Southern Capitol Ventures’ investment in DoublePositive represents a significant first for the Raleigh-based early stage venture capital firm.
The deal is the first Southern Capitol has made outside of North Carolina in its seven-year history.
Given the general lack of seed and early-stage funding for startups in North Carolina, the Southern Capitol foray into a later-stage deal in Maryland could be seen as a bad sign for Tar Heel entrepreneurs. However, Jason Caplain, a general partner with the firm, said there’s no reason for alarm.
“Our primary focus is always on North Carolina,” Caplain said, “but we continue to spend time in the Mid-Atlantic region and in Atlanta.”
Southern Capitol has money to invest out of its $15 million second fund that closed in December of last year. In fact, with early stage funds such as Intersouth, Aurora Funds, Noro-Moseley and NC IDEA also having raised cash, the competition to find deals is leading to more out-of-town trips.
Asked about the quality of deal flow, Caplain replied: “I think great deal flow by definition is always rare.
“If you talk to a lot of the funds here in N.C., many of them are ramping up their efforts spending more time outside of N.C.,” he added. “At the same time, we definitely see the next wave of technology entrepreneurs working on some interesting projects here. And we don’t want to miss them.”
Later-stage venture funds also are well stocked with cash, the result being that more money is chasing the same deals, Caplain pointed out.
“Valuations have risen substantially for later stage companies that have consistently executed,” he said. “Fueling this is that there are a lot of bigger funds out there and many of them are chasing the same companies.
“This creates a pretty big hole in the market for seed and early stage capital and something we continue to focus on. Our earlier investment in (Durham-based) eMinor, which was a seed investment, is a good example of that.”
Early funding from Southern Capitol has also helped some pretty high-profile companies such as Motricity, art.com, ChannelAdvisor and Batanga.
As for opting to make a “B” round investment in DoublePositive appealed to Southern Capitol because of its management team and perceived market opportunity, Caplain said.
“Our focus is on helping build seed and early stage companies, but at the same time, we will always be opportunistic and this was a company we didn’t want to pass up. "
The firm, which was founded in 2004, has developed a real-time system for generating and acquiring Internet sales leads. Data collected from banner ads on Web sites is collected, screened and transferred to sales people for immediate contact.
Southern Capitol has chosen not disclose the amount of its investment, but Caplain noted the firm’s deals average “about $500k.”
DoublePositive, which has an experienced management team, has grown rapidly. That combination drew Southern Capitol’s interest.
“They have done an amazing job executing becoming one of the fastest growing companies in the region and going forward, their model is very scalable,” Caplain said.
“We had heard about them from several people we know up in the Baltimore area. We were eventually introduced by Jonathan Wallace at WWC Capital, who is a good friend of ours. We met Sean Fenlon, DoublePositive’s CEO, and John Delta, their CFO, about a year and a half ago and built a relationship with them and the DoublePositive team over time.
“We think highly of the team at DoublePositive and there are a lot of ways we can help them well beyond our capital,” he added. “We are excited to be part of the team to help them grow.”