering a product and getting it to market I personally haven’t done, but we have plenty of people who have had that experience.

Really the balance of the prior experiences I bring to the table plus the phenomenal people in our SAGE program, our board members; it takes all of us to effectively run this organization.

Q: What are your plans for the Innosphere this year?

A: Being the former chair of the organization for a number of years, this is not like coming into a new organization. That’s great because I have a pretty good handle on the things we need to work on.

The two main priorities this year are access to capital and doing some really novel and unique things to address that issue for the companies that we work with.

Second is building a tighter relationship with the client companies we have.

Q: How are you going to accomplish those goals?

A: Access to capital is and has been a key issue for all the startups in this region.

We recognize that we have to address this issue in an environment where we’re still recovering. What we’re doing is putting some unique financing tools in place that between CSU and the Innosphere will control access to capital on behalf of a handful of companies we’ll actually invest in.

We’re putting what’s called a “donor pool” together. We’ve committed with CSU to collectively raise $1 million.

That money will be used at that seed stage with investments of roughly $50,000 to $150,000 to get entrepreneurs with good ideas out of the box quickly. That investment takes the form of a convertible note. We would expect down the road to be paid back for that. If the company fails or the idea doesn’t pan out, then we would factor a significant loss into that pool. This is risky capital at that stage.

We’ve been working with large banks, national and regional, to help us conceptualize how we put two different financing pools together.

One would be a debt pool where debt equity would be invested in the company – again, repaid at term.

The second one is really the most important one. It’s called a community development venture capital fund. There’s only about 70 of these in the U.S.; there’s none in Colorado.

We’re taking a leadership role to set the first one up here. The community development venture capital funds are capitalized by banks, typically through the Community Reinvestment Act.

The combination of having the donor pool, the debt instrument and then the venture fund is what will get the companies we work with out of the startup phase and venture-ready.