RESEARCH TRIANGLE PARK – A new report from Crunchbase finds that North Carolina is the state with the second-highest increase, on a percentage basis, in venture capital invested in startup companies, behind Michigan, between 2016 and 2020.

According to the data from Crunchbase, North Carolina firms brought in $4.1 billion in 2020, compared to $800 million in 2016, which is nearly a 410 percent increase.

Of course, Epic Games raised $1.5 billion in 2020 in one mega-round, and AvidXchange raised a combined $572 million.

Let’s not forget the rapid rise of nCino in Wilmington (now public) and other unicorns such as Raleigh-based Pendo.

Without large funding rounds, North Carolina’s totals, and its rank among the states, look a little bit different.

“It looks like if you eliminate those large funding rounds, NC would have ranked 14th in VC funding with about $1.3B in 2020,” said Chris Metinko, a senior reporter at Crunchbase News.

The data shows that while the total invested dollars increased dramatically in 2020, the total number of investments made actually decreased relative to 2017, 2018, and 2019.


Cash is flowing, but its heading into larger, later stage funds, David Gardner, founder and managing partner of Cofounders Capital told WRAL TechWire in April.

“The money going into VC funds continues to increase each year but if you look closely, that money is being concentrated in larger, later stage funds,” said Gardner.  “Early stage funds are still well underserved in North Carolina from a capital perspective.”

And, from those funds, there are more likely to be later-stage deals than deals at the seed stage, noted Karen LeVert, venture partner at Pappas Capital and a board member of AgTechInventures.

“These are likely to be later stage deals as funds poured more money into existing portfolios than into new companies,” LeVert told WRAL TechWire in April.  “This is great for later stage companies, not so much so for start-ups.”

2021 could still be a record year for venture capital, especially as Epic Games added an additional $1 billion, increasing its valuation to approximately $28 billion, in April.

2021 shaping up as another record year for venture capital; 37 deals in NC net nearly $390M

“Only 5 years ago $1B in equity investment across the state was considered a major accomplishment,” Hunter Young, the director of capital for CED, told The Entrepreneurship Center at UNC Kenan-Flagler Business School’s Shawn Ramsey, published in a blog post.  “However today, even if you normalize and remove the major billion-dollar fundraisers from Epic Games, the baseline level of investment across North Carolina is now approximately $1.5B, proving the dynamic and growing entrepreneurial atmosphere that currently exists,” said Young.

Most of that capital is coming from out of state, according to Jason Caplain, general partner at Bull City Venture Partners, who told Crunchbase that he’s reviewed data that shows as much as 80 percent of the venture capital money invested in North Carolina companies is coming from out-of-state investors.

Still, North Carolina remains well outside of the top five states in terms of total venture capital invested into companies based in the state, as California, New York, Massachusetts, Texas, and Washington comprise that list.

That could be changing.

Steve Case, founder of AOL and chairman and CEO of Revolution, described the impact of the pandemic on venture capital and company growth and formation as a “shake-the-snowglobe” moment, quoted in the Crunchbase report and also in a recent press statement on the Revolution website.

Case noted research published by Upwork, the “Future Workforce Pulse Report,” that found that the number of remote-based workers could double as soon as 2025.  That’s true across industries that typical attract venture capital, and many established companies, including ones that have announced new facilities in the Triangle, like Apple and Google, are anticipating some remote work, some hybrid work, and other work-location policies to meet the needs of its employees.

The future of the workplace may be changing, and this trend was likely accelerated by the pandemic, many have speculated.  But the pandemic has changed how some venture capitalists are approaching deal-seeking activity, said Gardner.

Cash continues to flow to venture capital funds – but early-stage money remains a challenge

“VC partners used to feel like they had to fly in for board meetings so it was preferred to have investments close by,” he said in an interview this week.  “That is changing with a greater acceptance of virtual meetings as both effective and normal.”

Who else is remote, or geographically-dispersed?  Management teams.  Company leaders are often geographically dispersed, said Gardner, which is more and more often the case for later, larger-stage companies.

North Carolina companies continue to garner attention, and receive support, from local universities and support organizations across the state.  The National Venture Capital Association (NVCA) selected UNC Chapel Hill as its co-host for its third “VC University LIVE” program, for instance, which occurs next month, and provides a certificate program on venture finance.

Established North Carolina companies may not experience much difficulty attracting growth capital, but early stage companies may still face an uphill battle, noted Gardner, especially as the data from Crunchbase shows fewer venture capital deals in the state in 2020 compared to the prior three years.

“I still can’t see a Silicon Valley VC fly to RDU to deploy a small check in a startup,” he said.  “We have to plant those seeds ourselves.   If we don’t plant those seeds then not many big VC checks are going to come here.”