The amount of potential seed money in the Southeast startup world is growing yet again.
Cofounders Capital, an early-stage VC firm in North Carolina, recently closed a $50 million fund. The fund, the third in the company’s history, is also the largest amount raised by David Gardner, Tim McLoughlin, and Tobi Walter.
Fund III includes many repeat investors from the previous two funds raised in 2015 and 2019.
Tim McLoughlin, partner at the firm, said that while it was a challenging time to raise capital and while 2022 was a slower year for the firm, he ultimately believes it is a great time to have dry powder ready to deploy.
“I think ultimately, it’s probably the best time to have a new fund ready to start writing checks. There’s been a reset in the market and valuation expectations over the last few months, so we’re pretty excited about where we’re at right now,” McLoughlin told Hypepotamus.
It is also a good time for the B2B SaaS ecosystem, says McLoughlin.
“People are having to do layoffs and have to do more with less,” which means software products are able to come in and prove they are “demonstrable ROI solutions. And those are the kinds of deals that we want to invest in,” he added.
New Fund, New Opportunities
The firm traditionally invests at the seed stage, with startups that are pre-revenue or those with a very little bit of revenue coming in. But deal flow and opportunities have changed recently, meaning new investment opportunities for the team at Cofounders Capital.
Specifically, McLoughlin pointed to the fact that more startups bootstrapped and were “very capital efficient” over the last year. That mentality makes such startups more enticing to firms like Cofounders Capital. McLoughlin also added that the firm’s potential investment pool and its deal flow has increased as Cofounders has started to look at “companies that are a little bit further along [in terms of revenue] but have more reasonable expectations [on valuation].”
Fund I and II include several startups that will be familiar to Hypepotamus readers, including EasyVote, EmployUs, Slope Software, Looma, Element451, Pattern Health, and Ecobot.
Most of Cofounders’ portfolio companies are in North Carolina, but the firm is starting to look at more deals outside the Tar Heel State.
“Through the years we’ve developed relationships with a lot of other investors from around the southeast that have been co-investors on deals or follow-on investors. We’ve gotten to know a lot of vendors and service providers across the Southeast…so they’re sending us tons of deal flow. So as we’re getting quality deal flow from trusted partners around the southeast, it would be kind of foolish of us not to take a look at those opportunities,” added McLoughlin.
