NextGen Angels’ partner Eric Koester had a hunch it wouldn’t be hard to find a group of eager young Raleigh-Durham entrepreneurs interested in investing together in startups.
March 23, 2016
40+ Investors In, NextGen Angels Launches in Raleigh-Durham
DC-based angel network rallies enough support in the Triangle to host first meeting in Durham.
Just four months later, he’s got a who’s who of at least 40 local startup founders and executives ready to start vetting deals in the Triangle and across the increasingly national angel network. They hail from later stage startups like Automated Insights, WedPics, Zift Solutions and Republic Wireless as well as early stage players like RocketBolt, Fabl and Upswing. Some agencies, consultants, existing VCs and ecosystem builders are involved, and there’s one craft brewer in Lonerider Brewing CEO Sumit Vohra.
The chapter kicks off tonight with an event at American Underground in Durham.
NextGen is a big deal for the region. Besides that it introduces a new crop of people to angel investing and gives them a way to share in the success of other local companies, it also opens up another funding option to our still capital-strapped community and has the potential to expose local startups to investors across the nation. Combined with a fresh Triangle Angel Partners fund, Cofounders Capital, the Duke Angel Network and new Triangle Venture Alliance, early stage capital may get a bit easier to find here.
Joining NextGen was a no-brainer for Derek Holt, a Duke University grad who moved back to Raleigh last summer after years working for the Startup America Partnership and in the DC startup community. He’s now president at K4Connect.
“It’s about activating people who are often really busy building their companies to get engaged with the next generation,” he says. That pay-it-forward mentality is important for building a strong startup ecosystem, he believes, and mirrors some of the work he did around the nation at Startup America.
“You’ve got other entrepreneurs part of similar organizations that are willing to make introductions and provide industry expertise that may get you to your next round,” says Holt.
NextGen is not an angel group like TAP. Instead, it’s an eight-city (growing to 15 this year) network of angel investors that vet deals together but invest individually.
What makes the network unique is that all members are young—almost all under the age of 47—and involved in each ecosystem in some way. The age was chosen based on data that shows the best performing venture investments over the last 10 years were sourced by venture partners that age or below.
“Our theory is that people who are younger and in the game, in the scene have different access,” Koester says. Each member commits to make one investment of at least $10,000 a year. The investment can be in a fellow Durham or Raleigh company, or one introduced by the chapter in say, Boston or DC. Koester says about two thirds of each network investment comes from investors in the community where the company is located and a third comes from outside investors interested in that company’s sector, technology or founding team.
Potential deals are sourced by the collective membership and one or two companies are chosen to pitch at each monthly meeting in each city. Those companies must have some level of traction, typically some initial funding and some way they might take advantage of a network of more than 400 venture partners around the nation.
“These are hundreds of people that can be champions or experts to help them,” Koester says. A company doing well in the Triangle, for example, might use a venture partner to help launch in Atlanta, Chicago or Baltimore.
Once a group of venture investors decides to do further due diligence on the company, it is entered in a database with tags (like industry sector or area of expertise) that line up with the profiles of certain investors in the network. Those investors are asked to help vet the deals. The network then presents that deal to all of the investors and acts within 30 days. A NextGen fund now coinvests alongside the angels.
The goal is to provide “acceleration funding” to help get the company to a Series A round.
Raleigh-Durham was a natural expansion city for NextGen, Koester says. Density, activity and the number of “smart repeat entrepreneurs” is significantly higher than people outside of North Carolina might realize, he says.
The challenges for the region are branding—people tend to ascribe themselves to Raleigh, Durham or Chapel Hill versus the collective region. And there hasn’t been a big consumer tech launch, like LivingSocial in DC or Yik Yak in Atlanta, he says.
“The Triangle has so many things going for it but it needs to define itself at some point,” says Koester.
NextGen could play a role in bringing the community together—its investors hail from across the region. According to Holt, it’s additive to many efforts already under way to make the Triangle stand out as a predominant startup community nationally.
“It’s another great program and network that this region is a part of that not every city or state has,” he says. “And if you look at the cities they’ve launched in, we fit right in.”
As for a big Triangle consumer tech play, perhaps NextGen will be the one to fund it.