RESEARCH TRIANGLE PARK – Monday’s venture capital report from Dow Jones VentureSource paints a different picture than what active investors and market watchers tell The Skinny.

Rick Smith, WRAL TechWire’s editor and a cofounder and author of The Skinny blog.

Funding dropped to its lowest second quarter total in three years at under $340 million and so far this year deals are slow enough that North Carolina’s startup and emerging company markets might not crack $1 billion as it has two-years running. Even with Epic Games’ NC record-breaking deal of $1.25 billion, 2018 was still a 10-figure year. But investors and market watchers told The Skinny a different story when asked about what they see happening.

“Our deal flow at the very early stage is off the charts,” says David Gardner of Cary-based Cofounders Capital. “We plan to close two more deals this month at over $1M each.”

TechWire notes in its report that Dow Jones didn’t include some deals that had been reported, but every venture report has its own criteria for deal inclusion, so every quarter – and year – figures can vary significantly.

“I’m not sure where they are getting this data,” Gardner says. “I don’t think it includes convertible notes and other investment vehicles that are gaining popularity but don’t immediately show up on a form D.”

Another billion-dollar year?

Asked about the Dow Jones report and what the Council for Entrepreneurial Development is seeing as it prepares its broader capital deals report, Jay Bigelow says:

NC startups raise $337M in Q2, lowest total in 3 years, but …

“Rick, to your first point, we have taken a deep-dive into the funding actively across North Carolina since 2013. It has been our experience no source captures 100% of the deal flow (there are several reason why).

“We haven’t yet closed out our Q2 2019 analysis and we already see almost $475 million in equity funding in this quarter.”

A cool $100 million higher than Dow Jones.

“That tops our Q2 2018 and is on par with our Q2 2017 total funding numbers,” Bigelow adds.

“Combined with Q1 2019 we show almost $600 million in equity investment into North Carolina-based companies thus far.”

So there is momentum for another big year. Yet Bigelow raises a yellow optimism flag, i.e. caution.

“As to the rest of the year, keep in mind there are no certainties in investing and, as we have talked about before, big deals (like Epic in 2018) really do make an impact.,” Bigelow explains.

“That said, given the Q2 funding thus far, the number of companies we talk with who are actively fund raising, the amount of money going into venture funds, and the increased awareness of North Carolina as a good place to make investment, I think we can estimate that 2019 will surpass $1 billion.”

Bigelow bases his comments on what he and the CED team are seeing and hearing around the state.

“We talk with dozens of investors every week (local, regional and out-of-region) . The one consistent theme we hear is a growing appreciation for the entrepreneurial ecosystem that continues to evolve here.,” he says.

“At least once a week we receive a call from an out-of-region investor.

“A few years ago it was more of ‘Huh, I wasn’t aware of what is going on’ and now it’s more ‘I hear great things and want to know how I can get engaged/find the next great company to invest in.'”

Investor, CEO Wingo is pumped

Scot Wingo, CEO of GetSpiffy which just raised $10 million and a very active investor, says a lot of other entrepreneurs and startups are growing while raising cash when needed.

“Despite this [Dow Jones] report, I think both are positive indications,” he explains.

“Some thoughts:

  • “We have 2-4 co’s in NC either at unicorn ($1b valuation) or well on their way – nCino, Pendo, PrecisionHawk and AvidExchange.  When those co’s raise capital, they are going to raise in $100m+ chunks and that’s going to make our number swing around – down when they don’t raise, up when they do, but long-term having 4 >$1b outcomes in NC is a huge win.
  • “For investors there is a ton of great co’s in the seed/A range and it’s exciting to see folks like Jess Lipsom start his 2.0 attempt – that has unicorn written all over it.
  • “On the fundraising/co side, we now have 3 co’s doing early stage and Cofounders just announced $30m for early stage which is a huge win.”

Wingo just doesn’t buy in to the idea that 2019 will be a ho-hum year and he sees a brighter future.

“Could we do better? Sure?  I’d love for more later stage capital to be here,” he says.

“I’d love for more b2c capital to be around,” he adds regarding startup capital, “but we’re definitely making great long-term progress.”

Early-stage pipeline is full

Mark Easley, a serial investor who has been a driving force to make crowdfunding a stronger alternative for startup dollars in NC, also paints in bright colors, not dull grays.

“With regards to the VC report, I am seeing a normal amount of deal flow and opportunities, and there are more early stage startups in the pipeline than ever because of the many new accelerators and incubators that have popped up around the state,” Easley says.

“The activity in the investment crowdfunding space is ramping up as well as startups see the success of the crowdfunding campaigns around the country. So I think we are entering an era of lots of new opportunities for startup investment for both accredited and non-accredited investors.

“Investment crowdfunding rounds tend to be early stage, so they don’t have a lot of impact on the VC community, but they do help show which companies have good traction and potential for growth.”

So what’s the picture you see?