Venture Watch appears every Tuesday on Local Tech Wire
RESEARCH TRIANGLE…Southern Capitol Ventures (SVC) an investor in ChannelAdvisor and Pinpoint (now PowerbyHand) is “contemplating” raising a new fund, founding partner Ben Brooks tells Local Tech Wire.
Brooks says he hopes to double Southern Capitol’s current fund of $4.1 million with a new one. “We’ve had a great response from our initial partners and institutional investors are looking at us,” he adds.
Brooks says when they look at SCV’s portfolio and see that all of its technology companies survived 2001 and are doing business, they’re impressed.
Raising the first SCV fund took 18 months in the brutal environment following the economic meltdown of 2001. “It was a great time to invest, but a terrible time to raise money. People were putting money in mattresses, not venture capital,” he says.
SCV also plans to announce a new life science partner soon, Brooks says. The fund presently invests 60 percent in IT companies and 40 percent in life sciences, although that ratio could change, Brooks says.
Brooks says SCV wants to make two more investments from its initial fund by the end of this year. “We’re looking to find companies similar to the ones we have already invested in, with great management, a good proprietary product and a good market,” he says.
We mentioned to Brooks that Venture Reporter’s list of investments by states for the last 60 days, North Carolina has a great big goose egg. In the same period, California companies raised a total of $1.089 billion; Massachusetts firms closed on $392 million; Texas, $231 million; and New Jersey $91 million.
Venture capitalists we spoke to earlier this year were bullish about the improving economy and deals in the works. The year indeed started well enough, with ChannelAdvisor, for instance, raising an additional $7 million that included an SCV investment.
Where’s the beef?
Biotech fared somewhat better than information technology.
Dynogen’s $50 million deal in the spring led the pack in amount raised. Other biotech start-ups raised over $10 million so far this year, including Icagen, which raised $19 million and later filed for an initial public offering of stock potentially worth more than $85 million. Amphora, Athenix, and Adherex also raised rounds over $10 million.
Transzyme, etrials, Hemocellular closed on lessor amounts. At least two other Research Triangle biotech companies have deals in the process of closing now.
Ultimus raised $10 million earlier this year, but other IT start-ups saw deals under $7 million.
Could the dearth of deals in the last two months mean we might see more closes in the third and fourth quarters this year?
“There might be more in the next two quarters,” says Brooks. “I think you’ll see more deals done with money from outside the region and that disturbs me,” he says. When the money comes from outside the region, he points out, “the rewards go outside as well.”
He mentions that SCV looked at a $10 million deal closing in Charlotte this month from all outside money that wanted a local player.
However, he says the current shortage of deals could be because there is “A shortage in the number of really high quality companies.” By that, he means the quality of ideas and management teams, he adds.
Brooks says another problem locally may be that we “punish failures too brutally.”. “We punish people too hard for failures. In our market, everyone is looking for 100 percent success.” In other regions, he says, VCs are used to serial entrepreneurs who won some and lost some.
Southern Capitol Ventures