‘We can see the milk and honey,” says managing director Matt Dunbar
What do high-growth startups, Babe Ruth and the biblical book of Numbers have to do with each other? Not much, unless you’re Matt Dunbar.
A Genesis (to Numbers) story
Matt Dunbar moved back to Greenville from Atlanta in spring of 2008 to join the recently formed Upstate Carolina Angel Network (UCAN) as the managing director. Cofounders J.B. Holeman and Tim Reed took a chance on Dunbar, but as with many of the risks UCAN has taken, it proved to be well worth it.
UCAN is a group of accredited investors who put their capital and expertise to work for high-growth startups across the Southeast. Dunbar compares it to the show “Shark Tank” – not because it’s the most apt reference, but because most people are familiar with the concept. “We’re not sharks,” Dunbar notes. “We’re trying to be angels.”
Ideal startups are capital-efficient, defensible, and scalable. While they’ve narrowed down key qualities, they’re a bit “agnostic” about industry, covering markets such as life sciences, software, and industrial/energy (and steak if you’re including New York Butchers Shoppe, jokes Dunbar). Over the years, Dunbar has learned that not every business fits their model, and occasionally unexpected businesses happen to fit the bill. Also, sometimes it’s best to bet your money on the jockey, not the horse, as the success or failure of a venture often relies equally on the mindset of the entrepreneur as it does on the product itself.
So far, UCAN has raised $200 million and invested $12 million in 39 campaigns. More than 80 percent of the money has been invested in South Carolina companies. The 23 companies in UCAN’s portfolio have generated more than 350 jobs. UCAN is currently ranked the eighth-best angel network in the nation based on investments, networks and exits.
Dunbar refers to “numbers” in the literal sense and also as a biblical reference, saying, “We’re not quite to the Promised Land, but we’re excited about how far we’ve come. We can see the milk and honey.”
A near-death experience
Dunbar, who collectively with UCAN investors has reviewed over 1,400 business plans, embraces Babe Ruth’s all-or-nothing playing style. “We’re swinging for the fences and we know we’re going to strike out a bunch,” he says.
One of the major risks taken by UCAN investors was the decision to assist Proterra with locating its headquarters and manufacturing plant in Greenville. Shortly after the move, the company’s hedge fund manager was convicted of a Ponzi scheme, unbeknownst to Proterra. Community leaders quickly coalesced and UCAN, with the help of SCRA, provided bridge financing to keep the company alive until June 2011, when Kleiner Perkins Caufield & Byers invested $30 million in Proterra.
“It’s not something we would have typically done,” Dunbar says, but the risk paid off. Proterra has truly become one of their “rise-from-the-ashes stories,” or more appropriately, a home run.
A big win
All net job growth comes from startups, Dunbar says. “Long-term job growth comes from entrepreneurial startups. Over the long term it pays off, but early-stage capital is scarce.”
To remedy this, UCAN advocated for legislation to incentivize angel investors, and after several years, the High Growth Small Business Job Creation Act finally passed in June 2013, providing angel investors with a 35 percent tax credit.
“The Upstate Chamber Coalition was a leading champion for this,” notes Dunbar, who also credited many other organizations and advocates for the role they played in bringing the bill to fruition. Since the bill passed, there has been growth in qualified businesses (those qualified to accept investments that qualify for the tax credit), applications and credits approved with $3 million in credits awarded last year.
The Flywheel Effect
Dunbar isn’t gloating about the big wins or dwelling on the near deaths, but he is sharing the stories of the past as a way to sustain the momentum UCAN has worked so hard to build. Dunbar references the Flywheel Effect from Jim Collins’ book “Good to Great.” The theory is that while it takes great effort to turn the flywheel initially, with continued hard work, the wheel will eventually turn of its own accord from the momentum gained. He hopes to use the momentum UCAN has gained to continue improving South Carolina’s robust entrepreneurial infrastructure. He’s excited about continuing and expanding partnerships across the state with groups such as the Palmetto Angel Fund and the growing South Carolina Angel Network, which currently consists of eight groups and over 200 investors.
Keeping the momentum up
With Dunbar at the helm, UCAN will continue turning the flywheel, swinging for the fences and cultivating the next generation of jobs and companies. But they can’t do it alone. UCAN may be ranked one of the top angel networks in the nation, but he’s made it clear that they haven’t gotten there on their own. Dunbar consistently shines the light on others and insists on the important role the community plays.
“We’re blessed to live in this business community,” Dunbar says. “We may be a small state, but we’re powerful together.”
