I have been really bad about keeping my blog updated and for those of you that check back here regularly, I hope that you have had a chance to check out some of the other entrepreneur or VC blogs that I list as favorites. There are some other folks that do a much better job at this than me.
As a firm, we have been really busy over the last few months. In fact, it might actually be the most active we have ever been investing. First, dating back to November, we announced our investment in Baltimore, MD-based DoublePositive. Then, there was our April announcement in Durham, NC-based ArtusLabs. Last month, we put out a release about partnering up with Morrisville, NC-based eTix. We have spent a lot of time getting all these across the finish line.
Between all of that, we have been on the road a lot meeting with more entrepreneurs, speaking at different events and of course doing anything we can to support to our existing portfolio companies.
But I wanted to focus on the meetings we have had over the past few months with entrepreneurs - not only the ones here in NC, but ones down in Atlanta and up in the Mid-Atlantic region. Here are some recent observations from those meetings and just other things we are seeing out in the market that affect the entrepreneurial community:
1. Entrepreneurs continue to be frustrated about the lack of early stage capital available in the region. I agree with the entrepreneurs that fundraising is a giant pain in the ass. I also know there aren't a lot of VC firms headquartered here and the angel market isn't as active as everyone would like. BUT the capital is readily available for the great entrepreneurs with great ideas. I think markets are efficient and there is a lot of money out there chasing these deals. From our firm, two of our last four deals are seed deals (guys with an idea, pre-powerpoint). The other 2 were more later stage. But if you are an entrepreneur with a great idea and want to raise capital, you should target not only the VCs here in the region, but also the ones out of state. Speaking about just Noth Carolina, threre are a lot of VCs from the Mid-Atlantic region and Boston that come through here regularly looking for opportunities. There are a handful of west coast VCs that do the same. A good way to figure out who is coming through here is to look at who has invested here since they come back regularly for board meetings. PWC puts out a quarterly list of all the VCs that have invested here. Start with that. If I can help you get your hands on that list, let me know.
2. The IPO market is dead. So, what is the impact on entrepreneurs and VCs? First, companies are needing more capital and as the round sizes increase, sometimes the difficulty in raising the capital does too. Second, we are seeing later stage compaies now put a greater emphasis on getting to profitability sooner. This could be interesting because when the IPO window does open again, there will be a flood of companies filing. And based on what is out there, these companies will be financially healthy.
3. More strategic investors are emerging. This is just something that we have seen pop up in the last 6 months. We are seeing a lot of public tech companies making their 1st strategic investment. We are also seeing the companies that have done this before actually start increasing the size of the checks they write. Both are doing this to help strengthen the relationship and very often to provide a path to acquisition or at least helping create the option. These strategic investors are interesting because unlike VCs, they can be less price and term sensitive. But it comes with strings usually.
4. More strategy consultants are preying on young companies and inexperienced entrepreneurs. So, how do you spot one? Usually they promise to help you raise capital, build out your team, recruit board members, help you find customers and partners. Usually they charge some monthly fee and want some equity in your business. These are usually small firms (1-5 people) sometimes made up of failed entrepreneurs or executives). I just haven't seen this model work out well yet for the entrepreneur. That's why I am so cynical here. If one of them is pitching you and you are considering their help, get strong details on their backgroud and ask for references and make sure you understand the measured results they were directly responsible for in those companies.
5. The next wave of entrepreneurs are on their way! We are definitely seeing what we call "the next wave of entrepreneurs" not only here in NC, but also up in the Mid-Atlantic area and in Atlanta. This is especially happening up in DC with execs leaving companies like Blackboard or AOL and starting their own company. And here in NC, we are seeing folks leave larger companies or even recent grads are talking with us about their ideas. Many of them are very scrappy and quickly gaining traction on only a small amount of capital.