Top 10 Angels Sends a Strong Signal for SC

Matt Dunbar writes about the top 10 angels sending a strong signal for SC here.

Top 10 Angels Sends a Strong Signal for SC

Two weeks ago, CB Insights, a leading data provider for the venture capital industry, released a ranking of U.S. angel groups based on the Investor Mosaic algorithm they developed to score venture capital firms.

When the analysis of 370 angel groups was complete, an unexpected result emerged. Among a list of premier groups from traditionally strong venture markets like California, Boston and New York, a group from South Carolina landed at number 8.

While the top 10 ranking is certainly nice recognition for the investor members of the Upstate Carolina Angel Network, we think the accolade signals something more important for the Upstate and for South Carolina. Namely, to borrow a phrase from the classic Jim Collins book “Good to Great,” the Flywheel Effect is taking hold in our entrepreneurial ecosystem.

Thanks to years of steady, strenuous pushing by a cadre of dedicated visionaries and partners, we’re building towards sustainable momentum as a place where entrepreneurs, investors and our economy can thrive.

We don’t know all the particulars of the CB Insights algorithm, but we do know that it includes factors such as portfolio selection (attractive companies), co-investment partners (successful syndication) and investment returns (exit events).

For UCAN to have success along any of those dimensions means that our ecosystem is attracting talented entrepreneurs, who are creating strong companies, that are attracting smart risk-tolerant capital from local investors, and generating attractive financial returns from exit events – which is ultimately the key to keeping the flywheel spinning. In other words, UCAN’s ranking is a function of the leaders, entrepreneurs and investors in our community who have been willing to risk failure for a chance to build successful new companies and a healthy startup community.

Here are three quick examples of successful UCAN investments that have drawn from the growing strength of that ecosystem – and surely helped generate points for UCAN in the CB Insights scoring system.

In 2006, aspiring entrepreneur Michael Bolick attended an InnoVenture conference where he learned about a Clemson University technology that he later licensed to form Selah Technologies. After receiving critical funding from individuals, SC Launch and UCAN, Selah Technologies eventually became Selah Genomics, which was recently acquired by EKF Diagnostics for $75 million, creating a several-fold return for investors.

In 2010, concerted efforts by city, county and state leaders, along with economic developers like GADC, Upstate Alliance and SCRA, led to the relocation of electric bus-maker Proterra from Colorado to Greenville. In 2011, key local business leaders partnered with UCAN and SCRA to provide the company with critical bridge funding while prestigious venture capital firm Kleiner Perkins considered an investment.

Since then, Kleiner has led multiple rounds of venture capital investment totaling more than $100 million alongside key industry leaders like GM Ventures and Edison Energy. As evidenced by the announcement last week that Seattle may order up to 200 Proterra buses, the company is well positioned to handsomely reward its angel and venture investors.

In 2011, Peter Barth sought to bring noted venture capitalist Brad Feld to Greenville as part of the NEXT initiative of the Chamber of Commerce. Those conversations led Barth to launch a startup accelerator now called the Iron Yard, which has helped launch over two dozen companies since 2012.

One of those companies is AuditFile, which moved to Greenville from the Bay Area to participate in the accelerator program. After receiving some local funding from UCAN and others, the team moved back to San Francisco and recently announced they have secured over $3 million in funding, led by legendary investor Tim Draper. AuditFile is now off to the races – and the Iron Yard has launched a code academy that has grown to over 10 cities in less than a year, creating another promising investment for UCAN.

There are many more stories to be told, (ask us about Charleston Pharma, Verdeeco, New York Butcher Shoppe, KIYATEC and others) but this small sample highlights that UCAN will only be as successful as the ecosystem in which it operates. Our group is a glad beneficiary of the momentum that’s been accelerating the local flywheel, and UCAN members are trying to do our part to accelerate the effort.

But just because we made a top 10 list doesn’t mean we can relax. We still have significant work to do in fully funding the promising entrepreneurs who create companies here. We need more accredited investors to participate in local funding efforts. We need entrepreneurs to continue recycling their intellectual and financial capital in building successful companies. We need our state and local agencies to make it easier, not harder for startups to set up shop and grow in our communities. We need more recognition by a broader audience that startups are key to our long-term economic vitality (it turns out startups create all net job growth in our economy).

UCAN is working to help build the infrastructure for that early stage capital marketplace by supporting the launch of new angel groups as part of the South Carolina Angel Network (SCAN). UCAN has also helped launch the Palmetto Angel Fund, which has closed on over $1 million in funding to co-invest with SCAN groups. With these efforts and others, we hope to create a more efficient marketplace for early-stage capital in South Carolina.

Our flywheel is spinning, but it’s not a perpetual motion machine. It is certainly easier to keep it spinning now than it was just five years ago, but if we don’t keep up the steady pressure, we could lose the momentum we’ve built and never make the transition from Good to Great.