According to the Council for Entrepreneurial Development’s (CED) just-released Innovators Report, 2015 might be a blockbuster year for investments in North Carolina startups. At least it will be if the second two quarters follow trends set during the first half of 2015, when nearly $427 million was invested in North Carolina companies through 90 deals.
However, IPOs are down nationally and globally, so North Carolina’s is not out of sync with the rest of the country. M&As, meanwhile, tend to be the most popular exit strategy in the Triangle. Leading the pack on the tech side is Bronto Software, which sold for $200 million earlier this year. Salix Pharmaceuticals was the largest sale on the life science side so far, with an $11 billion deal with Canada-based Valeant. Valeant’s other big Triangle acquisition—Sprout Pharmaceuticals—isn’t included in these numbers since the $1 billion deal didn’t close until August 2015.
The Report and its Data
This is the third year the CED has collected, compiled, analyzed and released data on startup activity through the Innovators Report, meaning trends are finally becoming evident and significant. Dhruv Patel, CED’s director of investor relations, developed and standardized a methodology in 2013 to collect and verify information on funding, deals and exits. He’s used the same methodology each year to compile the report.
CED collects the data from a variety of partners like the SEC, National Venture Capital Association (NVCA), the North Carolina Biotechnology Center, Ernst & Young and PricewaterhouseCoopers MoneyTree Report. The organization verifies the data by “doing a lot of detective work” and personally following up with companies and investors. For example, up to $200 million in investment is not included in these traditional reports because they are deals done with private individuals or foundations.
CED announced that data will be released quarterly in the future (as opposed to bi-annually) and is now filterable and searchable in an interactive online database. Siefert Rose says CED developed the new tool because, “there’s a real hunger for this kind of information.”
The year-over-year comparisons allow CED to benchmark the state against itself and to identify key trends in startup activity. To date, no other comparable report has been developed outside of North Carolina, so comparisons to peer states and regions are unavailable.
However, the trends identified in the report can be compared to national and global trends identified by other research institutions like the NVCA or Kauffman Foundation.
For most trends, North Carolina tracks with the rest of the country. Like in North Carolina, Q2 2015 was the strongest quarter for venture capital investments nationally since 2007 according to the NVCA. Companies are also increasingly putting off going public, so IPOs are down nationally and globally—not just in North Carolina.
What is an anomaly when compared to the rest of the country, is the higher investments made in life science companies. In Q2 2015, the NVCA reports that just a subsection of tech companies—software companies—outpace venture capital investments in biotech companies four to one. But like Siefert Rose indicated, the funding pendulum swings rapidly in North Carolina, so tech could be back on top next year.
Stay tuned for more from the CED Tech Venture conference.