Now with seven portfolio companies and $15 million invested, Raleigh-based Lookout Capital has retooled and restaffed to better meet the needs of its network of 75 high-net worth men and women pumping hundreds of thousands of dollars each year into local companies.

A year-and-a-half after creating a venture arm to make early stage investments, the firm has abandoned that strategy to acquire fast-growth healthcare, software and digital media companies with $5 million to $10 million in revenue. Its new mission is to take a majority stake in one or two of those companies each year, gain leadership on their boards, and help round out executive teams with its own talent. The goal is to grow portfolio companies to three to five times their size over five or seven years before selling or bringing in new investors.

[Note: WRAL TechWire has followed Lookout Capital closely since its launch. Check out the related posts linked to this story from our archives.]

Because fewer of those kinds of deals exist in the Triangle, the new model means Lookout could invest across the Southeast. 

Early stage is risky and bubbly

The change comes primarily at request of Lookout’s investor base, which has grown significantly from the 30 original investors co-founders Merrette Moore and his fatherBill Moore lined up to start the firm in 2010. Many investors are older and either don’t like the risk profile of an early stage company or they’ve had bad experiences with angel investing in the past, the younger Moore says. He also admits belief in a bubble forming in the Triangle. 

Early stage valuations are unreasonably high, some ideas getting funded just don’t seem doable, and there are the me-toos, he says. His insights come from 15 years of experience in the Triangle’s venture capital industry, first at Franklin Street Partners and then Idea Fund Partners. The elder Moore was a former investment banker who founded Trident Financial Corp., which sold to KeyCorp in the late 1990s. 

“There will be successful companies that come out of it, without a doubt,” son Moore says. “But I’m 100 percent certain we’re in a bubble.”

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