One Investor’s Plan to Make Venture Capital Count in Charlotte

Instead of a founder profile, this week we’re taking a look at Charlotte’s investment community. Guest author Sherrell Dorsey interviewed Greg Brown with the Charlotte Angel Fund to ask about his recent survey of local angel investors.

As Charlotte has come into its own to become the dynamic mid-sized city it is today, there has been some concern that the Charlotte technology startup scene has not followed suit. In a survey completed earlier this summer, Greg Brown set out to uncover the numbers behind this concern. Brown is the administrator of the Charlotte Angel Fund, Charlotte’s largest group of angel investors, as well as the founder of Cardinal Finance, which provides fractional CFO and accounting services for companies that do not have the time or budget to hire a full-time CFO.

Brown’s project surveyed, measured and organized Charlotte investors and their deal flow to better assess areas of opportunity for local entrepreneurs. The 61 survey responses were by no means a comprehensive survey of Charlotte’s active angel and venture capital investors. The survey was voluntary and did not include any investors who hold management positions at the company in which they have invested capital. His findings, however, provide a positive, if surprising to some, outlook for the startup community in Charlotte.

“The total of over $36 million of angel and venture capital investment made by Charlotte area residents demonstrates that there is a significant level of early stage capital available in our city,” Brown said in a press release. “That equates to $7 million of investment per year, or 14 startups that can be funded at $500,000 annually by those who responded to the survey.

According to the survey results, Charlotte investors overwhelmingly tend to invest close to home. A full one-third of their capital going to early stage companies in the Charlotte metro area.

“It is interesting to note that while the Raleigh-Durham area is seen as North Carolina’s hotbed for startups, Charlotte investors have deployed more than three times as much early stage capital in Charlotte-based companies as they have in the remainder of the state. Looking at the prospective data, the investors intend to increase even further their commitment to investing in Charlotte, the state of North Carolina, and the southeast U.S.”

Recently, Raleigh-Durham was named number four in the nation in the annual Innovation That Matters report as a top startup hub, noting its strong culture, ecosystem connectivity, and talent diversity. The Triangle has also received nods over the last few years for its investment of venture capital to the reported tune of $184 million.

“There are angel fund managers in the [Research Triangle Park] meeting monthly. It’s been a challenge to not have counterparts to talk with in Charlotte in a similar capacity,” says Brown, president and owner of Cardinal Finance—an accounting and finance service for entrepreneurs. “The broader Charlotte investment and angel community is here…it’s just disorganized.”

Charlotte’s continued entrepreneurial growth, however, is not bereft of quality talent nor wealthy firms and individuals willing to fund them. Brown says that there might be a misunderstanding of what types of projects are receiving local dollars.

“As expected, software and healthcare were the sectors which received the most early stage investment dollars,” commented Brown. “Of note is that Charlotte investors expect to increase their allocation to software over the next five years, with a corresponding decrease in healthcare startup funding.”

According to Brown, high quality deals typically trump locale as far as investment is concerned. As his theory goes, if Charlotte entrepreneurs have a greater understanding of what types of businesses local investors are looking to fund, mapping dollars within the local ecosystem to fundable business ventures could prove to move the statistics in the right direction.

Beyond the survey, Brown hopes to force a discussion about why certain local deals aren’t receiving funding, and to direct focus on improving the quality of businesses ideas gaining access to local investment dollars.

“We want investors to further build biased toward Charlotte entrepreneurs and change the notion that capital isn’t leaking well into the startup and business ecosystem,” Brown said.

Developing a baseline for the type of deal flow Charlotte investors are looking to align their money to, in theory, would propel a class of Charlotte entrepreneurs building businesses in accordance.

However, several questions abound around whether or not matching business ideas to current dollars could mean diluting creative venture projects, or risking implicit bias in an industry known for catering to homogenous pattern-matching that often excludes minority and female founders.

“I’m not at all worried about lack of variety in the Charlotte Angel Fund portfolio, as evidenced by our six investments to date,” explains Brown. “Those have included companies in augmented reality, semiconductors, education technology, medical devices, and [two in] medical diagnostics.”

“It is heartening to see the increased level of attention being paid to Charlotte’s entrepreneurial companies, as it is from that community that the drivers of Charlotte’s economic future will emerge,” Brown said. “Hopefully this survey will enable data-driven discussions between policy makers, entrepreneurs, and investors rather than having to rely upon anecdotes.”