On the whole, the pullback in venture funding over the last several months was drastic.
Startup funding fell by 53% year-over-year and 33% quarter-over-quarter, according to Crunchbase News.
But the slowdown has not impacted all segments of the tech scene equally. Software and FinTech are still widely attracting investors. And when you dive in specifically at the early-stage ecosystem, the narrative looks a bit different.
Seed stage funding was up in the first half of 2022 as compared to 2021 as investors look for startups that are a bit more insulated from macroeconomic factors like inflation and employee shortages.
The Triangle Tweener Fund looks specifically at startups in the Raleigh-Durham-Chapel Hill area with $1m ARR (or 10 people in the team), an investing thesis Wingo said is about building an index of “small programmatic investments” as opposed to making a few bigger bets.
The Tweener fund invested in 16 companies in Q3 alone, including ventures in B2B SaaS, FinTech, HealthTech, and real estate technology. The Tweener Fund has made 38 investments since launching at the beginning of 2022, and Wingo said he only sees more growth coming in Q4.
The portfolio includes several startups that will be familiar to Hypepotamus readers, including waste management company CompostNow, local marketplace Offline, B2B revenue management platform Klearly, healthcare startup Pattern Health, and crowdsourced career ratings platform Repvue.
The Tweener Fund has invested $2 million and already has $5 million committed from investors as the fund continues to grow.
A Look Ahead
Uncertainty has been the word of 2022, as companies of all sizes prepared for economic headwinds. But early stage startups are still searching for capital.
“As we end Q3 and start Q4, we saw a very big step up in startups fund-raising,” said Wingo. He attributes that to the fact that boards and founders are “[loading] up the balance sheet for ‘bad weather’”.
While larger tech firms have dealt with layoffs and down rounds (selling additional shares at a lower price than in previous financing rounds), Wingo believes early-stage startups are in a unique position for growth.
“If you look back in time to previous recessions, those periods saw the founding and seed stage rounds for many great startups, so counter-intuitively, history has shown that these are the best times to keep investing in early-state high-tech startups,” Wingo told Hypepotamus.
We asked Wingo about what industry verticals are of most interest to him. He said that PropTech, artificial intelligence, MarTech, and GreenTech continue to drive the Triangle’s innovation sector.
As far as what 2023 has in store for the Research Triangle, he also remains optimistic.
“2023 is going to be an interesting year. Here in the Triangle, we have our ‘unicorn’ Pendo hanging out ready to go IPO whenever the macro environment and IPO window open, so we’re all watching that and cheering for them to do really well. I also think with so much cash still sloshing around at the big tech companies, we’ll see an active M+A climate in 2023,” he added.