Editor’s note: Charles Davidson covers the Atlanta tech scene for Local Tech Wire. Serious Atlanta money is flowing to Florida.
As fewer promising companies percolate in its usual hunting grounds at home and in Research Triangle Park, Atlanta’s biggest venture capital firm is increasingly looking south.
Noro-Moseley Partners has invested in six Florida-based companies with its newest fund, double the number of Sunshine State firms in its two previous funds combined. And it’s one more than the number of Atlanta-based firms backed from the newest fund. Noro’s invested in three North Carolina companies in Fund V, its most recent.
The firm’s Website lists 16 companies in the portfolio of the $325 million Fund V, the biggest VC fund ever raised in the Southeast. The firm started investing Fund V in 2000.
Noro-Moseley’s Florida focus is a substantial shift. In its two previous funds, the firm invested in 54 companies; just three of those were based in Florida. By contrast, more than half of the investments, 30, were in Atlanta and nine were in North Carolina. Six of Noro-Moseley’s 28 Fund IV portfolio companies are based in the Tar Heel State.
‘Some significance can be read into it’
This reflects marketplace realities. Noro-Moseley Partner Alan Taetle says that as the pickings become slimmer in his firm’s two favorite markets, Florida looks more inviting.
“Some significance can be read into it,” he says of Noro-Moseley’s geographic turn. “The deal flow in Atlanta and Raleigh/Durham in the IT space has slowed down. Florida has picked up only in the sense that we’ve become more well known down there.”
Noro-Moseley is hardly alone in making fewer hometown deals. In the first quarter of 2002, 11 VC firms based here or with offices here invested in Atlanta companies, but just one of those firms, Cordova Ventures, made more than one such deal, according to data from the accounting firm PricewaterhouseCoopers and the National Venture Capital Association.
Noro-Moseley did just two Atlanta deals in the first quarter — an eighth round alongside five other investors in Netuitive Software, and as part of a $5.5 million first round for EG Technology. Meanwhile, according to PWC and the NVCA, another of Atlanta’s most prominent VC firms, Alliance Technology Ventures, made no local investments in the first quarter. Things apparently didn’t change much in the second quarter, as Alliance made one new Atlanta deal and Noro none.
Few VCs in Florida
Meanwhile, in Florida, one reason Noro-Moseley’s profile is rising is a dearth of major venture players dealing in technology, Taetle says. He cites several solid smaller firms such as Lovett Miller in Tampa and CrossBow Ventures in West Palm Beach.
“But if someone wants to raise five to 10 million dollars, they don’t have a place to go,” Taetle says. “So a lot of people come to us.”
These dynamics, of course, are not unnoticed in Florida. There have been numerous attempts at forming smallish venture funds there over the past two or three years, with varying degrees of success. In one of the latest such moves, a group affiliated with Village Ventures, a Williamstown, Mass., finance operation, in November revealed plans to form an early-stage fund with offices in Tampa, Orlando and Gainesville.
Like most Southern states, Florida has never had many venture firms. Worse, a couple of its bigger VCs have all but shut down. Interprise Technology Partners of Miami made more investments in 1999 than any Florida VC firm, according to PWC. But Interprise’s bedraggled portfolio — including high-profile busts like Miami-based Yupi Internet Inc. and Atlanta’s Nexchange Corp. — has effectively sidelined the firm.
Meanwhile, South Atlantic Ventures of Tampa slowed its investing before the tech industry freefall. South Atlantic never really focused on tech companies, anyway.
Its portfolio includes numerous health care outfits and companies like Silk Greenhouse and Outback Steaks.
So Florida will probably remain fertile ground for out-of-state VCs. Does that mean that Noro-Moseley, Atlanta’s biggest and oldest VC, is abandoning Atlanta and RTP?
Hardly. Noro-Moseley is respected and generally popular in Atlanta and Raleigh/Durham. It’s taken lumps, to be sure — Hsupply and SciQuest among them. But the firm has plenty of money to invest, and because of an excellent reputation and extensive contacts, Noro-Moseley has found it does best close to home.
Nevertheless, its mission is to deliver returns to limited partners. That’s gotten a lot tougher, meaning investors must go where the deals are. Limited partners don’t much care what ZIP code the returns come from.