No capital for startups in North Carolina?
I can give you more than 100 reasons to think otherwise.
The Council for Entrepreneurial Development (CED) recently released its 2013 Innovators Report showing that investment in tech, life science, and advanced materials companies in the state was more robust and diverse than you might imagine. We found that 108 separate funders did 260 deals in North Carolina last year totaling nearly half a billion dollars—and most of those deals were with companies located here in the Triangle.
Where is the money coming from? Seventy-five percent of investors are from out of state, including 24 funders from the Boston/New York region, 10 from California and 10 international funds. At least a dozen funds made first-time investments in North Carolina companies, which we see as an encouraging sign.
The Innovators Report gives a snapshot of activity in 2013, and we continue to learn more as we examine the data. Already, CED has talked with 10 out-of-state investors who are relatively new to the region—after all, if they've made one deal here, they might consider a second. Their feedback, not surprisingly, is that they found strong companies at good valuations, and they would be interested in meeting more. Several of these funders had existing relationships with local investors and entrepreneurs, which initially sparked their interest. The companies were sufficiently impressive to persuade them to write a check.
Some trends we've spotted in the Innovators Report include the growing importance of angel investors, both individually and collectively, for providing seed money and deal syndication; and that crowdfunding, mostly through Kickstarter campaigns, was a source of cash for some enterprising tech startups. Accelerators and competitions also provided money and recognition for early stage companies.
While most North Carolina deals in 2013 involved life science companies, as might be expected in a state with a strong biotechnology sector, we found that the mix of those funders is changing. Venture philanthropy organizations like the Michael J. Fox Foundation and the Bay Area Lyme Foundation joined corporate venture and VCs in supporting the work of drug development and medical device companies.
This is the first full year for the Innovators Report, so it will serve as a point of comparison going forward. CED will update the report twice annually, and plans to use it to tell the stories of successful companies and encourage more investment in the state's most promising companies.
We think we're off to a surprisingly good start.