Editor’s Note: Michael F. Elliott is a General Partner at Noro-Moseley Partners, one of the largest and oldest venture capital firms in the Southeast with a focus on early stage and growth companies located throughout the region. Elliot evaluates and oversees investment opportunities primarily in the software and business services sectors, and serves as director of several of the firm’s portfolio companies. Before joining Noro-Moseley, he was managing director at Wakefield Group, a private venture firm based in Charlotte. This article is the latest in the Entrepreneurial Spirit series produced in partnership through the Council for Entrepreneurial Development and WRAL Local Tech Wire.
ATLANTA, GA. & RESEARCH TRIANGLE PARK, N.C. – For years the Triangle has gotten a lot of attention from investors outside of the region and beyond North Carolina. It comes as no surprise that with the area’s strong innovation culture, creative talent and technology and life science leadership, the eyes of much of the world are on RTP.
CED President Monica Doss sat down with Michael Elliott, general partner at Noro-Moseley Partners, to discuss what sets the Triangle apart from similar innovation centers, and how entrepreneurs should approach investors within their market and beyond.
For those outside of this region, what do you think makes the Triangle an interesting location for investors?
First, we have business – and social – community that is tremendously aggressive about supporting entrepreneurs. I also believe we have an environment that, from an investor’s perspective, has a favorable balance between attractive investment opportunities and capital. As a result, the deal dynamics from both sides are typically open and honest. Also, while we cannot claim our region is world class at everything, we do have certain pockets of technology expertise that rival any location in the world. And of course, we have the greatest college basketball in the country.
Do you think that investors from other regions with strong technology and life science ties are taking full advantage of the triangle’s investment opportunities?
My view is that when out-of-region investors think about the RTP, we get lumped into broader “Southeast” market consideration. It is difficult for a Boston investor to cover interesting Southeastern markets like Florida, Atlanta & here in a single trip. That built in inefficiency prevents out-of-region investors from spending a tremendous amount of time on deal generation in the RTP. The “local” investors – and organizations like the CED – need to continue to play a critical role in soliciting broad perspectives, specific expertise (where applicable), and capital from national firms.
In your experience, what is the best way for entrepreneurs to break into the investor community?
Over the last 20+ years, the answer has been the same. Take a little time to research the vc firm or investor you wish to approach and, with that knowledge, tap the most credible referral source you can identify to help make the direct referral into the VC firm or investor. The initial challenge is simply to cut through the clutter and win an opportunity to tell your story.
What advice would you give an entrepreneur seeking their first round of venture funding?
Invest the time preparing before you sit down with VCs. Your story, the format of the pitch and points of emphasis will no doubt change as you watch the reaction from various audiences. Your 10th presentation will be clearer and more on point than you first, so – borrowing from Steve Nelson – open in Cleveland before you hit Broadway. Encourage honest, critical feedback from non-investor advisors. Second, don’t rule out uncommon sources of capital beyond VC. For instance, we have seen many business focused software companies bootstrap their way through the building of a product by providing services to a handful of key customers along the way. Third, be persistent!
When seeking capital, how important do you think it is to look to VCs in other regions?
I do think there is a preference on the part of many national firms to work with regional investors because most understand a local presence is a benefit given the “company-building” nature of our business. However, as a regional investor, we do not delude ourselves into thinking that the national firms are waiting for us to introduce them to interesting opportunities. It is a competitive market, and talking to firms outside the region makes a lot of sense.
How persistent should an entrepreneur be when pursing venture capital? What signs are there to indicate that he or she should stop pursuing a particular lead?
I think any entrepreneur raising capital has to be aggressive and persistent, but I also think VC’s have the responsibility to communicate clearly their position on a deal. Entrepreneurs should push until they get that answer. Sales skills are a key asset of most successful entrepreneurs, and those skills include understanding the decision drivers influencing the investor. Failing to hear the “no” is not only frustrating to the VC, the continued pushing is a waste of time for the entrepreneur.
What do you think are the top industries currently getting attention from investors?
There continue to be interesting consumer oriented technology plays and web 2.0 plays, but when I review our deal log for the last two weeks, it is clear we continue to see tremendous opportunities in healthcare services – that business is going to continue to grow even with an upcoming election – and outsourced, tech-enabled business services.