Danielle Shoots, middle, talks during a Denver Startup Week event. (Provided by Shannon Quarles via The Denver Post)
At least one of the startups that Denver invested in using tax dollars has no traditional physical presence in the city, despite a city contract with a venture capital firm that specifies companies receiving funds must be “physically located” within Denver’s limits.
Ad Fontes Media, one of 10 companies in which DEMI Fund invested city money in year one, lists its “principal office” in state paperwork as an address in Westminster.
Founder Vanessa Otero said Ad Fontes, which rates media outlets on reliability and political bias, said the address corresponds to her home. She said the company is fully remote and has no physical office, although most of its employees live in Denver and the company sometimes holds in-person meetings in Denver.
DEMI Fund, led by Danielle Shoots, was tapped by the city of Denver in 2022 to spend 1% of the city’s marijuana tax revenue — an estimated $15 million over three years — on supporting minority and women-owned businesses, sometimes through direct investments. The unusual arrangement means Denver taxpayers now own a small stake in various companies such as PetroFunders, a website for entry-level oil and gas investors, and finance software firm One Purse.
Last month, DEMI sued Denver, claiming the city had stopped transferring the tax dollars after sending $6.9 million through last August. Shoots claimed the fund was owed nearly $800,000 for spending that should be reimbursed.
The city has declined to comment publicly and has not yet responded to the lawsuit in court.
Asked repeatedly by BusinessDen for records that would detail the financial performance of the invested funds, Shoots has provided only a redacted annual report covering the period from August 2022 to July 2023. The document does not show how much individual companies received from Denver and how the city’s stakes in the companies are now valued.
In response to a public records request, two city departments said they did not have any reports detailing the performance of the investments.
Denver’s contract with DEMI Fund, which the city did provide in response to a records request, specifies that businesses receiving investment from the city must be “physically located within the boundaries of the City and County of Denver at the time of funding and for a minimum of three years after.”
While all the firms DEMI invested in during year one have a clear connection to the Denver region, the presence within the city’s limits of some seems less clear.
Petro Funders, the oil-and-gas investor website, lists a Lakewood address on its website. That company did not respond to a request for comment. Gritly, which offers training and hiring programs, appears to have been founded in Boulder, although after receiving money from DEMI Fund it was acquired by Interview IA, another DEMI Fund portfolio company that is based in Denver.
Shoots indicated that firms like Ad Fontes do qualify. In an email, she said some companies could qualify by simply having customers in Denver.
“Physically located can mean office buildings, employees, co-working space or in some cases, a significant number of customers,” Shoots said in an email.
A spokeswoman for Denver Economic Development & Opportunity, a city office known as DEDO, declined to comment on whether the city agrees with Shoots’ interpretation, citing the pending litigation.
The city contract also specifies that an employee of a DEDO staffer must sit on DEMI Fund’s board. Shoots said Michael Bevis, director of entrepreneurship and innovation at DEDO, was on the board until January but no longer is. Bevis hasn’t responded to requests for comment.
According to Otero, Ad Fontes received a $1 million investment from DEMI. That figure includes both tax dollars and other money contributed by the fund’s other investors, which include Bank of America and Xcel Energy.
“It was huge. Look, it has been hard for us to raise capital,” Otero said. “It’s not just the fact that I’m a female founder, solo founder, minority founder but our business is very mission-driven. Mission-driven for venture capital, they look at you like ‘You’re doing good in the world, is this really going to make money?’”
Ad Fontes sells its data to advertisers and other customers. Otero said her grander mission is to “improve news in society.” To do that, Ad Fontes makes media literacy lesson plans for students, supports reliable journalism and hopes to eventually rate news sources in other languages, she said.
Otero said DEMI’s investment was a part of a $4 million seed round that closed in June 2023, which allowed the company to invest in technology and go-to market strategies. The 6-year-old company has raised $6 million since inception.
Samuel Adewole, founder of One Purse, said the same.
“There are other funding opportunities … there are a lot of entrepreneurs, but in my experience, my perspective, it’s a little bit difficult for black people to get access to those,” Adewole said.
Adewole created One Purse so that immigrants can easily send money back to their family and friends in other countries. He received a $200,000 investment from Demi Fund after being introduced through Access Mode, an organization that helps startups.
“Without Access Mode and DEMI Fund in Colorado the ecosystem for black entrepreneurs would be dead,” Adewole said.
Adewole lives in Aurora but said his co-founder lives in Denver. He said they use a coworking space in Denver provided by DEDO.
Shoots said that many of the portfolio companies use that DEDO space to work, and they can also register it as their Denver office.
“This helps us deal with the fact that employees work from all over these days and that most startups can’t afford a physical location,” Shoots wrote. “The goal is that the business is creating jobs, paying taxes and creating customers in Denver.”
