The 52 members in the Triangle arm of a statewide angel group are so bullish on the life science and technology momentum taking place here that they’re raising a new fund that’s more than double the size of the first.
The Inception Micro Angel Fund RTP, so named because of the early stage at which it typically invests in a startup, has put cash into 14 companies since its start five years ago. And though there hasn’t been an exit from the portfolio, leaders are confident enough in the promise to up the ante in fund two.
The group is raising $2.5 million, up from $1.1 previously. It plans to start making investments out of the fund late this year or early next.
IMAF RTP isn’t known for its big bets—the group puts a one-time $80,000 to $100,000 in each company—but it does have a stake in some fast-growing companies like Raleigh-based Xanofi, which manufactures nanofibers used in a variety of applications, from regenerative medicine to biodegradable packaging to bulletproof uniforms.
There’s also Next Glass, a Wilmington predictive software startup that helps users find their next favorite alcoholic beverage. The company completed a merger last summer with Untappd, a social media app for beer lovers. Another is Groundfloor, the real estate crowdlending startup that moved from Raleigh to Atlanta in 2014 and has since raised $6 million to democratize commercial real estate investing.
These startups give a hint at the diversity of opportunities IMAF will consider.
Local angel investors are critical to the growth of any startup ecosystem—they often provide the first capital to help entrepreneurs validate their ideas and get ready for larger funding rounds. And in North Carolina last year, 83 percent of deals funded by Southeast-based angel groups went to companies also based in the region.
Though IMAF is one of just a handful of angel networks here, it has a unique network contributing to its success.
RTP chapter represents larger statewide angel presence
The Inception Micro Angel Fund ecosystem was founded in 2002 by Tim Janke, who at the time served as an executive at the Small Business Development Technology Center office in Winston-Salem.
Over 15 years, Janke launched and directed eight IMAF iterations in the Triad and throughout the state, covering areas such as Cape Fear, Charlotte and in the Sandhills.
The RTP expansion began about seven years ago when Janke reached out to two seasoned and connected entrepreneurs and investors in the region. Bill Warner, a once IBM executive who’s spent 13 years in angel investing and business consulting in the Triangle, and Rich Kramarik, an executive coach and serial entrepreneur, agreed to lead the Triangle chapter as fund executives.
They’ve since recruited a membership base of 51 individual members and one organization, the North Carolina Biotechnology Center. Based on early traction so far, the group is likely to grow with the new fund.
IMAF’s uniqueness in the angel ecosystem lies in the fact that the organization does not invest in a company more than once, a practice not typical among angel groups.
Warner says the policy against repeat investments is in place precisely because of the small size of each investment. Since the average total is shy of $100,000, the fund invests once and only once so that investment decisions are rationalized for what they’re worth. This also makes room for IMAF to diversify its investments—placing money in more companies and in multiple sectors.
Investments are only decided when the group’s members have thoroughly reviewed and discussed the opportunity. The final decision is made when two-thirds of the group says yes. The meticulous process ensures that deals are made with confidence. Warner laughs and adds, “We hunt with one bullet.”
Although IMAF RTP does not make repeat investments as a group, individual members are welcome to make personal follow-on investments. And as another way to engage with companies, IMAF encourages its angels to join boards and mentor portfolio startups along their journeys.
Collaborating with other funds
Warner says each branch of the IMAF network is an independent entity in terms of day-to-day operations, but they’ve all agreed to use the same brand name and work together to syndicate deals. For example, IMAF Sandhills, IMAF Coastal Plain, IMAF East and IMAF RTP co-invested alongside other groups in Durham medtech startup Camras Vision for its 2015 seed round.
Though the investing model is largely unified among all the IMAF locales (following that of the original IMAF in Winston-Salem), Warner says each branch is modified to fit local quirks and niches.
The RTP group will often meet around a table at a coffee shop to discuss deal flow and share industry observations—learning from each other and narrowing in on the deals they think are best. They then swap ideas and insights on promising companies to all the IMAFs in a monthly conference call with members and fund executives.
Warner says the IMAF network also communicates regularly within the larger angel scene in North Carolina and around the Southeast.
“There’s a very tight-knit grouping of angel investors in North Carolina working together,” Warner says. “If you pitch to one of us, we’ll all know about it.”
This collaboration speaks to the fact that IMAF RTP is just one spoke in a larger collective of angel groups throughout North Carolina, but particularly in the Triangle.
For example, last year Duke, UNC, NCSU and NCCU co-launched the Triangle Venture Alliance, a group of university-affiliated angel networks that make individual investments in faculty, alumni, staff or student startups, then share the best deals with each other. The group just made its first joint investment.
Virginia-headquartered nonprofit fund The Launch Place has been active in the region out of a Triangle-based office. And early-stage/seed investment organization RTP Capital was one of the most active angel groups in the U.S. over the course of 2016.
Seeking promising startups
Since IMAF RTP started fundraising in June, the effort to get angels involved is going well, Warner says. He’s getting a strong response from existing members, and the group is also attracting investors who weren’t a part of the first fund.
The new fund is already accepting pitches, though investing won’t happen for several months. The plan is to invest the $2.5 million into promising startups mostly in RTP, but possibly outside of the area as well.
Warner says the companies IMAF RTP has funded in the past include “medical devices and diagnostics on one side, and software-driven technology companies on the other.” Like the first, the new fund will also focus its trajectory toward early-stage life science and technology-focused startups—two areas of marked growth within the Triangle startup ecosystem.
A Council for Entrepreneurial Development report shows that life science and technology claimed the majority of North Carolina deals in Q1 2017, with 18 and 25 investments respectively. This is out of 48 equity investment deals across all industries.
In the Triangle region in particular, 12 life science deals took place, as well as 13 tech deals.
Given the steady flow of capital to these fields and to the region as a whole, IMAF’s second fund shows that investors remain confident and bullish on the Triangle startup ecosystem.