Last year, the RTP-based biotech company Humacyte raised $150 million, raking in the largest life science investment and the second largest of all deals in North Carolina in 2015.
The company took an unusual—but increasingly more common—path to raise the funds. Rather than approaching venture capitalists or angel investors, executives signed on as investors 27 family offices from places as far flung as Hong Kong, Dubai, Russia and Kuwait. Only a few investors were from the U.S.
Humacyte’s story is significant because it highlights several trends in North Carolina’s startup ecosystem, all of which contributed to a blockbuster 2015 that brought nearly $1.2 billion in equity funding into the state, a 122 percent increase over 2014 dollars.
The Council for Entrepreneurial Development (CED) unveiled the impressive stats from its 2015 Innovators Report report this morning. Humacyte’s CFO Paul Boyer and tech founder Karl Rectanus of Lea(R)n joined the CED executives to share their stories of raising funds from unconventional, and increasingly out-of-state investors, helping to paint a picture of a very different funding environment from just two years ago, when CED started collecting in depth funding data from 1,500 companies around the state and producing the biannual report.
CED predicted last September that the state would have a banner year of funding if investments in the second half of the year kept pace with the first two quarters. Reality far exceeded expectations. Total equity funding represented a 122 percent increase from 2014 and a 200 percent increase from 2013. And the funding total isn’t even complete—CED is still waiting for the federal government to release the amount of grant funds dispersed to NC companies in 2015.
CED reports the size of deals has grown too. On the tech side, AvidXchange, Inc. in Charlotte raised the largest round at $225 million. Humacyte’s $150 million series B raise topped the life science companies. The median deal size was roughly $900,000 for tech companies and just over $1.9 million for life science companies. The overall median deal size is $1.1 million because many funds go toward the seed rounds of early-stage companies—89 deals were less than $1 million.
While mid-year, it looked as if life-science companies were going to significantly outpace tech companies in deal size and investments, the final numbers show that tech companies mostly caught up to life science in deal volume. Life science companies did outrank tech companies by about $67 million to total almost $584 million. Tech investment hit nearly $516 million.
More M&A, less IPO
Another trend noted in mid-year stats—the demise of the IPO—did continue. Only two IPOs were filed in 2015. But overall exit activity rose in 2015, with 22 mergers, acquisitions and buyouts. Acquisitions included Ansible’s sale to Red Hat, Netsuite’s acquisition of Bronto and Valeant Pharmaceutical’s $1 billion purchase of Sprout Pharmaceuticals.
It’s hard to say if M&A activity will continue with less than two months of data so far in 2016. But CED’s leaders see strong activity at the seed stage as a strong indicator that there is a “really strong pipeline” both in tech and life science, and increasing in AgTech and clean tech. Industry diversity continues to be a huge asset for the state.
Impact of national speculation/over-valuation
With such a big 2015, it’s hard to imagine topping these numbers in 2016. Especially since the stock market has taken a dive, investors are being more cautious and valuations are down.
But CED’s data seems to show companies being more resilient because they’re less reliant on traditional funding sources. They’ve also maintained reasonable valuations, which could prove to be an advantage for NC since the high-valuation companies or those seeking to be highly-valued are taking hits in different parts of the country.
Along with CED and the rest of the region, we’ll be closely monitoring investment activity in 2016, so stay tuned. But in the meantime join us tonight from 8-9 p.m. for a Twitter chat with CED’s Dhruv Patel, who compiles the stats for the Innovators Reports and stays in regular touch with dozens of investors around the world. He’ll be answering questions about today’s data dump and what it means for local companies and the community.
