CARY – Cofounders Capital, an aggressive investment firm focused on early-stage companies with 18 deals on its books, is looking to ramp up investing with a new $20 million fund. And in a strategy shift, Managing Partner David Gardner plans to leverage that new cash by making later-stage deals in order to attract more money from out of state investors.
In an interview Wednesday afternoon, Gardner said more than 70 investors had lined up to participate in the fund. Cofounders had been operating off an initial fund of $12 million.
Regulations prohibit Gardner from talking about whether Cofounders will seek to raise even more money. But he didn’t rule it out.
“We filed for up to $50 million with a minimum closing of $20 million, so when we hit that mark, we chose to announce it,” he told WRAL TechWire.
Gardner said the round attracted “a lot of sophisticated investors, CEOs and successful entrepreneurs” for the round.
He and Cofounders Partner Tim McLoughlin [pictured above on left with Gardner] disclosed two high-proflie investors:
- Serial entrepreneur and ChannelAdvisor co-founder Scot Wingo
- Ven Poole, CEO of Waste Industries
With the new fund, Gardner said Cofounders will continue to fund early-stage startups. However, money also will be set aside to make followup investments as startups look for expansion capital.
“We have a real problem here in early-stage companies getting first-round funding,” Gardner said. By putting money into deals of several million dollars itself, Cofounders can more easily convince investors from out of state to co-invest.
“It makes it a lot easier to sell if we say we will put in $3 million, $4 million of $5 million,” Gardner said.
Gardner says investments made to date by he and McLoughlin enabled the raising of funding, which began back in December.
“We’ve made 18 investments and they are all still in business,” Gardner said. “That’s very unusual for an early-stage seed fund.”
While exits – such as through M&As or an IPO – have yet to make money for Cofounders, Gardner said the firms they back “are all great companies.”
In announcing the fund, Gardner also praised the startup ecosystem across the region.
“We were able to fully invest our first fund earlier than we expected because of the tremendous deal flow in the underserved Triangle area,” he said. “Our investment strategy for our second fund is to repeat the successful formula we used for our first fund – identify the best early-stage Triangle-based B2B software ventures and provide hands on management advice and industry connections to accelerate their time to market and sustainable revenue growth.”
Wingo and Poole added in the announcement that they support Cofounders’ strategy.
“We need more funds like Cofounders here that aren’t afraid to be the first money in a very early stage venture and then provide hands-on help especially during that critical first year of business,” added Wingo.
Said Poole: “If we want to keep our brightest entrepreneurs here and attract larger later stage capital into North Carolina, we have to support early stage funds like Cofounders.”
Cofounders also provides startup space.