Tech startups face an uphill funding battle in the Upstate

530 Views

For most startups, funding is always a challenge. But in the South, entrepreneurs have another, steeper hurdle to tackle: decades of investor knowledge and experience in traditional industries, not software and technology.

“We don’t have a heritage in that background,” says John Moore, president and CEO of entrepreneur-focused support organization NEXT. “It’s more in the traditional manufacturing and real estate part of that … but I think we may be catching up faster than anybody in the Southeast. I’m serious.”

The difference between investing in traditional industries versus software and technology can be stark, and means both investor education and funding challenges, according to local entrepreneur Logan Metcalfe, founder of tech startup Arkiver.

“Getting that initial capital, getting that MVP product and getting that product to market in the consumer space … that’s the biggest struggle that many startups are facing,” he says. “If you look at those startups around Greenville, and those who have been able to get to be a high-growth company … every single one of those raised money outside of Greenville.”

CoverStory325_1

In general, real estate investment cycles are longer, tend to be more stable and have lower returns due to lower risk – almost the opposite of software and technology investing, according to Greenville resident Eric Hassman, partner at Carbyne Capital Partners. Before moving to Greenville, Hassman spent more than a decade in Silicon Valley, pounding the pavement for an array of high-growth tech startups in Northern California’s hyper-competitive landscape.

“Software operates in a world where the cycles are a lot faster, and if you do it right, you can win big,” he says. But if something goes wrong, “you can end up with a pile of code that you don’t necessarily know what to do with.”

But the issue is more than just finding funding, says Greenville entrepreneur Ryan DeMattia – it’s a cultural shift. A history of investing in physical assets like land and equipment has made it difficult to fully embrace software and technology startups. This means untapped potential not only to spur local business, he says, but missed opportunities in drawing innovative companies, entrepreneurs and residents.

In Silicon Valley, for example, even those working outside the startup scene recognize the vast potential of software and tech, he says. People there “recognize it as a viable industry … but around here, software has always been a niche for things like shipping or manufacturing,” he said.

Another problem, DeMattia says, is a lack of knowledge about what local talent exists. Just like any “support local business” movement, he says, a campaign to keep code local is a way to reinvest and invigorate local industry.

CoverStory325_1

“Right now, if you go into some random business and software isn’t their main thing … a lot of their first thought is to go to the Internet and try to get it,” he said. “So many times I see someone take those projects from Greenville and outsource them, despite the community that we have here that could fill that need.”

In that sense, according to Hassman, the Upstate has all of the necessary components for a great tech and software startup culture, which means huge potential down the road.

“You have the guys that do the coding. You’ve got guys starting the companies. You’ve got guys investing in the companies,” he said. “All of that exists, but the coordination [between those players] is not as good.”

High-profile success stories would go a long way toward growing the reputation of the Upstate’s software scene, he said. Things are changing, he says, but it takes a long time.

Coverstory325_2“You look at Hughes and Milliken, those that have been successful in those traditional industries,” he says. “I think we’re going to start, hopefully, generating some of those big success stories … that everybody is going to point to. Those success stories will help drive everybody else.”

Moore says one of his least glamorous but most crucial functions is connecting entrepreneurs to one another, making introductions and promoting resource sharing to build a supportive, self-sustaining bedrock of innovating companies. That practice, he says, can be key to bringing in new companies, most recently senior health care platform Wellzesta, he says. The company chose Greenville over Raleigh to launch their wellness-focused senior healthcare platform partly because they were able to connect quickly, Moore says.

While startups wait for momentum, Metcalfe says startups can use the GOOGLE method: Get out of Greenville and Look Elsewhere for funding.

The result, he says, not only spurs Upstate growth with outside capital, but it forces startups to hyper-focus on their minimum viable product, bootstrap wherever possible and work with non-monetary support such as partnerships.

According to Hassman, a shortage of capital and the push towards bootstrapping can be a key advantage to the Upstate that provides for more honest, sustainable businesses. It’s like plants, he says.

“If you provide lots of water, lots of fertilizer, it’s easier,” he says.  “But if you use a little less fertilizer, a little less water, then only the heartier plants will survive.”

[break]

More from this week’s cover story…

GreenvilleCoffeeRoasters

Tech startups face an uphill funding battle in the Upstate >>

SHARE

Comments

Related Articles