Charlotte’s late-stage funding success stories — and how we can create more of them

There comes a point in the life of some startups when you need serious money to pursue next-level growth. You have an established business, a track record of success, revenue. Now you’re looking for exponential growth. While bootstrapping is always a valid option, there are some businesses who need an infusion of capital on a grand scale to get there. 

In the past two articles in this series, we’ve discussed the funding that happens in the earlier stages of startup life: the friends-and-family round and seed or angel funding. In this article, we’re talking about late-stage funding, and while its definition varies depending on who you talk to, generally speaking, it means you’re no longer looking for hundreds of thousands of dollars. You’re looking for millions.

Locally, we have a handful of examples of companies that have successfully raised late-stage funding. Late last year, for instance, Passport raised $65 million in Series D funding. MapAnything raised $42.5 million in Series C funding back in 2018, shortly before Salesforce announced it was buying the company. And after bootstrapping SignUpGenius to support more than 66 million visitors a year, co-founders Dan and Angel Rutledge and Michael Vadini sold a majority stake in their company to a private equity firm.

“We knew what we wanted to do, and we still had a vision for going forward, but we knew it was going to be better if we had advisers come in and also share the risk and that whole next step,” Angel Rutledge recalled. 

 The move worked: SignUpGenius has continued its strong organic growth, reaching more than 131 million unique users in 2019. At the same time, the private equity team has led the way on making strategic acquisitions and developing a strong B2B enterprise solution.  

That’s the power of late-stage funding. The problem can be finding it, particularly in Charlotte, where the options are more limited than in more established startup hubs like Silicon Valley, New York and Atlanta.

William Bissett, an angel investor and host of the Charlotte Angel Connection podcast, has interviewed many founders and investors in Charlotte since he launched the podcast. He said most founders and investors understand that Charlotte’s later-stage funding opportunities are limited, which means companies looking for that kind of investment are forced to look elsewhere.

“If you want to open a business and run it with all Charlotte money, that’s going to be a hard thing to do,” Bissett said. “You might have a great friends and family network here, and they might fund the business. But if you’re creating a startup and you’re expecting it to be fully funded within 485, there’s a poor chance.”

That doesn’t mean it’s impossible. 2U Laundry, for instance, closed a $2.5 million round of funding back in 2017 that was led, in part, by two partners at the Charlotte-based Pamlico Capital, which ranks second on the Charlotte Business Journal’s list of North Carolina’s largest venture capital and private equity firms. 2U Laundry recently announced another round of funding totaling $6 million.

But, as Charlotte’s startup scene continues to grow, the question becomes, how do we increase late-stage funding opportunities for Charlotte companies from Charlotte companies?

Rob Cummings, an angel investor and co-founder of DealCloud, said the answer lies in part in filling Charlotte’s startup pipeline, which right now is heavily weighted toward early-stage startups.

“There are a lot of very interesting companies that are very early on in Charlotte, and then there are a few others that have raised VC funding and are well on their way. But there aren’t a ton right in the middle,” Cummings said. “But it’s the cycle working, and as those early-stage companies grow, they will continue to move through the funnel.”

Greg Brown, administrator of the Charlotte Angel Fund, said the city’s startup community would also benefit from more research and development resources, to fill the area with the tech talent necessary to build what our startup founders want to create.

“If you gave me a magic wand and said, ‘Do something with it that you think will enhance the startup environment here in Charlotte,’ I’d be thinking about how can I increase R&D being done here in Charlotte — either corporately or academically — because what I want is more engineers in the system rather than more finance and MBA types.”

Charlotte has found success bringing more companies to the city. It kept LendingTree from moving its headquarters elsewhere, and while we may have lost out on Amazon, we won Honeywell, wooing its headquarters away from New Jersey. And Truist, the new bank formed by the merger of BB&T and SunTrust, will call Uptown Charlotte home, as well.

But those companies aren’t bringing more research and development to the city, Brown said. And as we’ve seen just a few hours up the road in Raleigh, where venture capital firms routinely invest in local tech startups, more tech talent and resources can make a profound impact on the success of founders and investors.

 “If R&D is a core element, why would founders and investors put themselves in an environment that was low on one of the raw materials that you need?” Brown said. 

Bringing more R&D to the city would take time. But, as Bissett explains, so will transforming the Charlotte from banking town to startup hub.

“It’s like creating family wealth. For most people, it does happen over time, and the first generation has it tougher than the second generation. And the second has it tougher than the third. Where we are in the startup cycle is in the first generation,” Bissett said. “In 10 years, the first generation is going to sit around and tell the second generation how easy life is for them.”

Until then, the community needs to continue throwing out ideas, trying and failing, and then sharing their wins and losses. INCLT is proud to play a role in that process, providing access to critical mentorship services and giving a voice to members of the community thanks to the generous support of software development agency RMCSoft.

If you’d like to do your part for local founders, you can sign up to serve as a mentor to a local founder. We are also accepting applications for founders in need of mentorship.

You can find more information here.