But investments still are scarce for entrepreneurs who often need funds the most – “seed” startups. When it comes to “Top Ten” lists, venture capital statistics are not something David Letterman everwould consider for “The Late Show.” But those figures serve as an important barometer of the business climate – especially for entrepreneurs – in the nation’s economy. And since the height of the2001 Internet/”dotcom” boom, VC investments have plunged about as fast as the percentage of all those new economy firms who ultimately discovered that survival meant paying bills and selling productsjust like in the old economy.
But amidst the doom and gloom nationally has come some good news for North Carolina, and in particular RTP.
The percentage of VC money coming to North Carolina continues to grow, and so far in 2003 the state is generating more money than a year ago. Through April 10, North Carolina has raised $92 million in 14 deals, according to tracking by LTW compared to $85 million a year ago.
Figures compiled by the Council for Entrepreneurial Development, PricewaterhouseCoopers (PwC) and Venture Economics also show that North Carolina cracked for the first time the “Top Ten” in financing for 2002, ranking ninth among the 50 states.
North Carolina firms generated 88 deals worth $547 million. Another $20 million in VC would have vaulted the state past Georgia into seventh place. More importantly, however, is that North Carolina firms are attracting a higher percentage of what funds are available.
Jeff Barber, partner in charge for PwC, used the same figures in pointing out to Local Tech Wire recently other trends he saw in the figures. “For the first time ever, we have topped more than 2 percent of the total amount of venture capital invested in the United States,” he explained. “I think that’s great. “Tracking U.S. investment dating back to 1996, Barber said the $547 million represented 2.6 percent of the US total. NC’s share had not topped 1.8 percent before. “We’re rebounding faster than other people,” Barber said. North Carolina firms raised more money in 2001 – $63 5 million but that was 1. 5 percent of the national total. Even in its best year, 2000, North Carolina raised just 1.7 percent of the national total, some $1.8 billion. “We’re extremely pleased about North Carolina’s venture progress in this uncertain economy,” said Monica Doss, president of the CED, in CED’s annual venture capital report. “However, we mustn’t rest on our laurels.”
She pointed out that North Carolina ranks third in biotechnology and life science fund raising. But Doss also noted that most funds are going to more established startups who are raising later rounds.
“Seed” companies received only 0.8 percent of the national percentage, some $4.5 million. That was an 89 percent drop in money raised in North Carolina the previous year. Early stage firms received 11.8 percent, expansion stage 34 percent and late rounds 53 percent. Only late round deals increased in number and value from the previous year.
As the statistics show, left largely in the cold are the true startups that must “bootstrap” firms on their own for a variety of reasons.
One, many so-called angel investors – wealthy individuals were hit especially hard by the “dot-com” collapse and the accompanying meltdown on Wall Street and Nasdaq.
Why are there fewer angels?
“Many of them believe in technology, and they invested in technology,” said Richard Holcomb, a serial entrepreneur who helped launch Q+E Software and HAHT software before rolling out another new venture, StrikeIron. “They lost heavily when the economy turned.”
Barber concurred with Holcomb’s view and said startups simply have to accept the fact money is tight.
“It’s really a sad situation,” he explained. “These small companies that aren’t quite ready for institutional investment rounds really have to bootstrap these companies along.
“I don’t think it’s terribly different than the mid-90s, before we had the big run-up in fundings in 98 and beyond,” he adds. “But a lot of people don’t remember those days.”
What advice can barber offer?
“Look for friends and families,” he says, and the 25 credit cards.”
Copyright Business to Business,Inc. May 01, 2003
