Record-setting Deal Activity for North Carolina Entrepreneurs as 2017 Funding Breaks $1 Billion

CED’s Innovators Report provides a view into the data supporting CED’s Connections to Capital, a strategic investor-entrepreneur matching service.

DURHAM, NC, February 20, 2018 – North Carolina entrepreneurs raised over $1.1 billion last year. Released today, the Council for Entrepreneurial Development (CED)’s 2017 Innovators Report provides a snapshot of the state’s thriving entrepreneurial ecosystem and further spotlights why North Carolina is attractive to innovative technology-based companies. It is no secret, especially given the Triangle’s consideration for Amazon’s second headquarters.

“At CED, we know how North Carolina fuels entrepreneurial companies. It’s the combination of a great quality of life, talent and universities, low cost of living, and supportive community,” said Jay Bigelow, CED’s Director of Entrepreneurship. “The 2017 Innovators Report data helps show the strength of the state’s entrepreneurial activity, with increases in both total funding and number of deals over 2016.”

Jay leads CED’s Connections to Capital, a highly curated, targeted and strategic investor-entrepreneur matching service. By fostering relationships with NC entrepreneurs and investors from across the country, he is able to make introductions by pairing specific investment criteria with NC company data. As a glimpse into CED’s data set, the Innovators Report tracks funding activity in North Carolina for technology-based entrepreneurial companies.

A total of 173 North Carolina entrepreneurial companies in the life science, technology, cleantech, and advanced manufacturing and materials sectors participated in a record-setting 224 equity investment deals in 2017, the highest total for a year since CED began publishing the report in 2013. This is a 19% increase in the number of deals over 2016. Deals include venture capital, angel, corporate, growth equity and strategic investments.

North Carolina entrepreneurs collectively raised $1,125,749,682. Similar to 2015’s banner year of funding, a few big deals launched the dollars over the billion benchmark. The two largest deals accounted for over 40% of total funding for the year: AvidXchange ($300 million) and SmartSky Networks LLC ($176 million).

Sector Swap: A Monster Year for Tech

In 2015 and 2016, life science companies raised more money than tech companies in North Carolina. But the trend flipped in 2017. Tech companies accounted for $784,522,003 (or 70%) of the total funding for the year. The top five biggest deals of the year were all in the tech sector, ranging from $25 million to $300 million. While these major deals launched the dollars past life science, the number of deals and companies were also highest in tech versus the other sectors.

Life science companies accounted for $269,850,572 (or 24%) of the total funding for the year. Compared to previous years, the life science sector experienced a lack of big deals. In looking at 2017 quarterly data, funding remained flat at an average of $67 million per quarter in life science. But the number of life science deals slightly increased this year. Jay Bigelow noted that “the pipeline of younger life science companies is encouraging”.

Total funding for Cleantech companies ($48,484,364) is almost triple the year-end total from 2016, thanks to two large deals accounting for over 70% of the dollars.

Similar to life science, funding for advanced manufacturing and materials companies lagged in 2017 in part due to a lack of big deals.

Charlotte on the Rise

Typically, over 75% of the annual funding in North Carolina goes to Triangle-based companies. In 2017, Charlotte brought in the bulk of dollars with $614,214,603 raised. The top four deals of the year were all to Charlotte-based companies, accounting for a combined $552 million (almost 50% of total NC funding).

“These big deals matter not just for Charlotte but for the state as a whole,” said Bigelow. “It’s exciting to see this activity in Charlotte, particularly the fact that the number of deals doubled.”

While dollars and deals increased for Charlotte, NC’s deal activity is still concentrated in the Triangle. Triangle companies raised $408,109,651 through 140 deals. Durham had the most activity of any city in the state with 62 deals, and Raleigh came in second with 49 deals.

Sizing Up Convertible Notes

Recently, Innovators Report data started identifying convertible notes among the deals. In 2016, NC companies completed 20 convertible note deals for about $16 million. In 2017, the number of convertible notes increased to 43 deals for about $35 million. And this uptick applies to companies at all different stages.

“The use of convertible notes seems to be on the rise and not just for $50,000 starter fees,” said Bigelow. “They can be great for the entrepreneur, as long as the decision to take part in a convertible note is part of a strategic funding strategy. In my conversations with entrepreneurs, I try to help them understand that funding is a series of stepping stones.”  

For more on the Innovators Report data and Connections to Capital service, join CED next week at the CED Life Science Conference, February 27-28 at the Raleigh Convention Center in Raleigh, NC.

CED Innovators Report: www.cednc.org/innovatorsreport

Download the Report

CED’s proprietary Innovators Report tracks data not readily available elsewhere. CED leverages its deep relationships with companies and investors, and its partnerships with organizations and sources such as Pitchbook, the National Venture Capital Association, the North Carolina Biotechnology Center, Small Business Technology Development Center (SBTDC), NC IDEA, Ernst & Young and PricewaterhouseCoopers MoneyTree Report to gather, analyze and report these data. In addition to absolute numbers, the report uncovers trends in the entrepreneurial sector.