You might call the change in financing for startups in the Triangle and elsewhere across the state the “el Nino of VC in 2015.”

After virtually drying up in 2012, venture capital flowed back into North Carolina startups in 2015. A new report shows that N.C. firms enjoyed a near-flood of money compared to recent years, netting $675 million. That’s the best annual total since the “dot com” boom year of 2000 which produced $1.8 billion.

The only year better than that for the state was 1999 as the “dot com” bloom blossomed, producing $854 million.

The number of deals also surged, hitting 63. That’s the most since 2008.

North Carolina’s surge didn’t happen in a vacuum. Nationally, fundings also rose to heights not seen since the dot com boom, the MoneyTree report found. The state ranked 12th.in a year in which $58.8 billion was invested, the second highest full year total in the last 20 years,

Expanded coverage: WRALTechWire Insider interviews

Q&As with several executives across the spectrum of startups and investing in the Triangle are part of a special report for WRAL TechWire Insider subscribers on the latest MoneyTree investment statistics:

  • From PriceWaterhouseCoopers: Analysis of the “strong year” deal making
  • From entrepreneur/investor Scot Wingo: A strong year but more capital needed
  • From the Council for Entrepreneurial Development: Venture Capital isn’t all there is to a very good year
  • From VC firm Bull City Ventures: The “balance” of deals is strong, and Charlotte is growing as a startup hub
  • From startup investor David Gardner: A good year but more capital is needed – and crowdfunding isn’t the answer

Just three years ago, North Carolina firms secured a meager $201 million in 35 deals. The “deal flow,” as entrepreneurs and investors describe VC activity, has accelerated sharply since then to $262 million in 2013 and $349 million in 2014.

“Strong year for venture investments in the state of NC, primarily in terms of dollars invested, but number of deals is also up,” Laura Robinette of PricewaterhouseCoopers’ office in Raleigh, says. “The dollars invested in the state is at the highest level since 2000.

“Clearly the state is getting more attention from investors outside of the state, which is a good sign.”

The data is part of the PwC MoneyTree venture capital report, which was published Friday.

So what triggered this “el Nino” like change of fortune?

“We are coming off a couple of strong years of IPOs and mergers and acquisitions, which puts more liquidity in the hands of the VC firms for investments,” Robinette said.

Indeed. 2013 and 2014 were banner years for IPOs across the state. In 2015, a slew of acquisitions – especially of Triangle-based startups and emerging companies – added to the news of startup action to investors around the country.

Investment capital based in North Carolina remains scarce, as noted in a recent N.C. Department of Commerce report. But more and more Silicon Valley firms as well as others in Washington, D.C. and the Northeast are finding places in North Carolina to invest.

The Council for Entrepreneurial Development, which is based in Durham and is the largest such statewide organization in the country, says even better news is coming.

“2015 was a great fundraising year for North Carolina entrepreneurial companies,” says CED’s Dhruv Patel, who oversees investor relations.

“Venture data is incredibly important but it is a single element of the overall funding picture,” he adds, but there’s more.

“We will take their 2015 data and add funding numbers drawn from angels and unaffiliated investors, strategics, growth equity, and grants and awards. This total will be released in the first quarter of 2016 in the form of CED’s Innovators
Report.

“A preliminary review of our data suggests 2015 was a terrific year for fundraising in North Carolina.”

Deal flow and dollars raised did fall off in the fourth quarter, but a review of PwC data dating back to the first year it was published (1995) shows just how far North Carolina’s entrepreneurial company soared in 2015:

Year, Deals Made, VC Funding raised

  • 1995, 36, $211M
  • 1996, 60, $181M
  • 1997, 80, $271M
  • 1998, 82, $327M
  • 1999, 104, $845M
  • 2000, 153, $1.8B
  • 2001, 88, $586M
  • 2002, 78, $551M
  • 2003, 76, $379M
  • 2004, 56, $311M
  • 2005, 47, $338M
  • 2006, 58, $423M
  • 2007, 70, $551M
  • 2008, 62, $502M
  • 2009, 39, $245M
  • 2010, 57, $403M
  • 2011, 48, $304M
  • 2012, 35, $201M
  • 2013, 53, $262M
  • 2014, 56, $349M
  • 2015, 63, $675M

Scot Wingo, who co-founded Morrisville-based ChannelAdvisor in 2001 and grew the firm to an initial public offering (IPO) in 2013 as part of the N.C. IPO surge, praised the performance of N.C. firms in 2015. He is part of the funding surge, now acting as an angel investor. But he says what happened last year is not an overnight success story.

“North Carolina is really advancing as a region in the minds (and check books) of VCs. I think 2015 was a strong year, but represents a lot of development that has gone on in our region over the last 20 years,” Wingo said. “Building a startup ecosystem that can generated $675 million in venture investment doesn’t happen over night.”

Jason Caplain, a venture capitalist with Bull City Ventures in the Triangle, and investor David Gardner, who raised a $10 million venture last year, also had praise for what North Carolina firms accomplished. But they lamented the fact that more capital is not available locally, as did Wingo.

“While we have a surge in angel and seed funding here, as you know we don’t have much active institutional investment (series A/B/C),” Wingo said.

Added Gardner: “My world is focused more on very early stage investing but some of my companies have managed to draw in capital from outside the state this year. There is a little more money coming into the state but we need much more A round capital here.”

Caplain said Bull City Ventures constantly looks for partners to syndicate deals – and most of those are with firms far beyond North Carolina.

“There is not enough capital in North Carolina to support our growing ecosystem of companies here,” he said. “Just in our own portfolio from BCVP III, 85% of the capital in our portfolio companies has come from out of state capital sources. Having financing partners outside the region often brings validation, a different perspective and a whole new network.”

Looking ahead to 2016, Wingo and others like the potential of numerous companies showing promise.A recent example of a big exit: Two-year-old software firm Ansible in Durham, which Raleigh-based Red Hat acquired for some $100 million.

Those types of “exits” are what investors want to see.

“I think it definitely helps,” Wingo said of the exits,”but we have also had some good IPOs as well and most investors are using the criteria of growth rate, scale, category, team, entrepreneur and what-not vs. exits in the region specifically.”