Angel investors, corporate funds and family offices are the story behind a significant jump in funding to North Carolina companies from 2013 to 2014.
March 3, 2015
Funding to NC Startups Jumps 35% in 2014; Tech Funding Up 138%
CED's year-end Innovators Report shows record IPO activity over two years, and impressive investment growth
The Council for Entrepreneurial Development calls them “undisclosed investors.” They aren’t required to report their investments to the Securities and Exchange Commission, meaning they’re left out of national venture capital data that show declines in funding to North Carolina startups in recent years.
According to the CED Innovators Report—what the organization believes to be the first of its kind nationally—total funding topped $622 million in 2014, up from $461 million. Especially interesting in the data was a spike in tech funding from $116.9 million in 2013 to $288.7 million in 2014, outpacing life science investment by about $36,000.
One way to explain the trend, says CED President Joan Siefert Rose, is those active angels and family offices want returns in three to five years and traditional life science companies (pharmaceutical and drug development specifically) can’t meet that demand due to government regulation. A growing piece of the tech pie, however, are digital health companies. For the first time this year, they also will have a large presence at the CED Life Science Conference, which kicks off today in downtown Raleigh. CED says investors attending the conference asked for them to be included.
Other interesting highlights of the study include a growth in the number of investors into North Carolina companies—132 unique funders up 23 percent from 108 in 2013. 20 of those came from California, representing the second largest state for investment into NC startups.
“This proves that capital finds good deals wherever they are,” says Dhruv Patel, CED’s director of investor relations. “For those that say North Carolina needs stronger connections to West Coast investors, that’s already happening.”
Also, six IPOs in 2014 helped the state hit a two-year record of 15 public offerings. All of the data is presented in the infographics below.
So how does this data compare to other regions? CED can’t say for sure. Just last year, it began benchmarking the Triangle against Chicago, Atlanta, Denver, Austin and Seattle, but none of those regions collects data on undisclosed investors.
Anecdotally and according to reported venture capital data, however, the Triangle region tends to outperform its competitors based on its size and population. But angel investment is growing nationally, including the number of investors and number of deals including angel investors. The University of New Hampshire’s Center for Venture Research reported last April that angel investment nationally grew 8.3 percent in 2013 over 2012. And for the mid-year 2014, the number of deals receiving angel investment grew 5.9 percent over the same period of 2013.
Helping North Carolina especially, is its equal weight in life science and technology, industries that help to keep investment constant each quarter, Siefert Rose says.
But growing contributors to the region’s investment activity are advanced manufacturing and clean tech companies. Clean tech, which received about $11 million in 2014 funding, was broken out from the tech category for the first time. Advanced manufacturing companies, meanwhile, received $81.1 million, a $12 million increase over 2013.
Stay tuned as we continue to dive into this data in the months to come.