‘Good quarter:’ $111M for NC startups, says MoneyTree report

The third significant venture capital report is in and it’s a “good one,” says one venture tracker. As for the rest of 2016, it is likely to be challenging, say numerous Triangle executives. But the underlying strength of N.C.’s startup ecosystem appears to be very strong.

Example? North Carolina deals and fundings were up from the previous quarter and nearly matched 2015’s total while national figures declined.

The MoneyTree report from PricewaterhouseCoopers and the National Venture Capital Association released Friday morning shows North Carolina startups and emerging companies raised $111 million spread across 17 deals.

Nationally, invested dollars were flat at $12.1 billion compared to the previous quarter and were down 11 percent from Q1 2015.

Plus, there was a good geographical spread with investments made from Charlotte to Asheville to Huntersville and Brevard although the Triangle dominated deal-making as usual.

That NC total dollar figure is good for 11th nationally, based on data provided by Thomson Reuters.

“Anytime the dollars invested in the state exceed $100 million for a quarter, I call it a great quarter,” said Laura Robinette, who heads PwC’s Raleigh office.

“Generally, the first quarter of any year is slow.

“This, coupled with the fact that the public markets had been down a bit in Q1 makes the dollars invested a bigger deal. Q1 was a good quarter.”

David Jones, co-founder of Bull City Venture Partners in Durham, agreed with Robinette.

“I’m a little surprised to hear that given what the public market did in Q1 2016,” Jones said of the reports’ findings.

But for the rest of the year, Jones said he expects fundraising to be challenging. So, too, do tech CEOs who were surveyed by BCVP, results of which included a lot of optimism about their own firms but concerns about the funding environment.

A growing deal flow

However, Lewis Sheats, who runs the NCSU Entrepreneurship Clinic, is very upbeat about 2016, citing the growing strength of the state’s startup community.

“I expect investment to be up in NC this year,” he told WRAL TechWire. “Each year the quality of start-ups and entrepreneurs has continued to increase and build upon itself in NC. This has led to an increase in quality deal flow, increased angel investment and investment from outside NC into local startups.

“We are continuing seeing the results of decades of efforts to build a strong entrepreneurial ecosystem.”

Fundings actually increased $3 million over the last quarter of 2015 although the deal count was down three.

The MoneyTree report varies – as usual – from date compiled by CB Insights and Dow Jones VentureSource, which released their reports earlier in the week:

CB Insights reported 16 deals totaling $160 million.
VentureSource cited 12 deals worth just under $103 million.

Each reported that deal making dropped in Q1 from the previous quarter.

“Strength” across state

The MoneyTree total is slightly under the $118 million spread across 13 deals a year ago. 2015 was the best year for N.C. venture investments since 2002. A review of SEC filings in the first quarter by WRAL TechWire found even more deals and money, but standards for incorporation into venture reporting by each of the three sources do vary.

Dhruv Patel, Director of Investor Relations at the Council for Entrepreneurial Development, liked what he saw in the reports.

“These data certainly suggest continued strength in fundraising for entrepreneurs in North Carolina, which tracks with what we’ve seen over the past 18 months,” he said.

“While we do not draw conclusions from comparing data quarter to quarter – because of the lag time built into these investments – this active first quarter reflects what we’re hearing from investors regarding their interest in North Carolina companies.”

“Tweeners” emerging

The fact that North Carolina broke six figures in an opening quarter of a year impressed Scot Wingo, the chairman of ecommerce services provider ChannelAdvisor which he took public. Wingo now is a very active investor and is known for his “Tweeners” list in which he evaluates and finds startups he believes are headed for stardom as investments.

“I believe that Q1 is seasonally stronger than Q4 generally – Q4 is a hard time to raise, you are trying to end the year strong and you have the holiday distractions,” Wingo explained.

“As you know I track the ‘Triangle Tweeners’ and what I’ve seen over the last six months is both a ton of new tweeners coming on strong and then also the ones we have are growing very rapidly.

“A good example is Transloc which was one of the Tweeners that received funding.”

TransLoc was one of 12 Triangle-area firms to land deals, pulling in $8 million.

The biggest raiser, however, was outside the Triangle: Gaic Herbs in Brevard at $21 million.

More stories coming

Look for much more on what’s happening in venture capital later from WTW, including expanded Q&As and comments from: