North Carolina Venture Capital Trends

In case you haven't seen it, the Center for Entrepreneurial Development recently published its 2019 Innovators Report.  It contains  venture capital data going back to 2015, covering funding, funders, deals, and exits. The report explores a number of useful categories, including year-over-year comparisons, sectors, locations, funding and investor types and much more. 

Its great to see the entrepreneurial activity in the Triangle area (and the rest of the state) is doing well.  Kudos to the team at the CED for pulling this together.


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Reflections After a Year in Raleigh-Durham

As you know, Red Rocket opened an office in the Raleigh-Durham area a year ago.  As I was reminiscing on my life changes over the last year, I thought it would make for a good blog post for any of you looking to break into a new market, or perhaps considering a move of your own.

RALEIGH-DURHAM VS. CHICAGO, AS CITIES

• Chicago is one of the most world-class cities, with around 9MM in the metro region, and the business community largely centralized in or near downtown Chicago.  The RDU area, in comparison has 2MM people in the metro market, geographically spread across very disparate cities (e.g., Raleigh, Durham, Chapel Hill, Cary, Morrisville).  The RDU area lacks the identity of being one central city, and the competition between the cities that comes with that.
• The Chicago economy has a lot of challenges with Cook County and the State of Illinois near bankruptcy, with rising taxes resulting in a leaky bucket of a slowly declining population.  The Raleigh-Durham area, on the otherhand, is exploding.  The population is forecasted to approximately double to 3.5MM over the next 20 years, creating new tax revenues.  Both Amazon and Apple are giving Raleigh a serious look for adding tens of thousands of jobs in the region, with new second headquarters locations.
• Chicago is a pretty diverse city in terms of industries served, including companies the technology, advertising, financial, retail, manufacturing, hospitality, consumer products, aerospace and other industries.  The Triangle area is very deep in technology and life sciences, as their primary industries served. And, the technology here is much more B2B facing, with a much smaller B2C community.
• The pace of business is a lot faster in Chicago, with a bigger sense of urgency to move at light speed.  People moving to the Triangle area, often do so to create a better lifestyle.  So, a lot less late nights and rush to get things done quickly in the area.  Which can be a good thing, or a bad thing, depending on your perspective.

RALEIGH-DURHAM VS. CHICAGO, AS STARTUP ECOSYSTEMS

• Chicago is a much more mature startup ecosystem, built over decades.  You have seen serial entrepreneurs build one successful startup after another, and reinvesting their "winnings" from their prior companies, back into the ecosystem with their next companies, spreading equity deep and creating hundreds of millionaires in the process.  Chicago has clear leadership propeling the ecosystem forward, in terms of what it wants to become in future years, and is flush with capital from investors across all stages of investment.
• The Triangle feels like Chicago about 10-15 years ago.  It has all the ingredients to make for a successful startup ecosystem, with a lot of key players in town trying to take the region to the next level.  But, the region is desperately short on capital, and needs more funds in town to support the local startups.  And, only a handful of entrepreneurs have built unicorn scale companies, with equity largely concentrated with the founders, many of which have not reinvested their "winnings" back into the startup community.  For this reason, many of the successful startups, typically sell much earlier in their growth curve, than their Chicago counterparts, and include a lot more "first timers".
• Both markets have world-class universities to lean on for talent and research innovation.  Chicago with greats like Northwestern and the University of Chicago. And, the Triangle with greats like Duke, North Carolina and North Carolina State.
• Both markets are equally conservative, not wanting to make mistakes with their venture capital investments.  Both markets equally unlike Silicon Valley with their "failure is a badge of honor" mindset, not afraid to swing for the fences on long shot game-changing ideas that may explode to success, or miserably flame out.
• Chicago invests about 2x the amount of venture capital into startups than the Triangle area does each year, most of which into the technology industry.  Raleigh-Durham splits its investments between the technology and life sciences industry.  So, that means there is about 25% of the capital going into tech startups in the Triangle area, as compared to Chicago.
• Both markets have equally warm and welcoming members of the startup ecosystem.  I had no trouble meeting about 200 key influencers in town over the last year, all willing to welcome me to the market and offer whatever assistance they could.  Just as easily as I could in Chicago.

MY PROFESSIONAL LIFE

• I typically like to work with growth stage B2C companies.  Those basically don't exist here in any material quantity.  Many of the B2C startups that have to gotten to that point, are sold beforehand.  So, it is like looking for needle in the haystack for B2C.  But, there is plenty of B2B here to keep me busy.
• I am loving running our newest acquisition, Restaurant Furniture Plus.  I am glad I was able to find a good business, that was not in the region, that could easily be managed virtually from here.  It is so much fun building another business of my own, in addition to my Red Rocket work.

MY PERSONAL LIFE

• I moved to a bigger, newer home for half the price of what I was paying in Chicago.  For example, my real estate taxes dropped from $20,000 to $5,000 a year.  So, I love the cost of living advantages, for largely the same nice suburban lifestyle I left behind.
• Our neighbors are all friendly and welcoming.  We live in the Cary area.  So, there are a lot of transplants from the north, like us.  Both regions lean liberal, politically (which is an outlier within the more broadly conservative state of North Carolina).  And, both regions are very diversified, ethnically and racially.  The people are down to earth here, and less concerned with competing for material things.
• Because the population is growing so quickly, the schools are having a hard time keeping up with the growth, which creates overcrowded classrooms and constant redistricting as they add new schools, in many areas.  But, overall, I think the education experience is actually equal or better to what we left behind, forcing the kids to compete on a bigger stage, sooner than they normally would have, with less hand holding in the process.  We also like how much more diverse the schools are, more representative of the real world.
• Chicago winters were so depressing--six months of grey, cold and snow.  I love the warmer climate here.  Winters rarely have high temperatures below 50 degrees and the sun is always out.  Which means I can workout outside year round.
• The Raleigh-Durham area is surrounded by a lot of great roadtrip opportunities with the kids--two hours from the ocean, three hours from the mountains, four hours from Charleston or Washington DC, etc.  So, we are loving the close proximity to a lot more great weekend trips.  Chicago was largely an island of itself, with not much to do within a few hours of the city.

CONCLUSION

• Both cities have so much to offer.  Chicago a world-class city, and the Triangle a world-class lifestyle.  I love both for very different reasons.  And, startups can succeed in both regions, with a supporting ecosystem.  I am very excited to see how Raleigh-Durham evolves in the coming decade as all the new people and companies move into the region.
• Both cities are ripe with terrificly skilled people to work with, across all needs of the community (e.g., entrepreneurs, lawyers, accountants, bankers, investors, accelerators, community leaders).  So, you can't go wrong professionally or personally.  I am glad we have a presence in both markets.

For future posts, please follow me on Twitter at: @georgedeeb.

Raleigh-Durham's Best Lawyers for Startups

Getting a good startup lawyer right from the beginning, can often be the difference between "off to the races" and "oops, why didn't we think of that before".  Picking a good lawyer often revolves around their expertise with startups, expertise in your industry, expertise for your specific project, bench strength of their firm, affordability, references and personality fit with your organization.  So, speak with several, to assess who is best for your business and liking, before making your decision.

There are several worthy full-service lawyers in the Raleigh-Durham area, with deep expertise in serving the startup community.  Below is a list of some of my favorites (in alphabetical order of law firm name), having met with most of them.  You will be well-served by any of their counsel.

Neil Bagchi at Bagchi Law
Location:  Chapel Hill
Online Bio:  http://bagchilaw.com/team/
Contact:  (919) 537-8159 or neil@ bagchilaw .com
Firm Size: 5 attorneys ($)
Industries:  technology and life sciences
Involvement:  CED, Idea Fund

Jesse Jones at Fourscore Business Law 
Location:  Raleigh
Online Bio:  https://fourscorelaw.com/team/
Contact: 919-307-5356 or jesse@ fourscorelaw .com
Firm Size: 2 attorneys ($)
Industries:  technology and life sciences

Fred Hutchison or Justyn Kasierski at Hutchison PLLC
Location:  Raleigh
Fred's Online Bio: http://www.hutchlaw.com/people/attorneys/fred-d-hutchison
Justyn's Online Bio: http://www.hutchlaw.com/people/attorneys/justyn-j-kasierski 
Fred's Contact:  919.829.4300 or fhutchison@ hutchlaw .com 
Justyn's Contact:  919.829.4337 or jkasierski@ hutchlaw .com
Firm Size: 21 attorneys ($$)
Industries:  technology and life sciences
Involvement:  CED, First Flight, NC IDEA, UNC, NC State, Duke, Launch Chapel Hill, Triangle TechBreakfast, HQ Community, LaunchBio/BioLabs NC

Jim Verdonik or Benji Taylor Jones at Innovate Capital Law
Location:  Raleigh (North Hills)
Jim's Online Bio:  https://www.linkedin.com/in/jim-verdonik-b36b6635/
Benji's Online Bio:  https://www.linkedin.com/in/benji-taylor-jones-283271a/

Jim's Contact:  (919) 616-3225 or  JimV@ InnovateCapitalLaw .com
Benji's Contact:  (919) 673-4301 or Benji@ InnovateCapitalLaw .com
Firm Size: 2 attorneys ($$)
Industries:  technology and life sciences; fintech & blockchain, coin & digital assets
Involvement:  CED, Raleigh Chamber, NCTA, Duke, Campbell, UNC
Other:  Jim wrote the book on crowdfunding.  Flexible fee structures, including deferred fees, task-based billing, flat fees and annual subscription services to fit the needs of each client.

Randy Whitmeyer at Morningstar Law Group
Location:  Raleigh
Online Bio:  http://morningstarlawgroup.com/author/rwhitmeyer/
Contact:  919-590-0369 or rwhitmeyer@ morningstarlawgroup .com
Firm Size: 26 attorneys ($$)
Industries:  technology and life sciences
Involvement:  UNC, Raleigh Chamber, CED, NCTA

Glen Caplan or John Fogg at Robinson Bradshaw
Location:  Chapel Hill and Durham
Glen's Online Bio:  http://www.robinsonbradshaw.com/professionals-Glen-Caplan.html
John's Online Bio:  http://www.robinsonbradshaw.com/professionals-John-Fogg.html
Glen's Contact:  (919) 328-8807 or gcaplan@ robinsonbradshaw .com
John's Contact:  (919) 328-8806 or jfogg@ robinsonbradshaw .com
Firm Size: 130 attorneys ($$$$)
Industries:  technology and life sciences
Involvement:  CED, Duke, UNC, NC State, Exit Event & Groundwork Labs
Some Clients:  Dude Solutions, Automated Insights, Distil Networks, Validic, WedPics, IDEA Fund, Cofounders Capital, Sony Ericsson, Digitalsmiths, Cloupia, ExtraOrtho, Bull City Ventures, River Cities, RTI, Inlet Technologies, Get Spiffy, Filter Easy and Valencell.
Other:  Glen and John both have past experience working in Silicon Valley for Wilson Sonsini (Glen) and DLA Piper (John).

Merrill Mason at Smith Anderson
Location:  Raleigh and Durham
Merrill's Online Bio:  http://www.smithlaw.com/professionals-Merrill-Mason
Merrill's Contact:  (919) 821-6733 or mmason@ smithlaw .com
Firm Size: 130 attorneys ($$$, but willing to consider creative alternatives)
Industries:  technology and life sciences
Involvement:  Launch Chapel Hill, CED, IDEA Fund, HQ Raleigh, Carolina Angel Network, 1789 Venture Lab, Triangle Angel Partners, UNC, Duke, NCSU

Other: We are a team of startup lawyers at a full-service law firm enabling us to leverage in-house tax, employment, IP, licensing, securities and real estate expertise.

Larry Robbins or Chris Lynch at Wyrick Robbins

Location:  Raleigh and Durham
Larry's Online Bio:  http://www.wyrick.com/our-people/larry-e-robbins
Chris's Online Bio:  http://www.wyrick.com/our-people/j-christopher-lynch
Larry's Contact:  (919) 865-2800 or lrobbins@ wyrick .com
Chris's Contact:  (919) 865-2807 or clynch@ wyrick .com
Firm Size: 90 attorneys ($$$, but flexible for lower budgets)
Industries:  technology and life sciences
Involvement:  CED, BB&T, NCTA

Other:  Chris is a former Silicon Valley lawyer with Wilson Sonsini and Harvard Law grad.

If you think I am missing anybody, or think you should be included in this discussion, feel free to add your thoughts in the comments field below.

For future posts, please follow me at:  @georgedeeb.

Raleigh-Durham Private Equity Firms

Following up on our list of Raleigh-Durham Venture Capital Firms & Angel Networks, below is a list of private equity firms in the region, serving later stage companies.  I included a high-level summary of their investment criteria, as communicated on their websites.

Aiglon Capital Mgmt. --  mfg., dist., svs., $20-$250MM revs, $2-$20MM EBITDA.

Capitala Group --  diversified. $3-$10MM checks, under $4.5MM EBITDA, $1BN fund

Cherokee Fund --  brownfield real estate, $2BN managed + VC in env./energy

Davie Poplar Capital --  health, educ., med., svs., mfg., dist. Up to $20MM revs, $500K-$3MM EBITDA, recurring revs., capex light.

Eli Global --  fin., health, ins., mktg., other.

Fulcrum Equity Partners --  health svs. & tech, SaaS, tech-enabled services, $3-$20MM checks, $3-$50MM revs, $204MM fund.  Chapel Hill office of Atlanta based firm.

Halifax Group -- biz svs., franchising, health, infrastructure.  $5-$30MM EBITDA, $25-$75MM checks, $50-$250MM valuations.

Hargett Hunter --  hospitality, restaurants.  $10-$30MM checks. $150MM fund, 5-50 stores.

Hawthorne Capital --  health, tech.  $3-$20MM checks.  $2-$100MM+ revenues.

Investors Management Corp. --  diversified, franchisable.  $5-$25MM EBITDA.

Meriturn Partners --  diversified.  $20-$300MM revs, control oriented.

Morgan Creek Capital --  health, energy, nat. resources.

Mosaic Capital Partners --  biz svs., chem., CPG, env., food/bev.., health, dist., mfg., log..  Over $10MM revs, reliable cash flow.

NovaQuest Capital Mgmt. --  life sciences, health.  $1.6BN mgd, $20-$100MM revs, up to $500MM valuations.

Plexus Capital  --  diversified.  $950MM mgd., $12MM average check, middle market.

Triangle Capital Corp. (TCAP) --  mfg., dist., transport, energy, comms., health, restaurants, other.  $5-$50MM checks, $20-$300MM revs, $5-$75MM EBITDA.


OTHER PRIVATE EQUITY FIRMS IN NORTH CAROLINA (INVESTING IN REGION)

Blue Point Capital Partners (Charlotte) -- eng., env., ind., metals, dist.  $20-$300MM revs, over $5MM EBITDA.

Cadrillion Capital (Charlotte) --  info., health, agric., biz svs., fin., other.  Over $1MM EBITDA.

Carlyle Group (Charlotte) --  aero., defense, govt., cons., energy, fin., health, ind., RE, tech, biz svs., telecom, media, transport.  $53BN mgd., $130MM average check.

Carousel Capital (Charlotte) --  biz svs., cons. svs., health svs.  Over $3MM EBITDA,  up to $150MM valuation.

Coleville Capital (Charlotte) --  mfg., dist., biz svs., diversified, ind.  $10-$100MM revs, $2-$6MM EBITDA.

Copeley Capital (Charlotte) --  health, svs., bldg., waste, ind., CPG.  Over $2MM EBITDA.

Falfurrias Capital (Charlotte) --  cons., food/bev, biz svs., fin., mfg., ind., energy, health.  $3-$25MM EBITDA.

Fidus Investment Corp. (Charlotte) --  diversified.  $10-$150MM revs.

Five Points Capital (Winston-Salem) --  biz svs., ind., mfg., dist., health, educ., tech., mfg.  Over $3MM EBITDA, $5-$25MM checks.

Global Endowment Mgmt. (Charlotte)  --  manage money for foundations

Kian Capital (Charlotte) --  biz svs., dist., health, mfg.  $5-$15MM checks, $15-$150MM revs, $2-$15MM EBITDA.

Pamlico Capital (Charlotte) --  biz svs., comm., health, tech.  $15-$200MM revs, $20-$100MM checks.

Ridgemont Equity Partners (Charlotte) --  ind., svs., health, energy, telecom, media, tech.  $25-$100MM checks, $5-$30MM EBITDA.

Salem Investment Partners (Charlotte) --  biz svs., mfg., CPG, dist., recurring revs.  $1MM+ EBITDA, $10MM+ Revs, $2-$10MM checks.

Summit Park (Charlotte) --  biz svs, cons. svs., mfg., dist.  $150MM fund.  $20-$100MM revs, $4-$12MM EBITDA.

Tidewater Equity Partners (Wilmington) --  mfg., svs., tech, fin., energy, retail, health.  $10-$30MM revs, $1-$3MM EBITDA.


Be sure to dig deeper on their websites to make sure they invest in your specific industry, revenue stage, geography and desired minority/majority deal structure before reaching out to these investors. Red Rocket can help make introductions to many of these investors, so please leverage our relationships here.

For future posts, please follow us on Twitter at: @RedRocketVC

Raleigh-Durham Venture Capital Firms & Angel Investor Networks

Below is a list of selected venture capital firms and angel investor networks that are actively investing in the Raleigh-Durham area.  Most are split between a technology or life sciences focus, although many invest in additional industries, as well.  Please research them at their linked websites, to see who may be the best fit for you.  I organized this list in terms of stage of investment focus, from early to late stage investors.  So, please don't reach out to VC's if you do not fit their target criteria.  And, be sure to research their specific technology focus on their websites (e.g., healthcare, education, digital media, SaaS), to make sure your business is a fit for them.  Also, as a reminder, don't blindly cold call these companies.  It is always best to have a warm intro into one of their partners, where Red Rocket or others may be able to help here.

ANGEL INVESTOR NETWORKS IN RALEIGH-DURHAM

Carolina Angel Network --  UNC angels for UNC related entrepreneurs

Carolina Seed Investors --  life sciences focus

Duke Capital Partners --  Duke angels for Duke related entrepreneurs

Eagle Angel Network --  UNNC angels for UNNC related enterpreneurs

Investors' Circle --  impact investing

RTP Angel Fund -- for promising startups based in North Carolina or the Southeast

RTP Capital Associates --  technology centric, or low-tech execution driven

Triangle Venture Alliance --  UNC, Duke, NCSU, NCCU consortium of networks

Wolfpack Investor Network --  NC State angels for NC State related entrepreneurs

xElle Ventures -- women angel network for women entrepreneurs


SEED STAGE (Up to $250K checks from $0 revenues)

Althing Ventures -- AI infrastructure, energy, aerospace, robotics

Attic Ventures -- pre-seed creation stage

Cape Fear BioCapital -- therapeutics focus

Champion Hill Labs -- technology focus 

Contender Capital --  technology focus

Front Porch Venture Partners -- represent family offices looking for startups

Harbright Ventures -- technology, services, healthcare, industrial focus

North Carolina Venture Capital Fund --  technology focus

Primordial -- pre-seed tech companies based in the Triangle area

Resilient Ventures --  African American founded and owned businesses.

Revolution Ventures--Rise of the Rest Seed Fund --  sector-agnostic (Raleigh office of  D.C. firm)

Solidarity Capital Group --  social impact (community dev, economic dev, sustainable agric., energy/environmental, social finance)

Sustainable Food Ventures -- sustainable food products

Triangle Tweener Fund --  regional index fund spreading money across early stage companies.


EARLY STAGE (Up to $1MM checks in up to $1MM revenues) 

Animal Capital -- consumer tech, fintech, health, and media via creator economy (100MM social)

Bull City Venture Partners --  software, internet focus

Cofounders Capital --  software focus

IDEA Fund Partners --  technology focus

Morgan Creek Capital -- blockchain focus

Oval Park Capital --  deep technology and enterprise software

SERIES A STAGE ($1MM-$5MM checks in $1MM-$5MM revenues)

Cherokee Investment Partners --  real estate, environmental, energy, others

Jurassic Capital --  B2B software

SJF Ventures --  impact investing

Topmark Partners -- technology focus (Chapel Hill office of Tampa firm)

Union Grove Venture Partners --  data, agriculture, retail, and food tech


SERIES B  STAGE ($5MM-$20MM checks in over $5MM revenues)

Fulcrum Equity Partners --  healthcare and technology focus (Chapel Hill office of Atlanta firm)

Hatteras Venture Partners --  life sciences focus

Intel Capital --  technology focus (corporate backed by Intel)

One Better Ventures - mission-driven consumer brands

River Cities Capital Funds --  healthcare and technology focus

True Bridge Capital Partners --  into funds early or mid-to-late stage direct, tech focus


ALL STAGES

Echo Health Ventures --  healthcare focus

Pappas Capital -- life sciences focus


STARTUP STUDIOS

Acorn Innovestments -- advanced materials that solve environmental issues

Bluedoor --  healthcare technology

Bootstrap Advisors --  niche consumer products, online training,  telehealth focus

Disruptive Enterprises --  food & beverage focus

8 Rivers -- sustainable infrastructure innovations in future-critical areas

Excelerate Health Ventures -- healthcare focus

The Launch Place --  generalist

Rex Health Ventures --  UNC related, healthcare focus

Sherpa Collaborative --  consumer products focus

OTHER NORTH CAROLINA FIRMS WHO INVEST IN RALEIGH-DURHAM

Asheville Angels (seed stage, Asheville)

Blue Ridge Angel Investor Network (seed stage, Asheville)

Charlotte Angel Fund (seed stage, Charlotte)

Double Time Capital (growth stage, Charlotte, sustainable energy)

ECU Investor Network (seed stage, Greenville)

Frontier Capital (growth stage, Charlotte)

Lowe's Ventures (all stages, Mooresville, emerging tech, retail tech, home tech)

North Carolina Innovation Funds (Charlotte, state fund co-invests behind other VCs)

Piedmont Angel Network (seed stage, Winston-Salem)

SunBridge Partners (early stage, Charlotte, technology with global applications)

VentureSouth Piedmont (angel network, Piedmont area)

Wilmington Investor Network (seed stage, Wilmington)


OTHER FIRMS

I would also recommend reaching out to investors outside of North Carolina who are open to investing in the region.  So, research venture investors in the surrounding states in the Southeast.  Or, even further beyond, as I know a lot of Chicago venture capitalists are open to investing in smart companies, wherever they are located, and for the right companies, Red Rocket can make introductions to our relationships there.


For future posts, please follow me on Twitter at: @georgedeeb.