Why hasn’t Charlotte Angel Fund invested in any Charlotte-based companies?

Why hasn’t Charlotte Angel Fund invested in any Charlotte-based companies?
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(Note: This is a new monthly startup series authored by Charlotte investor Greg Brown, the administrator of the Charlotte Angel Fund, where he will discuss the current batch of startups presenting to the fund’s membership as well as topics that may be of interest to those who care about Charlotte’s entrepreneurial community.)

There’s no sense avoiding the elephant in the room. We have invested in six companies to date, none of which are based in Charlotte. Let’s talk about that.

The data

Believe me, I hear and read the comments of those who think that Charlotte’s angel investors are biased against Charlotte-based companies or are simply overlooking local investment opportunities. That was part of the motivation for the recent survey that we performed of Charlotte’s angel investor community. The survey data indicates that one-third of the angel and venture capital investment made by Charlotte-based investors has gone to companies from Charlotte. If anything, I would argue that the results indicate a bias towards investing in Charlotte companies.

OK, if investors are biased towards investing locally, why aren’t there any Charlotte-based companies in our portfolio?

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We’re looking.

In 2015, we had seven companies from Charlotte among the presenters at our monthly meetings. In the first half of 2016, we had four Charlotte-based presenters with another two from Charlotte scheduled for July. With continued maturation of Charlotte’s entrepreneurial community, we will likely see increasing numbers of Charlotte-based presenters at our meetings.

It shouldn’t be assumed that we’ve looked at and passed on investment in any particular company.

Sometimes we simply don’t have an opportunity to invest. That is particularly the case when founders are able to provide the initial capital from their personal resources or have ready access to angel investors with whom they are already familiar.

It also shouldn’t be assumed that if we look at and happen not to proceed with a particular company that we don’t like that company or its founders. There are a myriad of stars that have to align in order to proceed with an investment, and it could be the case that a particular opportunity simply doesn’t fit within our financial model or isn’t in an industry sector that aligns with our areas of interest.

Lastly, there are times when an investor proposes to put money into a startup but the terms of the proposed investment are not acceptable to the company. That has been the case for us on one occasion with a Charlotte-based company.

I am confident that we will end up with multiple Charlotte-based companies in the Charlotte Angel Fund portfolio.

Charlotte’s challenges

While Charlotte’s entrepreneurial ecosystem has recently advanced by leaps and bounds, there is certainly room for continued growth.

  • The survey results linked above indicate that over the past five years, the 61 respondents invested $36 million into early stage companies. That is a significant figure, but of course more would be better. Expanding the number of Charlotte residents who are comfortable making investments in early stage companies is a part of the reason for Charlotte Angel Fund’s existence.
  • Charlotte trails other cities in terms of corporate and university-based R&D spending. This means that we have less technology innovation occurring in our city, and therefore less of the technological raw material that is often the foundation of highly scalable startups. The result is that Charlotte-based startups are often services-based (can be difficult to scale to the degree necessary to product angel or VC investor target rates of return) or some version of an “Uber for X” model (successful models do not necessarily apply to other markets). Increasing the degree of interaction between entrepreneurs and investors via initiatives such as Pitch Breakfast will help align startup initiatives with areas of investment interest.
  • Because Charlotte’s economy isn’t heavily populated by entrepreneurial companies, it isn’t home to a lot of people who have had the experience of being in an entrepreneurial environment. At times I see this evidenced in a lack of understanding of startup company norms. Continued evolution of our startup scene will resolve some of this, as will the infusion of individuals with entrepreneurial experience who are moving to Charlotte for quality of life reasons. Hopefully these monthly articles will have a positive impact on founder understanding of investor perspectives, and ultimately help more companies get funded.

Who is presenting to Charlotte Angel Fund in July?

Our lineup of presenters this month is as follows:

2ULaundry

2ULaundry is a Charlotte-based subscription-based laundry and dry cleaning delivery club. They are looking to expand upon the services that they offer as well as introduce their services in additional cities, with Raleigh being next on their list.

Green Badger

Green Badger offers a SaaS platform used by building developers to streamline the process of achieving LEED certification for their projects. The Savannah-based company seeks to leverage its initial customer relationships for significant expansion in 2016 and 2017.

T1V

T1V is a Charlotte-based company that creates interactive experiences for retail, corporate, and education markets. Their solutions take the form of interactive tables and walls as well as digital signage.

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