RESEARCH TRIANGLE PARK – While investors certainly are all ears about promising startups and potential deals, they also monitor the latest statistical trends just as baseball general managers check the deepest analytics before making trades ahead of the non-waiver July 31 deadline.
After the three leading quarterly VC reports were issued last week, WRAL TechWire reached out to several investors along with Jay Bigelow, director of entrepreneurship at the Council for Entrepreneurial Development, and Joan Siefert Rose, CEO of LaunchBio, as well as several investors and venture capitalists.
The original VC posts:
- https://wraltechwire.com/2018/07/12/nc-venture-deal-flow-highest-since-2000-through-first-half-of-2018-dow-jones-report-says/
- https://wraltechwire.com/2018/07/12/nc-startups-raise-most-capital-429m-in-3-years-moneytree-report-says/
- https://wraltechwire.com/2018/07/10/venture-capital-on-record-pace-in-nc-through-first-6-months-of-2018/
We’ve published Bigelow’s analysis and Rose’s observations.
Today we hear from Mark Easley, an angel investor and a leading advocate for crowdfunding in North Carolina which he sees as a tool that will grow in importance to entrepreneurs.
Also offering their thoughts are David Gardner of Cofounders Capital and Jason Caplain of Bull City Venture Partners.
First up, Easley:
Mark Easley
“[T}hose [three venture reports] are very interesting posts, and it is great to see this strong trend for our North Carolina businesses. I am sure there are many reasons for the increase in venture funding, including more money than ever is available from existing and new venture funds, and we have a very vibrant and active startup community in the Triangle and around the state.
“In my opinion we now truly have one of the top startup ecosystems in the nation, allowing us to rank right up there with places like Austin, Boston, Seattle and Atlanta as places where startups want to be and investors want to invest. The strong consideration of our area by Apple and Amazon reinforces that belief.
“Of course I view things from the investment crowdfunding perspective, and I think that has made a contribution to the whole growth of the venture capital market nationwide in a couple of ways:
- “A larger pool of potential companies for the VCs to back. Many companies that are too early stage for most of the VC community have been able to prove their value proposition and achieve important metrics with seed stage investment crowdfunding rounds. So this is providing a larger pool of pre-vetted companies as they move to the Series A and later stages where the VCs like to participate. About the same amount of money is now being raised by companies with crowdfunding as is being raised from early stage angel investors, so the available pool of seed stage funded startups is now much larger.
- “Earlier exit opportunities. The investment crowdfunding platforms have begun to create secondary markets for the stock of these startups. Before, it usually took 5 to 10 years for even a very successful startup to be acquired or have an IPO. But now the early investors and startup employees have a new alternative to getting some of their return earlier. They can sell some of their stock as a secondary offering on one of the investment crowdfunding platforms (Microventures.com in Austin has been a leader in this area), or they can use the Federal JOBS Act Regulation A+ to sell up to $50M worth of their stock as an investment crowdfunding round in what is known as a “Mini IPO”. A percentage of the stock can be from early investors and employees.
“Both of these developments are helping the VCs to raise money for their own funds and then invest it in startups, because there is a larger pool of pre-vetted startups to put the money to work, and the potential for some quicker returns on investment. The effect of these developments is not that large yet in North Carolina, but I think it will grow into a significant factor here soon as it has in places like Silicon Valley, Austin, Boston, Seattle and Atlanta. So our startup community has a strong future ahead of it.”
Next, Gardner:
David Gardner, General Partner, Cofounderes Capital. Cofounders photo.
“A lot of money can go into a single later stage deal. If two of those deals happen to close in the same quarter it can really look significant.
“I’m more interested in the number of seed stage deals getting done.
“Although these dollars are small, I believe that they are the best predictor of how much big money will be invested in two to five years. In other words, the best of to lots of big dollar investments in the future is to do lots of small dollar seed investments now.
“It’s not that hard to get big VC’s to deploy big checks into great later stage NC companies but they aren’t going to fly here to deploy small checks into early stage ventures. That is what we have to do ourselves and what will consistently keep those later stage investment dollars moving in the right direction.”
And from Caplain:
Jason Caplain
“As typical for North Carolina, our numbers are usually lumpy quarter to quarter given a large deal or two that have significant impact.
“We continue to see a real thirst from many of the larger PE groups. Tech companies with revenue above $10 million, with solid margins and growth rates are getting the most attention.
“And many times these PE firms are offering valuations that exceed what a strategic might offer.
“I think that interest level coupled with many North Carolina companies getting to scale will mean more deals getting done during the back half of 2018.”
