Editor’s note: In the third of a three-part story examining the North Carolina Innovation Fund, the people charged with managing it tell WRALTechWire that they know there is a “high risk” profile for investing in early-stage companies. But they continue to look for opportunities, encouraged by a high rate of return so far.

RALEIGH, N.C. - “The NC Innovation Fund is a key investor,” said Richard Maclean, managing partner at Frontier Capital, “and is a high value add for us.”

 

The network that the NC Innovation Fund has established statewide, said Maclean, is an incredible building block for the future of investment in the state of North Carolina.

“The Treasurer’s Office has done a fantastic job designing and rolling out the management of this effort,” said Maclean.

One key benefit for entrepreneurs, said Maclean, is “the NC Innovation Fund’s ability to directly invest and help make introductions for companies.”

The network that the state, and the fund managers, are building and growing will be vital to the future of entrepreneurial activity in the state of North Carolina, said Maclean.

The question, said Tracy Harris, vice president at Credit Suisse, is “how can we put more money to work in the state?”

“This fund is not just the state sitting on the money,” said Harris, “and it’s actually doing quite well.” A 17% rate of return is excellent, said Harris.

Looking for Opportunities

Of the $63 million not yet committed, Harris expects the NC Innovation Fund to invest in one additional venture fund or private equity firm, though she chose not to comment on a specific organization. The rest of the money will be allocated directly to startups in North Carolina through co-investment, said Harris.

“The risk profile to invest in a bunch of early-state companies,” said Harris, “is high.” This is the reason that the fund invests in the state’s venture capital and private equity firms in addition to their co-investments.

“We’re following companies like Netsertive and SchoolDude,” he added, “because in a years time, these companies will be cash flow positive and have received private equity sponsors.”

“If we can add an additional five or 10 million dollars, then that’s really good for the state.”

Long-term View

“We have a long-term view,” said Treasurer Janet Cowell, “and I’ve got to deliver people’s pension checks at the end of the month.”

It’s a delicate balancing act between investing in companies that will grow the North Carolina infrastructure, create jobs, and develop new technologies and earning a high rate of return for the state’s pensioners.

So far, so good …

Note: Part One as well as Part Two of WRALtechWire’s report is available online to WRALTechWire Insiders.