Editor’s note: David Gardner, a serial entrepreneur, investor and the driving force behind Cary-based Cofounders Capital, is a regular contributor to WRAL TechWire.
CARY – As they do every year, the Bull City Venture Partner team put together another great conference recently focused on the venture capital outlook for 2018. The event was held at the Carolina Theater in Durham and hosted some excellent key note speakers and panels made up of seasoned venture capitalists and major angel investors from all over the east coast. It was interesting to compare and contrast the numbers being presented at the conference from a national and southeast perspective to those presented in the CED Venture report focused exclusively on North Carolina the week before.
IT investing in NC outpaced life science investing for the first time with an amazing 277% increase over 2016. This is in sharp contrast to national trends as Bobby Franklin, President of the National Venture Capital Association, pointed out that angel investing in the US as a whole has declined over the last four years running, dropping 60% since 2014. The reluctance of many angel and university investment groups to lead early stage rounds has lead to an explosion of micro VC funds to fill the gap.
NC may not be bucking the national trend as much as it appears. Nationally, one in every four VC dollars goes to a Unicorn, a company with a valuation over one billion dollars. In NC last year, 40% of IT investment dollars went to just two Charlotte-based companies, AvidXchange and SmartSky Networks.
When asked why his firm did not have an office here or do more investing in NC, Paul Martino, General Partner at Bullpen Capital, said that he would need to see “a lot more seed activity” in NC to invest more of his company’s resources here. Without a large and steady stream deal-leading term sheets, NC will continue to find it difficult to attract larger, later round Investment firms to the area.
The presenters all seemed to agree that 2018 should be an awesome year for those doing seed investing. Seed valuations are low due to increasingly less seed round capital, while at the same time later stage funds have raised more investment dollars than ever.
I left the conference with a reinforced feeling I’ve had for years. The way to radically improve the flow of big venture capital into NC in the future is to focus on expanding our early stage investment funds and dollars at work here today. Specifically, we need funds that are focused on participating and leading first-money-in rounds. Larger VC firms are not going to fly to NC to deploy small amounts of capital into early stage companies. We have to do that ourselves. Venture Capitalists are willing and eager to deploy a lot of big later stage capital here but only in proportion to our commitment to increased our seed stage investing activity.