When Next Frontier Capital opened an office in Missoula this year, the decision was driven by the city’s growing number of early startups. At the time, four of the firm’s 12 investments were located in Missoula, though “great potential” remained untapped.
The arrival of Next Frontier has helped propel Montana up the list of states with access to venture capital, itself a sign of early startup activity and a growing undercurrent of entrepreneurship.
For those who have helped drive that growth, the changes are both welcome and long overdue.
“Montana has made huge progress in access to venture capital,” said Christina Henderson, executive director of the Montana High Tech Business Alliance. “In 2015, Montana was last in the nation for venture capital dollars invested, literally behind Puerto Rico and 49 other states.”
The High Tech Business Alliance launched in 2014 with a goal of supporting growth in the state’s technology sector and the high-paying jobs it generally creates.
Nearly five years later, Montana’s tech industry is growing nine times faster than the state economy while generating more than $1.7 billion in annual revenue. Access to venture capital has helped drive that growth, Henderson said.
“Having a Montana-based capital fund has opened up a lot of opportunity in that there’s local VC available to vet deals and identify growth opportunities,” said Henderson. “In addition to the local money invested, it also has attracted more out-of-state investment.”
Back in 2015, Montana lagged behind the nation in access to venture capital, limiting growth in the state’s early startups. While this year’s figures aren’t yet in, the state improved its standing in 2017 by netting roughly $83 million in venture capital investments.
That outpaces North and South Dakota, Wyoming, Iowa, Alabama, Vermont, New Hampshire and Rhode Island. Still, it lags behind other surrounding states, including Idaho, which netted $128 million in capital, and Washington with its $1.8 billion.
“What it all boils down to is a lot more local investment in Montana, more wealth into the state, and more high-paying jobs,” Henderson said. “We’re seeing more early stage companies get money that’s allowing them to ramp up in the beginning, and we’re seeing these more established companies access growth capital, allowing them to grow more significantly.”
OnX of Missoula scored one of the larger growth investments this year when it closed on a $20.3 million round of funding from Summit Partners in California. It’s now ranked as Montana’s most valuable venture-backed company with a valuation of roughly $120 million, according to Pitchbook.
Other Missoula-based companies including Submittable, Clearas and Orbital Shift have received venture funding from Next Frontier, as has onX. Such investments tend to lift all boats, said Tom Stergios, senior vice president of strategy and corporate development for ATG in Missoula.
“It’s great to be on the investor map,” Stergios said. “We’ve been underserved in that area relative to all the other Western states. Not all investments are going to work out, but it’s great because we’ve got a lot of entrepreneurial talent in the state and access to capital isn’t a bad thing.”
ATG of Missoula may lead the way in 2019 among tech companies poised for growth. The firm was recently acquired by Cognizant and is now looking to grow its Missoula workforce several fold.
Stergios said Missoula’s density of tech talent is reaching critical mass, something that pairs well with the growing number of venture capital investments made in Montana companies.
“Slowly, we’re creating more tech leadership density in Missoula and across western Montana, which is great,” said Stergios. “For the longest time, we didn’t have the critical mass of good tech leaders in the state. They were all focused in Bozeman.
“But now, successful companies are sprouting up all over Montana, and they’re not being narrow-minded in their own success. They’re all trying to figure out how to help each other out.”