High-tech's march on Colorado: industry a boom and buffer to economy. (Hightech Coloradobiz).

THIRTY YEARS AGO, COLORADO HAD MORE IN COMMON WITH WEST TEXAS THAN IT DID WITH SILICON VALLEY.

Agricultural reports led off KOA's morning business broadcast. Computer programming jobs were few and far between, and those few that were available were jobs with large companies or the government. When this magazine published its first issue, mining, water and energy issues dominated its pages.

Technology, back then, as it related to business, was ultra-specialized and ultra-expensive, and it garnered only a fraction of the media's coverage. But the foundation for Colorado's modern high-tech economy was already in place.

Federal labs in Boulder and military and space installations in Colorado Springs were both products of the 1950s. Colorado's remote, mid-continent location made it a defense hub, in turn luring contractors like Martin Marietta and Ball Aerospace.

By 1960, when Hewlett-Packard chose Loveland as the site of its first manufacturing facility outside of California, the high-tech ball had slowly started to roll.

Late developer George M. Wallace helped speed things along by transforming 40 acres of pasture into the Denver Technological Center, beginning in 1962, as did the maturation of the University of Colorado as a research center for space technology and other leading-edge subjects.

IBM followed H-P to the Centennial State in 1965, opening its manufacturing plant and R&D labs near Boulder. Within six months, IBM Boulder was swamped with 10,000 applications and requests for transfer to the new facility. Programmers and engineers started arriving on a daily basis, not unlike the newcomers who came in search of gold and silver a century earlier. It also became apparent then that recruiting high-tech talent to Colorado would not be a problem.

Thanks to its diverse mix of national companies and federal entities, the state's high-tech labor pool got deeper and deeper. In 1969, four engineers left IBM and founded a data-storage startup that would make an indelible mark on the state's emerging tech landscape as its first and foremost homegrown hero.

That company -- StorageTechnology Corp. -- ultimately made Boulder County a capital for the storage industry, spawning dozens of other startups in the process.

In ColoradoBiz's 30-year lifespan, companies have come and gone, technologies have materialized and become obsolete, and innovation has surpassed our wildest dreams. Decade by decade, the only constant has been change.

THOSE GO-GO 1970S

The disco decade saw more than 100 high-tech manufacturing companies commence operations in Colorado, as banking, insurance, health care and other old-guard industries welcomed information technology with open arms. IBM, H-P and numerous now-defunct hardware suppliers saw sales boom.

After Jesse Aweida, Zoltan Herger, Juan Rodriguez and Tom Kavanagh left IBM and struck out on their own in 1969, the four launched the company now known as StorageTek from an office above Boulder's Aristocrat Steak House on Pearl Street (now the home of The Gap). The company's early growth curve was impressively steep, and it quickly captured the leading market share in the tape storage market - a position it holds even to this day.

In the early 1970s, Aweida and company had modest goals: to capitalize on the demand for high-performance data storage products, and capture a small chunk of IBM's business in the process. Did Aweida ever fancy StorageTek becoming a $1 billion dollar business by 1982? "No way," he answered. "At that time, we thought maybe $10 million."

But big-business' acceptance of information technology resulted in hefty revenue gains for StorageTek during the '70s; downward pressure on pricing led smaller companies to get in the game during the decade as well. For example, Denver-based Lewan & Associates Inc., founded in 1972, was selling watches and typewriters in its early days. Now it sells computers and all manner of advanced technology.

Another firm that emerged to meet the IT needs of business was J.D. Edwards & Co., founded in Denver in 1977. Initially a three-person consulting firm, the company grew into a 5,000-employee leader in the enterprise-resource-planning market. Recalled Idella Kercher, J.D. Edwards' first hire and now vice president of customer advocacy: "That first year we billed S 160,000 in consulting revenues. Last year, in consulting, our billings were about $600 million."

On the wall of Kercher's office today is a framed copy of J.D. Edwards' first invoice. The highest hourly consulting fee: $29. "Now I bet you can't find a consultant for less than $200 an hour," she said.

The seeds of Denver's cable-television industry were also sown during the '70s, when entrepreneurs like Bill Daniels, Bob Magness, John Malone and Glenn Jones ramped up the industry, initially to serve rural customers in Colorado and Wyoming. After HBO aired "The Thrilla in Manila" boxing match in 1975, live via satellite, it became clear to Colorado's cable mavericks that content would drive the industry forward in the years to come. They were right.

THEN CAME THE '80S

The critical mass in high tech turned out to be a savior for the state's economy after the oil bust of 1 982 and the recession that followed. Low points aside, the 1 980s were loaded with high-tech bright spots. Led by Malone and Magness's TeleCommunications Inc.--TCI--metro Denver emerged as the nation's cable capital.

"The economy became more diversified, and cable played a big part in that," said Jim O'Brien, president of the Cable Center in Denver and former president of Jones Intercable. Despite Comcast's recent acquisition of AT&T Broadband (which bought TCI in 1999), "I still look at Denver as cable's intellectual capital," O'Brien added. "You still have the same people in some form or fashion."

After the breakup of telephone monopoly AT&T in 1984, the Mile High City also became the telecom hub for a 14-state regional Baby Bell, a standing that was further cemented when US West chose Colorado over Utah for its advanced tech research center in 1987.

The space industry gained ground and became the state's third largest business enterprise, after agriculture and tourism. Colorado aerospace manufacturers grew to produce 80 percent of the entire nation's launch capability.

And Colorado Springs, home of the Air Force Academy, Fort Carson and the Cheyenne Mountain defense facility, began to take advantage of its workers' military-taught high-tech skills and began to blossom as a semiconductor fabrication center.

Perhaps the most significant development of the "me decade," however, was the dawn of the personal-computer era, ushering in a new way of life for the hardware and software industries, not to mention the average small business. "The PC really revolutionized computing," said Don McCubbrey, professor at the University of Denver's Daniels College of Business. "I like to say it gave power to the people."

Amid a flourishing software industry, J.D. Edwards experienced tremendous growth during the '80s, opening seven branch offices across the U.S., and its first international office in 1988. The shift from IT consulting to packaged software was the market trend that defined the decade, said Kercher. "There were a lot of oil-and-gas customers in the early days," she added. After they crashed, "It was time for us to look at spreading our wings," she said.

StorageTek entered the '80s like a lion, but took on too much debt, over-diversified and filed for Chapter 11 bankruptcy protection on Halloween 1 984.

It took only three years to emerge from Chapter 11, and the company learned a lesson in the process, said Gary Francis, a 26-year StorageTek veteran and current corporate VP. "You can't do everything," he said. "You really have to focus on what you're good at."

Beyond StorageTek, IBM and other tech stalwarts were downsizing during the mid-'80s. The mass high-tech layoffs had their silver lining: Hordes of pink-slipped employees took destiny into their own hands and launched their own tech startups.

"Some of the people that left the company were darn good people," said StorageTek's Francis. "They had ideas and they liked the area."

Not dominated by any one employer, Colorado's high-tech economy thus became more resilient than ever. As the decade ended, the recession of the mid-'80s began loosening its economic grip on the state, and all systems were go for the roaring '90s.

OH YES! THE 1990s

In the shadow of the ragged economic conditions of the mid- to late '80s, the state was in need of a more diverse economic base. It got one.

Telecommunications and software thrived. High-tech job growth was stellar, piling up nearly 50,000 new jobs between 1993 and 1998. Colorado Springs led the nation's cities during that period, its high-tech employment base jumped by 77 percent; and Denver was close behind.

Throughout the decade, mergers and acquisitions dominated headlines: Lockheed/Martin Marietta, AT&T/TCI, Qwest/US West.

Storage Tek recovered nicely following bankruptcy, thanks to R&D on automated tape drives that took place during its protection in Chapter 11.

"We hit the sweet spot of the market," said Francis. After peaking at 16,000 employees in the mid-'80s, the company now employs about 7,000.

The incubator concept, which arose locally in the late 1 980s as a means of diversifying the economy, gained ground, and the Boulder Technology Incubator (now known as the Colorado Technology Incubator) emerged as a standout. The '90s saw a phenomenon of "all these big employers turning into a bunch of small companies under 20 employees," said Jerry Donahue, who served as the incubator's director throughout much of the '90s and currently works with CU's Technology Transfer Office.

Colorado's Front Range received a fair share of national press as an up-and-coming high-tech hotspot. The October 1995 issue of Inc. "highlighted Boulder County as kind of a Playmate centerfold" of the tech boom, said Donahue.

In the latter half of the decade, Internet mania struck the nation, and Colorado was no exception. Growth was rampant and driven largely by high tech: Colorado companies buried millions of miles of fiber-optic cable, venture capital flowed like wine at a high-tech business after hours, and dot-com startups budded left and right.

But as we know all too well now, many of those businesses went the way of a bad hangover. Here today, gone tomorrow.

DEFLATABLE 2000S

Like the silver swoon and the railroad rout, the tech bust is now part of Colorado's economic lore. Once the dot-coin bubble popped, Colorado's statewide high-tech economy ran smack into its first ever stumbling block, which has taken the shape of a sheer rock wall.

Amid the empty office parks along the U.S. 36 corridor and the financial mess that Qwest has become, it's easy to lose sight of how far Colorado high tech has come, and how fast it's gotten there.

According to the American Electronics Association's June 2002 study, Colorado had the highest concentration of high-tech workers in the nation (9.8 percent of all private-sector jobs), and high technology represented 50 percent of the Colorado's exports. In 2000 alone, $4.6 billion in venture capital was invested in the state, compared with $42 million for all of the 1970s.

VC investment has plummeted since then, (in 2002, it was down more than 90 percent from 2000 at press time), but the total amount of Colorado-based venture capital has risen sharply.

"Over the past five years, there's been a dramatic evolution to where are we now," noted Colorado Secretary of Technology Marc Holtzman. "The primary characteristic is the diversification of the tech economy that is happening right before our eyes."

In the end, it comes back to an attribute so often touted in the sales pitch for Colorado technology that it has become a cliche: quality of life.

But the three words still ring true--as they have since the early days of high tech in Colorado. And innovation never stops.

New technologies--satellite imaging, photonics, nanotechnology--are expanding in Colorado, and Level 3, flush with $500 million from an investment group led by Warren Buffett, could eventually climb out of the glut of fiber-optic cable that has been built nationally, to become the broadband market leader. Anything is still possible.

"We're very, very early on in this revolution," said DU's McCubbrey.

"It's going to be marvelous to watch."

RELATED ARTICLE: Made in Colorado

TECH STARTUPS BLOSSOM OVER TIME

BY ERIC PETERSON 

INITIAL LIGHTBULB: Bringing innovation to market--and hopefully coming out a winner in the process--has always been the driving force behind the tech startup. By tackling niches too small or too speculative for established players, startups have emerged from companies of all kinds especially when employees leave a firm because they think their employers have either missed the boat or are restraining their creativity. Corporate downsizing has also proven a boon for some entrepreneurs, giving many the kick in the pants it takes to get them to do their own thing.

For just about every market segment that's boomed in the last 30 years, there's a local tech startup that's grownup with it--from J.D. Edwards and Quark in software, to StorageTek and Exabyte in storage, from Echostar and Space Imaging in satellites, to Qwest and Level 3 in telecom.

IN A NUTSHELL: Thanks to a deep labor pool and its still lustrous quality-of-life cachet, 2003 Colorado is the envy of every other state its size when it comes to startup fertility and venture capital investment. The defining market trends--smaller, faster, better--have not changed since 1973, when StorageTek was pumping out refrigerator-sized tape drives. They've only accelerated.

However, with the state littered with bankruptcies of once-hyped tech startups, today's economic climate is very similar" to that of the late '80s, said Jerry Donahue, former director of the Boulder Technology Incubator, With one key difference. "In that mid-to late '80s period, things were not good," said Donahue, "but we had less resources to work with. Today things are not good, but we have a lot more resources to work the problem"--i.e. established incubators and increased state support.

THE MARKET: As technology has evolved and improved, so has the market for just about every conceivable type of tech product. But the current economic doldrums have hit corporate budgets hard, and numerous startups have folded because of weak demand. Without the bountiful spending of the late 1990s, even the best mousetraps are having a tough time prying open those oh-so-tight corporate pocketbooks.

FINANCING: The days of spinning a PowerPoint presentation into millions in venture capital gold are long gone, and that's a good thing. "There definitely has been a healthy rationalization in the startup environment," said Secretary of Technology Marc Holtzman. Venture capital under management in Colorado has increased by a factor of five since 1997, he added to $3.3 billion in 2002.

While there is more money In the state, Colorado's VC market, post-dot-com-bomb, is tightfisted, to be sure with investment at its lowest level in five years. The 90-percent-plus drop-off represents more healthy and more sustainable" levels of VC investment, said Tim Connor of Boulders Sequel Partners And it can largely be attributed to the end of massive investments in fiber optic networks.

QUOTE OF NOTE: "There's no question in my mind that, where we are today, it's much more conducive to people doing their own thing. Back in the '60s, that did not happen that much--people did not want to leave the security of the big companies."--StorageTek co-founder and current venture capitalist Jesse Aweida