From startup to scale-up

MattDunbar

“Scaling up is vastly harder than starting up,” said Daniel Isenberg, professor and founder of the Babson Entrepreneurial Ecosystem Project. “Starting up a venture is just the first baby step on a long hard trudge to scale up.”

When we launched UCAN in the spring of 2008 to invest in Southeastern startups, we were, of course, a startup ourselves. Like many new ventures, we faced classic startup challenges even as we looked to invest in other startups – and needless to say those were exacerbated by the perils of the Great Recession that came shortly thereafter.

But with the dedication and support of more than 50 local investors and a strong board of directors, we slowly built momentum, and by the end of 2013 we had invested over $9 million in 31 companies – many of which had been acquired or were well along the pathway of evolving from startup to scale-up.

By that time, we too were ready to look beyond our startup phase to consider how we could build a more sustainable and impactful enterprise by scaling up. With inbound demand from other cities seeking help in starting angel groups, Charlie Banks and Paul Clark joined our team in 2013 to prepare for the launch of the South Carolina Angel Network in 2014. That year we launched two new angel groups in Columbia and Asheville, along with our first sidecar fund, the Palmetto Angel Fund.

In 2015 our growth continued with the addition of five more angel groups (Aiken, Anderson, Charleston, Rock Hill and Spartanburg), and we faced many of the early challenges encountered by every organization that scales. It takes a significant investment of time and resources to hone the right processes and communications to effectively manage a distributed network of more than 200 investors who make individual investment decisions on a steady stream of incoming startup opportunities.

Like any scale-up, we’ve stubbed our toe on a few things here and there, but we’re focused on learning fast and correcting course quickly – and now in 2016 we are proud to have reached several significant new milestones:

This summer we launched a new brand name – VentureSouth – that reflects both the focus of our business and our continuing growth across the Carolinas.
We also invested in our 50^th portfolio company this summer – and as of this month we have now invested in 52 companies since 2008.
We’ve invested 90 times in those 52 companies, now totaling over $18 million in capital deployed. We’ve now invested as much in the last two and a half years since we began our expansion as we did in our first five and a half years as a single angel group in Greenville
Importantly, nine of those companies have been acquired or monetized and 37 are still operating – meaning only six have shut down thus far – much better than the expected 50 percent-plus failure rate for early-stage investments.
Since July, we’ve started new angel groups in Hilton Head and Myrtle Beach, and next week we are launching our newest group in Charlotte with the help of our fourth partner in VentureSouth, Mac Lackey.
This month we began investing in our second sidecar fund, VentureSouth Angel Fund II, which co-invests alongside our active angel investor groups
We are expanding our educational offerings for entrepreneurs and investors. Next month, we are hosting a pitch workshop for entrepreneurs, and in November we’ll host a workshop on executing exits led by renowned angel investor Bill Payne (see venturesouth.vc for details).

While we are proud of the progress we’ve made, we know, like all scale-ups, that there’s plenty of hard work ahead. But we believe strongly that our efforts to build the infrastructure to support a more robust and efficient market for early-stage investments in the Upstate and beyond are worth the risks and challenges.

By providing local entrepreneurs with more access to risk capital, we help give them reason to come here, stay here and grow here rather than emigrating to other startup hotspots. By providing investors with infrastructure and education, we give them a vehicle to diversify with discipline in a very risky asset class – helping them to “make money, have fun, and do good.”

The “do good” part matters. All net job growth in our economy comes from high-growth startups that become successful scale-ups. But it takes patience and risk-tolerance to get there, so if we want a vibrant, thriving economy that accelerates the growth of new jobs and wealth and opportunity, we need our early stage capital market to scale up too. And that’s what VentureSouth is all about.