RESEARCH TRIANGLE PARK – Investors changed their behavior after the onset of the global coronavirus pandemic, a panel of four Triangle-area investors discussed at the Startup Summit event held in person at the RTP Frontier earlier this week.
But not necessarily in expected ways.
Sure, more deals came together on Zoom than in-person, said Mark Friedman of RTP Capital. But, on the whole, one trend that Friedman and a syndicate of investors noticed recently is that the size of investing shifted.
“Investment levels, generally, were lower,” said Friedman. “One of the things I came to realize that the biggest thing for our member network, like RTP Capital, was that we couldn’t look an entrepreneur in the eyes.”
Investors do still believe that in-person meetings can make a difference, including a difference for entrepreneurs. That’s because without meeting in person, said Friedman, investors didn’t have as much of an ability to navigate risk or to build rapport.
“You were able to relate to the entrepreneur when you met in person, and it was really difficult to do by Zoom,” said Friedman. “It was subtle, it took a while to realize that it was happening, that relationship was really tough to build.”
Tobi Walter, with Cofounders Capital, noted that all partners in the firm agreed they wouldn’t invest in any company whose founder or founders they hadn’t met in person in the early months following the onset of the COVID-19 pandemic.
But Keith Daniel, founder of Resilient Ventures, said that his firm invested in two companies without ever meeting the founding team in person. “Entirely by Zoom,” said Daniel, who noted that each firm had been referred by trusted members of the company’s network.
“We are going against the odds, so to speak, our thesis is undervalued, underrepresented,” said Daniel, noting that most businesses in the black community are currently structured as sole proprietorships, and Resilient Ventures is working to expand access to capital, networks, and opportunity to African American entrepreneurs.
“We talk about adaptation, being resilient, making pivots, using technology, maxing out technology,” said Daniel. Those are the companies for whom a partnership with Resilient Ventures could make sense.
Entrepreneurs interested in fundraising ought to start that process early, Daniel and Friedman both noted.
“Part of the key determination is what kind of money, what kind of investors, and the work behind all of that,” said Daniel.
“Start building relationships early,” added Friedman. “It’s much easier when you start early.”
The Triangle is different, for entrepreneurs and investors
One thing that entrepreneurs based in the Triangle do have in their favor, according to the panel?
Investors in the Triangle region are collaborative, each panelist noted. And, speaking for each of their colleagues and peers, each investor noted that they actively sought out conversations with early stage entrepreneurs, to provide advice, guidance, and support.
“Investing should be a team sport,” said Walter. “A good example is answering the question about who should a company approach about funding.”
“In our jobs, it truly helps, one of the things that I’m fighting, in the VC world, is that people are too stingy with their time, but I truly feel, that for institutional investors, that is our job,” said Walter.
“We’re making connections for the future,” he said. “Every NC company that we could help build will create dividends for us,” Creating new angel investors, new investors in the fund, creating new companies, driving new companies.
Friedman noted that the Triangle’s investor community, and its entrepreneurial community, often get high marks for collaboration and teamwork from out-of-region experts.
And due to the pandemic, that collaboration has actually increased, said Friedman, and a monthly meeting of investors now held on Zoom expanded during the last 18 months, with investors from across the state of North Carolina now participating.
That’s happening as Charlotte, Asheville, Wilmington, the Triad, and other towns, cities, and regions across the state are expanding their own entrepreneurial ecosystems, said Friedman. “Syndicate is all across the state, now,” he said.
What matters most to investors, though, is that first-time entrepreneurs are consistent in their vision, are coachable, and are effective in communicating, whether in-person or in a virtual setting, the panel discussed.
Entrepreneurs must be persistent, show that they’re coachable, that they listen, said Karen LeVert of Pappas Capital.
“We have to understand how you’re going to perform as an entrepreneur,” she noted.
And, for companies seeking angel investment, said Friedman, entrepreneurs must understand the reasons that people become angel investors.
“The vast majority of investors want to make money through your company,” said Friedman. “But for an angel investor, there’s so much more to it.”
“Angels, very often, almost always, believe that their investment may help,” said Friedman, adding that investors also believe that their connections, their industry experience, will be important for the company’s success. And that’s what matters, said Friedman. “Investors get energized by the entrepreneurs they work with.”