We’ve reached the final stretch of 2020.
Even with the political and economic uncertainty swirling around Q4 of 2020, VC firms across the Southeast are deploying capital and looking to strategically grow their portfolios.
Hypepotamus had a chance to catch up with David Jones of Bull City Venture Partners and Ryan Collins of Noro-Moseley Partners to get their thoughts about the state of venture capital in the Southeast as we round out 2020. If you’re a founder, their answers give not only some optimism for future fundraising efforts, but also some tangible steps to take to be prepared to pitch even during an unpredictable year.
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Based out of Durham, North Carolina, Bull City Venture Partners focus on investing in internet and software companies across the Southeast and Mid-Atlantic region. David Jones, General Partner at Bull City, shared some thoughts about the tech ecosystem heading into the last part of 2020, and how his firm is thinking about future growth.
Have you seen any unique trends in Southeastern-based early stage software/health/internet companies?
Depending on the type of company, most startups made cuts in late March and April 2020, but many software and tech companies have quickly rebounded from there. The trends I’ve seen are:
- eCommerce, distance learning, cybersecurity, Telehealth, Artificial Intelligence, software for remote workers, and digital payments to name a few segments who have seen a huge boost from the pandemic. All these sectors continue to garner VC funding. I often hear that eCommerce has skipped forward 7+ years.
- I continue to see incredible talent, senior executives, moving out of major tech centers – New York, San Francisco. The pandemic has accelerated this dramatically.
- Over the last 5-8 years we’ve seen more VC funds get started, more angel groups get started, more University sponsored angel groups get started and this benefits the entrepreneurs. Raising that first $300k-$500k to get your company started continues to get better in the Southeast.
What do you look for in companies/founders during this time of uncertainty? Anything that early-stage companies should keep in mind if they are seeking capital in the next couple of months?
At BCVP we continue to look for amazing founders who are great leaders, persistent, mission-driven, open minded and passionate about what they are building. In evaluating companies, we first and foremost invest in great people/teams. Other factors are market size, momentum or traction to date, and any sustainable competitive advantage the business might have. But at these earliest stages, the team is the most important ingredient to us. Most businesses will change or pivot and so we try to have conviction around the team first.
For startup companies seeking capital in the next few months – a) show your passion and show the mission-side of why you are building what you are, b) Show that you can convince great people to join your team, c) do your homework and treat the capital raising process as a sales process….because it is.
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Atlanta-based VC firm Noro-Moseley focus on early-stage technology and healthcare fields. Vice President Ryan Collins gave Hypepotamus some of his thoughts about how the firm is taking the uncertainties surrounding 2020 into consideration while deploying capital.
2020 has been an uncertain year on nearly all fronts. How is your team thinking about deploying capital for the rest of the year?
I think we’re now at a point where deal flow and plans for capital deployment are fairly comparable to where they were pre-COVID. Looking at 2020 as a whole, we’ll probably do 1-2 fewer deals than we would during a normal year given there were 3-4 months with incredible uncertainty. Current challenge right now is the valuation environment – think many investors are looking at the public markets and scratching their heads at some of the multiples, and that trickles its way down to our end of the market. There is an even higher premium on growth given there are fewer assets growing and the supply of capital is similar if not larger.
Have you seen any unique trends in Southeastern-based early stage software/health/internet companies?
I continue to be impressed with the capital efficient mindset of companies in the Southeast – I think this has proven beneficial in a challenging economic environment. I also think that the Southeast has done a good job of leveraging its unique strengths – Nashville’s early-stage ecosystem reflects the healthcare hub that the city has become, Raleigh/Durham is strong for biotech, and Atlanta has a great combination of technological expertise (i.e. GA Tech) and large corporations (i.e. initial customers, strategic funding, launch pads for new startups).
What do you look for in companies/founders during this time of uncertainty? Anything that early-stage companies should keep in mind if they are seeking capital in the next couple of months?
Companies who (1) took steps to manage burn quickly at the outset of COVID, (2) have an easily demonstrable ROI to help with sales cycles that are now longer / virtual, and (3) have proven inside sales capabilities.
In terms of planning for fundraising, my advice would be the same as it typically would be (1) don’t wait until you need the cash, (2) prepare a data room in advance with the appropriate metrics available to save yourself time during the raise, and (3) if you haven’t shown recent growth or have high recent churn, you may want to push off the fundraise or consider alternative sources of capital.
